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California vs Tennessee: Making the Best Financial Decision

Octavio must choose between living in Los Angeles, California or Knoxville, Tennessee. This scenario compares job offers, living costs, and savings goals to determine the best financial decision.

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California vs Tennessee: Making the Best Financial Decision

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  1. Group members: David Baldonado Christian Kouttjie Henry Phung Rafael Ruiz Group 6: Leaving your heart in California… or not?

  2. ScenarioSouthern California vs. Tennessee • Octavio and his dog, Rex, are saving up $200,000 for a down payment on a house back home in California. • Housing ~ 850sq ft apartment that accepts dogs • Where should he live?

  3. Options • Two job offers are available • In Los Angeles, CA: $70,000 /year salary, with a raise of 3% every 2 years • In Knoxville, TN: $50,000 /year salary, with a raise of 3% every year

  4. Considerations • Equivalent Distance Commuting Cost – • LA: $2.26/gal for 20 miles roundtrip • TN: $1.82/gal for 20 miles roundtrip • Healthcare Costs– • LA: $4,156/year • TN: $4,274/year • Dog Cost - $1,525/year • Rent -$1200 LA and $540 Knoxville • State Income Tax – 9.3% CA and 0% TN

  5. Considerations • Food and Entertainment: • $3600 per year • Car payment (lease): $300/mo • 25 MPG • Car insurance: • LA: $842/yr • TN: $659/yr

  6. Decision • Which location will let Octavio reach his savings goal the fastest? • Without Sensitivity Analysis • With Sensitivity Analysis

  7. Without Sensitivity Analysis • Tennessee is the obvious choice given the considerations • Knoxville: Goal is reached in 9 years with $4700 leftover • Los Angeles: Goal is reached in 12 years with $1500 leftover

  8. With Sensitivity Analysis • What does it take to make Los Angeles more financially desirable? • Factors to consider • Raises • Savings APR • Inflation • Affordable Apartment in each city • Affordable car in each city • Starting Salary

  9. Starting Income

  10. Car Lease Payments BMW ///3 (M3) BMW 328i

  11. Conclusions • It depends… • Personally, we would stay in L.A. • Sacrifices can be made • If you do not mind living in Knoxville, then you can either lease an M3 or you can stay in a MUCH more luxurious apartment. • Your choice!

  12. Resources • www.google.com • http://www.sniksnak.com/ac/costs.html - Dog Annual Cost • http://swz.salary.com/costoflivingwizard/layoutscripts/coll_result.asp?presentsalary=70000&presenthomemetrocode=98&presentworkmetrocode=98&newhomemetrocode=84&newworkmetrocode=84&x=56&y=6 – Cost of Living Estimates and Salary Comparison and State Income Tax • Rent.com – Apartment Information • Ncsl.org – Annual Health Care Cost • Losangelesgasprices.com – Gas Prices…in Los Angeles, CA • Knoxvillegasprices.com – Gas Prices…in Knoxville, TN • Iii.org – Car Insurance

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