Do you take time to think about the quality of your life?   What about this — do you take time to reflect on whether you control money, or does money control you?  Do you think about your financial surroundings and whether to cost of that is too low, about right, or too high?

This post builds off my earlier posts: Living and Working Abroad — Why Not?, the On-Line Exercise re: Living and Working Abroad, and Critical Success Qualities for an Expat Managaer in China ….

Introduction, and please read this twice before you read any further, as I know that for some this blog post can be an explosive cocktail:   The purpose of this post is not to convince you to move to China or India or (Kansas) or to bash the US (or California) or imply who should or should not be the President.  The purpose of this post is to highlight the issue of cost of living and doing business in California in general, to suggest one reason talented Chinese and Indians, after they complete their undergraduate or graduate degree in the US, high tail it back to China or India to live and work, and, to touch on how over time such cost differentials can have geopolitical impacts (see the Fareed Zakaria book you will read for one of your book reviews).  So as you look at the below rough, back-of-the-envelope numbers, be open minded, and take a chill pill if you think somebody is trying to suggest to you that you move or abandon your California or American citizenship.  Now, please go back and read this introduction and disclaimer one more time before reading further …

[Body of post -originally written for one of our China trips]

A number of Americans I have run into over the years return from their 10 day stay (only in four or five star hotels), China visit “convinced” we have it better than our equivalents in China (or other parts of Asia).

Or do we? And did these visitors to China do their homework while they were there, investigate beneath the surface of what they (thought they) saw, and do their due diligence? Did they apply the Mark Twain quote I had you read, or did they ignore his advice?  Did the consider how to use and leverage China in their own portfolio, or was this just a check the box trip for them to get their MBA degree?

Stay with me on this one. Reading the rest of this post may be worth it.

[My thanks to my good friend and Chinese colleague, John Wu, for helping me fill in some of the gaps re: the below China numbers and expenses when I drafted this post. John is a Professor at CSU San Bernardino, just down the road from us.]

I have friends in China who, like you and me, have a high level of formal education and have good jobs and make good money (for China). I am not talking about the poor peasants of China or the factory workers in Shenzhen or Guangzhou in this post. I am talking about our equivalents in China. I am trying to compare apples to apples here, to the extent I can, and I need you to keep this in mind.

Yet a number of these friends in the PRC retain a simple and admirable goal – work hard for a while, save some money, and then to move to Lijiang or Yangsuo in southwestern China or to Hangzhou or Suzhou in the Yangtze River Delta to open a tea shop, and slow the down and enjoy a very low key life with low expenses.  Having lived in high octane California for well over 20 years now, I never fully understood or appreciated this view until I gained more experience with and in China and the Chinese (see below discussion) and how they spend their money and live their lives.

Using an admittedly over-simplified example, here is where they are coming from and what I would like you to think about:

Exhibit A – Cal Poly Undergraduate Business Student Who Wants to Stay in California:

Revenue:

• Starting salary: $50,000 (US) (this is probably an optimistic number for an undergrad and will, of course, depend on the field)

Expenses:

• State and Federal income taxes: 1/3 of your salary, which is roughly $16,000 (and I am assuming this person is paying the taxes they are supposed to pay to Uncle Sam)
• All the sales tax we pay when we buy something or stay in a hotel, the tips we pay when we go out for a meal, etc.: $1,000 per year (I think this is a low estimate)
• Rent and utilities (including cable, water, gas, electric, cell phone, internet, etc., etc.): $12,000 per year ($1,000/month)
• Food: $3,600 per year ($300/month)
• Car payment: $3,600 per year ($300/ month; you can’t drive a crappy car when you have to impress your boss and meet and work with clients)
• Gas: $1,800 per year ($150/month)
• Student Loan Payment: $1,200 per year ($120/month)
• Entertainment, clubbin, movies, that yearly Vegas trip, meet your friends in Tahoe for that ski weekend, etc.: $3,600 per year ($300/month)
• Clothes for work (suits, dresses; gotta look good for clients), and getting rid of those 3 year old jeans you wore to class: $3,500 per year
• Insurance of all kinds: car, health care, dental, worker’s comp, renter/home owner, etc.: Let’s add another $1,000 per year for this item

• Vacation each year: probably two weeks, maybe three if you are lucky. Let’s assume you spend $500 on each vacation (this is a very conservative estimate), for a total of $1,000 per year

• Misc./all things I forgot to list??: Let’s add $1,000 per year to be safe

Net: Roughly $700, give or take a few bucks. (MBAs - yes I know you will make more per year than an undergrad but I also think your above expenses (which are already conservative numbers), will also be higher for you given where you are in life and related lifestyle so while you may gain a few bucks on this $700 number, I don’t know that it will be a big change).

$700. And with this $700, you STILL will want to buy that house in California, right?

By the way, as of a year or so ago the median price of a house in SLO was $580,000 (probably $680,000 plus for Bay Area and decent areas in LA), and you need 20% down to get into the housing game so you will need to save up for that 20% down payment.

Men, also don’t forget the $$$ you will need to meet and impress and wine and dine your future spouse, etc. – that ain’t cheap and above I did not include a category above for “Dating”. Heck, the above also does not include Christmas presents. Nor is the cost of your wedding in there.

Exhibit B – Undergraduate Business Major from a Good (not a crappy) Chinese University Living in a Tier One City in the PRC

Revenue:

• Starting salary: $6,000 (US) (that’s right, this is not a typo)

Expenses:

• State and Federal income taxes: $500 per year
• All the sales tax we pay in China when we buy something or stay in a hotel, the tips we pay when we go out for a meal, etc.: $0 (There is no sales tax and people/the locals don’t normally tip in China!)
• Rent and utilities: $1,200 per year (also note that for many young professionals, early in their career, this amount may be $0 for a number of years because they live with their parents in part because it is culturally expected they do so)
• Food: $1,200 per year
• Car payment: $0 (Public transportation is convenient and inexpensive and move people use it. For example, a bus ride in Beijing costs 5 cents (yes, 5 cents) and subway 40 cents)
• Gas: $0
• Student Loan Payment: $0
• Entertainment: $1,200 per year (Many times the entertainment expenses are picked up by the company you work for. Going out with colleagues and bosses is common and expected.)
• Insurance: $0
• Clothes for work: $750 per year
• Vacation each year: two weeks, and spend $200 each on each vacation, for a total of $400 per year
• Misc./all the things I forgot to list: $300 per year

Special note from Professor Wu: “You need to be aware that a lot of things in China can be bartered. For example, I will give you a free medical check up because my in-law works at a hospital and you help me get my vacation free because your grade school classmate works at the city government where the national park is located. I got a deeply discounted cell phone and monthly plan because I helped his friend (who is a manager at China Mobile) get his car fixed at his other friend’s garage. When you have a large enough personal network or guanxi, you can live a comfortable and affordable life. Get it? Also, since rent is so cheap in China, why bother to buy a house and enter that rat race?”

Net: Roughly $450, give or take a few bucks

[Similar to the Cal Poly graduate example, this $450 does not take into account gifts for Chinese New Year, getting married and the cost of a wedding, etc.]

Summary Thoughts:

So who has the better quality of life? The Cal Poly grad, or, his/her Chinese equivalent? Who is more of a slave to money and the cost of living? The Cal Poly grad, or, his/her Chinese equivalent?

Some will say, “But I don’t care what you say, my family means everything and I must be near them.”  Ya’ think?  No kidding.  Who doesn’t want this?  This post is not about the obvious family issue that we all care deeply about, it is asking you to consider other things in life that also matter (if we are being honest with ourselves).  This post is asking you to push deeper.

When I was 25, I would have said the we/us have a higher “quality of life”, hands down. But now that I seen other parts of the world, now that I better understand places like China and India, and now that I (not my parents or in-laws) have to send in that friggin’ California mortgage check each month in this over-heated housing market on the West Coast, this boy sometimes questions and may not carte blanche accept the California definition of “success” and what makes for a high quality of life. (Click HERE and see this related WSJ article about a small southern California business who thew up its hands and said “screw it” to California and its high costs and moved its operations to North Carolina.)

You may conclude in your own analysis that here in California we DO have a higher quality of life, and if so no problem. The purpose of this post is not to argue one is right and one is wrong, but to make you reflect on this issue while you are still young enough and free enough to make the decisions that will impact the rest of your life, to ask yourself some questions you have never asked yourself before, do your analysis and reach your conclusion.  As I have run this post over the years I have also noticed a rough trend — for the student who was blessed to have parents or grandparents alive and how paid for their undergrad, grad school, down payment for a house AND their wedding they tend to say “Ho, hum, who cares.  I love Cali and I ain’t going anywhere else and/or my family is the only thing that matters to me” and for those who do not have such financial support from their family I tend to see more along the lines of, “Holy ****[plug in any cuss word that may fit here[, that sucks.  I did not know what I was looking at on the financials the next 40 years of my life if I stay in California.  Maybe I need to reconsider that job offer I had in Boise or Omaha that I turned down because the only place I am open to working in is San Diego because I just love that town."

In China and many part of Asia, yes, you don't make much; but as you can see above you also don't spend much because things do not cost as much and good guanxi connections also help you minimize your spending.  You may also have a better chance of starting and owning your own company, where people work for you you don't work for "the man", in an emerging market like a China or an India than in a more developed economy.

So to repeat, yet again, I am not suggesting we all leave Cali and move to China. You will see for yourself that Asia is not for everyone. And, yes, I know that the above over-simplifies things and that there are things you can’t quantify like crowded cities, pollution (and yes it totally sucks in China's major cities), being able to take your kids to Avila Beach, living close to your parents, the value of wine tasting, having that 2,500 plus square foot house and driving your own car to work each day (while claiming to be an environmentalist?!; versus taking that hot sweaty bus to work each day or riding your bike to work in Beijing), the value of that $5.00 cheap foot massage in Shenzhen (priceless in my view!), quality of health care and education in a country and access to it, etc. I also appreciate, very much, that the above very general example has holes in it and/or that anyone can change the above numbers, criteria and variables and nit pick it to death to obtain the result they want to get to.   But one of my purposes here was to throw out a general example to illustrate why sometimes you meet people from other parts of the world that have no interest to to invest or buy into the American lifestyle and now you may understand where they are coming from so you don't make embarrass yourself at a dinner party you both attend, whether in LA or Shanghai.  Fareed Zakaria is right, it's not that the US is in decline, it's that others are raising their game and catching up.  This will present business opportunities to people on both sides of the ocean that are smart enough to spot said opportunity, come up with a good idea or product, and then execute better and faster than the competition.

(By the way, here is some rough data I pulled off the US Census Bureau website re: the median family (not individual; this means multiple people in the house are working trying to survive and pay their bills and send their kids to school) income in California for 2009:  2 person family - $61,954, 3 person family - $67,562, 4 person family - $77,596, 5 person family - $66,106, 6 person family - $63,109, 7 person family $70,741).

For more information and a wonderful related post on this topic, see the China Law Blog’s "China on $128 a Month" and related discussion thread – some good stuff in those comments. Be sure to also read the hyperlink posted there (“Living on $1,000 RMB a Month in Shanghai”)   [FYI -- as of the date of this post $1,000 RMB = about $125 US.]

Some Other Questions to Consider re: Quality of Life:

1. How much you make vs. how much you save? (See above.)
2. How much happiness you can buy with your disposable. income (life’s many pleasures such as going out with friends, intimate relationships, foot massage in China, a hair cut and shave, eating out, travel, reading, going to movies or performances, etc., often cost very little in China).
3. Living in a convenient city with clean air and worry-free traffic?
4. Did anyone mention chronic work fatigue?

See also/refer to the Quality of Life Index (QLI) developed by Ferrans and Powers and their website. And, see also this link and where you can do a living wage calculation for where you live or wish to live (I don’t know where/how they got the numbers and data they did and use, because at least in the case of San Luis Obispo some of their estimated living expenses are way off and ridiculously low).

Above I have publicly put on the table some of my own lifestyle cards, views, values and biases. I look forward to reading about yours. Read the above, think about your future and what you want it to look like, and then comment below, but please, no jihads, be rational and respectful in doing so.  Let’s learn from each other.

Professor Carr October 26, 2008 addendum: See this excellent related post by Dan Harris of China Law Blog fame - Go Ahead and Quote Me: $100 = 100 RMB. See also this related blog POST from a guy who walked away from his $300,000 a year job and burned his Harvard degree, not out of spite or bitterness toward Harvard, but to symbolize his move and decision to simplify his life (you may be able to still watch the actual burning ceremony by clicking on his video link).

Professor Carr November 29, 2010 addendum: To now throw a wrench into much of what I typed above, see this counter post and topic I came across on the China Law Blog titled,  97% of Chinese Want to Live in the United States.  Is This Really True? (Answer: I don’t think so, but an interesting article nonetheless!)   Be sure to read the comments thereto as that is where the more interesting sub-issues, meat, and themes can sometimes appear in a blog post.