If you’re chasing the American Dream, be prepared to handle hefty costs. A former Goldman Sachs analyst, Sam Dogen, suggests that his family of four needs to earn over $230,000 annually to live comfortably in California’s San Francisco Bay Area.
Dogen, who retired at 34 with a $3 million net worth in 2012, has been relying on passive income from stocks, bonds, and real estate since then. In a recent post on his website, Financial Samurai, he shared that he cashed out a significant portion of his investments to buy a property for his family in the still expensive San Francisco.
Now, he expects his investments to generate $230,000 before taxes, but his annual expenses are projected to surpass $288,000 in 2024. To cover these expenses, Dogen estimates he would need to earn around $420,000 per year before taxes.
Dogen made it clear that he wasn’t seeking sympathy or empathy. He openly acknowledged that he and his family lead a comfortably upper-middle-class life, consisting of his wife and two children.
Breaking down his estimated annual expenses, Dogen compared them to those of other two-parent, two-children families in similarly expensive areas like New York City.
He explained, “The budget is based on my ideal lifestyle for a family of four in a big city. Of course, there are areas to cut. But overall, it is a realistic and comfortable lifestyle.”
Dogen’s annual budget includes $80,400 for private grade school tuition for his two kids and $24,000 for healthcare costs. He anticipates food expenses of over $26,000, while housing expenses, encompassing property taxes, maintenance, and insurance, are estimated at a substantial $68,400.
He mentioned the challenge of paying for unsubsidized healthcare insurance, which costs $2,300 per month in premiums for him and his wife, as they don’t have day jobs.
Regarding San Francisco’s high real estate prices, Dogen noted, “The good thing about living in San Francisco is that there are so many career and money-making opportunities… There’s just too much excitement to leave to a lower-cost area of the country to try to save money at the moment.”
Dogen’s detailed budget breakdown is likely to resonate with a growing number of Americans struggling to manage the rising costs of utilities, rent, and groceries.
“It really is a struggle to raise a family in an expensive city, save for retirement, figure out how to spend a lot of time with your kids before they leave for college, and enjoy life in general,” Dogen expressed to The Post.
Despite holding an MBA from the University of California, Berkeley, and having worked as an executive director at Credit Suisse, Dogen is now considering returning to work or consulting after over a decade of retirement.
For context, Forbes reports that the average annual salary for a working American is currently $59,428. In California, where Dogen resides, the average is slightly higher at $73,220.
A recent study by Investopedia revealed that the average American needs to earn a substantial $3,455,305 throughout their lifetime to achieve the American Dream, defined as “owning a home, a car, a pet, and sending two children to school.” However, the study found that the average American, irrespective of education levels, only earns around $2.3 million.
Despite the challenges of inflation, Dogen emphasizes the importance of saving wherever possible and making wise investments. He advises, “The best way to combat inflation is to save aggressively and invest consistently. History has shown that risk assets like real estate and stocks tend to outperform inflation over time. Therefore, it behooves everybody to save and invest as much as possible for as long as possible.”