My friends are unfortunately being forced to recruit at what’s probably the worst time in a decade, and it’s honestly awful. Career fairs are being replaced with awful abominations of Zoom calls and Q&A sessions; the recruiting pipeline is drying up, and even the biggest firms on the market are hesitant to recruit.
Don’t feel too bad for them - most of them are still CS majors, and I’m sure that they’re doing better than 90% of the country right now. A few of my friends have started to get their offers in, and some of the numbers are pretty staggering. The lowest base salary that I’ve heard so far is over $100k, which, needless to say, is a lot of money for a 22 year old to make right out of a state school (Hook ‘em Horns!).
The catch is that while the gross salary number sounds really attractive, the reality is that their paychecks won’t be remotely as extravagant as their imaginations might desire. Here’s what happens to a “standard” $120,000 salary in San Francisco:
That seems pretty crazy to me, honestly. Over 35% of the salary is lost to taxes, which brings each of the 26 paychecks to $2,964.19. On top of that, this person hasn’t actually saved any money yet. Let’s pretend that this person is really on board with saving money for an earlier retirement/more freedom later in life, and puts away the full $6,000 a year toward a Roth IRA, and the full $19,500 a year toward a Roth 401(k). Alternatively, perhaps our worker is trying to pay off their student loans quickly - in any case, $25,500 is gone each year, post-taxes.
We’re now at $1,983.42 each paycheck, or a hair over $4,000 a month. Median rent in SF was well beyond $2,500 pre-COVID for a one-bedroom apartment, and we still haven’t covered the basics of transportation, groceries, etc. Donating to charity seems tough with these case prices and savings rates.
Going remote: life in austin
I decided to run similar numbers to show how things change in Austin (seeing as it’s a favorite destination for people leaving the Golden State, and the fact that it’s home to UT). In short - no state income tax, no local income tax, and no state insurance taxes puts almost $1,000 back in your pocket each month:
Austin median rent for a one-bedroom apartment is about $1,280, which is a downright bargain by comparison. That creates a ton of headroom for tacos, entertainment, transportation, and the rest.
explore more
I used this calculator to run through all of the numbers - it’s certainly worth playing around with.
gross salary, take-home, and discretionary income
The major point of all of this is to show just how different three numbers can be: (1) your gross salary, which is (loosely) what your offer letter says you make, (2) your paycheck after taxes are deducted, which is what I refer to as take-home pay (and others call disposable income), and (3) discretionary income, the amount of money available for you to actually use after covering things like food and rent. Where you live has a huge effect on how much of your gross salary you get to actually enjoy.
I am not providing or intending to provide tax, legal, or accounting advice. This blog post is for informational purposes only, so please don’t rely on it for tax, legal or accounting advice. Consult your own tax, legal and accounting advisors before engaging in any transaction. I’m just a guy on the internet. Please don’t sue me.