Author Topic: New grad trying to decide where to live in high COL area  (Read 1935 times)

Claudius

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Hello,

I graduated last month and I'll start an entry-level job as a software engineer at a big company in Jersey City. I am very fortunate to start my career with a $110k salary a year (I think that is around $77k after taxes), and I have to make some important financial decisions.

My first decision is my living situation, I could get a 1 bedroom apartment/studio for $1100-1300 or a luxury apartment/studio including a gym for $1700-1800. My living costs, in general, are not very high, as I've learned to save money and I don't like to focus on material stuff. Right now I am focused on work and trying to increase my overall salary to >$200k in the next few years (although this could mean relocating to NYC). My regular expenses not including rent should not be higher than $1,200 (food, transportation, donations, traveling, entertainment, health insurance, etc.)

I try to save as much money as possible, but I do like the idea of living comfortably, given that in the past I've lived in some difficult situations and now that I could afford it, perhaps the extra cost of $600-700 on rent per month may allow me to feel happier and be more productive, but I also know that all of this is debatable, and I could feel as happy/comfortable in a cheaper apartment. The idea of spending extra money for a bit of luxury does make me feel a bit guilty, but I think long term it may be worth it, as I intend to increase my salary and try to remain with roughly the same living expenses.

With respect to debt, I have around $25k in student loans and $5k in credit cards (I'll pay the CC's as soon as I receive my signing bonus, also I got the credit cards last year so they have 0% interest until next month).

Finally, I don't really plan to retire early, and I'd like to start my own company eventually. The idea of FI attracts me because once I am FI I could pursue any ideas I want.

What do you guys think? Do you guys think it's a good idea to pay a few extra hundred for some extra comfort? Or should I try to save the extra $500 that this could provide me, and use that to pay my debt and start saving?



MonkeyJenga

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Re: New grad trying to decide where to live in high COL area
« Reply #1 on: May 10, 2019, 12:18:55 AM »
Get the cheaper studio apartment. That's still a lot better than many new grads have. Also, you don't need too wait until you're 100% FI to start your own business. Pay off your loans, save up a good FU fund, keep your required expenses low, and give it a shot. Or even start trying on the side, if your hours aren't too crazy.

damyst

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Re: New grad trying to decide where to live in high COL area
« Reply #2 on: May 10, 2019, 01:06:13 AM »
Congratulations on your high-quality problem.

I agree with MonkeyJenga that the lower-cost apartment sounds like the right deal at this time.
 * It's much more palatable to upgrade later, if you decide it's worth it, than it is to downgrade.
 * The gym is almost always a waste of time. Most people end up using those rarely if ever. People who are serious about their gym habit usually find the apartment complex's gym inadequate.
 * Other perks of luxury apartments (concierge, pool, etc) rarely make a real difference in your daily routine, and the premium you pay for them is very high.

The best thing you can do for your future business on the personal finance front is to keep your costs of living low, and save up your cash cushion / FU fund as quickly as possible. Again as the previous commenter said, this is not about FI. It's about having options. For example, it'll be super helpful for a future business owner to spend time working at a small startup beforehand. Having a pile of money saved up gives you the freedom to jump on such an opportunity when the time is right.

reeshau

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Re: New grad trying to decide where to live in high COL area
« Reply #3 on: May 10, 2019, 02:38:02 AM »
Let's put it this way... $700 per month, put into an index fund making 7%, will be $439k by the time you are 40.  (I assume you are 22)  Sounds like you could be well on your way to FIRE, given that you have about $3,500 per month to save on top of that, given your reported expenses.

Do you like the luxuries that much?

Of course, as your income scales (and if you move to NYC--make sure any pay raise covers the increased expense) you will choose the luxuries that are important to you.  But now, as you start, you are making your first decision as to your priorities.  And you posted your question to this board, so we all have some assumptions on what your priorities are.  If you decide to add luxuries because you make more money, then you are on the hedonic treadmill.  If you decide that some luxury is an important goal for you, then save up / work for it / make it happen, then that's something that's really important.  The way you phrase your question, it seems to me you are in the first camp.
« Last Edit: May 10, 2019, 02:51:59 AM by reeshau »

jaylbail

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Re: New grad trying to decide where to live in high COL area
« Reply #4 on: May 10, 2019, 03:17:34 AM »
Here's the maths, plugged into this calculator: https://networthify.com/calculator/earlyretirement

77k after taxes, 29k expenses with the cheaper apartment (Assuming 1200/month for non-rent expenses) is a savings rate of 62%, for 11.7 years til FI.

77k after taxes, 35k expenses with the luxury apartment is a savings rate of 55%, for 14.9 years until FI.

But you're likely to earn more over time, so let's say your average earnings til FI are 100k after taxes. That means that you have 10.2 years to FI with the cheaper place, or 12.4 years to FI with the more expensive place.

Thus, this is the question you need to ask yourself. Is the more luxurious apartment worth delaying FI by 2-3 years?

I can't make that decision for you, but this is the real decision you're making. Personally, unless having a better apartment was extremely important to me, to the point where it would seriously affect my quality of life if I lacked it, I wouldn't sacrifice 2-3 years of my working life to have it. Which do you want more?

Fomerly known as something

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Re: New grad trying to decide where to live in high COL area
« Reply #5 on: May 10, 2019, 05:35:07 AM »
Add me in as another vote for the cheaper apartment.  I started my career in NYC and my luxury was having my own apartment.  Jersey City has everything within walking distance of the cheaper apartment to make up for the luxuries in the more expensive one.

GizmoTX

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Re: New grad trying to decide where to live in high COL area
« Reply #6 on: May 10, 2019, 02:46:19 PM »
The OP hasn't mentioned commute time. IMO, this can negate an otherwise cheap apartment. We advised DS to reduce his commute as much as possible, trading some increase in apartment cost for a decrease in traveling time & expense. 

MonkeyJenga

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Re: New grad trying to decide where to live in high COL area
« Reply #7 on: May 10, 2019, 03:38:31 PM »
The difference doesn't seem to be distance. Just studio vs one bedroom and luxury building vs not. Jersey City has every kind.

Claudius

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Re: New grad trying to decide where to live in high COL area
« Reply #8 on: May 10, 2019, 11:12:30 PM »
Hello,

OP here. After a lot of consideration, Iíve decided the cheaper apartment is the best choice because it seems obvious now. As a plus, I talked today to a co-worker about MMM and he was onboard and a few hours later he had already told somebody else!

Actually, I am even considering a cheaper route that might get me all the things I want. I could rent a room in a nice/luxury apartment for around $900 and save the rest. That way I donít have to buy my own furniture and I have a bigger living space; thatís at least for now.

I appreciate everyoneís time for replying to this post, and I appreciate this community for pushing some common sense to me. I could have made a $500k horrible decision!

former player

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Re: New grad trying to decide where to live in high COL area
« Reply #9 on: May 11, 2019, 05:56:12 AM »
The OP hasn't mentioned commute time. IMO, this can negate an otherwise cheap apartment. We advised DS to reduce his commute as much as possible, trading some increase in apartment cost for a decrease in traveling time & expense.

I agree with this - someone just out of college and starting their first adult job is establishing patterns and ways of life that could stick for a long time.  Adding in a long commute is a bad pattern in itself but also one which gets in the way of finding meaningful activities and making personal connections outside work.

chasesfish

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Re: New grad trying to decide where to live in high COL area
« Reply #10 on: May 11, 2019, 07:43:51 AM »
Nice choice.

Have you considered roommates?  You're early in your career and will/should be working all the time, paying for an entire kitchen/living room that you aren't using seems silly.

galliver

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Re: New grad trying to decide where to live in high COL area
« Reply #11 on: May 11, 2019, 07:46:52 AM »
Go with option C-get a well-vetted roommate (flatmate...don't share a room). Maybe in the nice place for 900, maybe someplace cheaper.

I have just about the same salary as you. After maxing my 401k, taxes, medical, and other deductions, it's about 60k take home (your numbers may vary with state taxes and benefits), 1.8k rent will leave you 2k to work toward goals...but with 3k (or more...) from cheaper housing, you can pay of loans and save SO FAST.

Opting for an inexpensive apartment is one of the easiest ways to cut your budget. You decide once and then lock in your rate for a year, and as long as there are no explicit annoyances (roaches, etc) you won't even think about it. Get a nice gym membership for $100 of you want a pool.

JLee

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Re: New grad trying to decide where to live in high COL area
« Reply #12 on: May 11, 2019, 08:13:55 AM »
Go with option C-get a well-vetted roommate (flatmate...don't share a room). Maybe in the nice place for 900, maybe someplace cheaper.

I have just about the same salary as you. After maxing my 401k, taxes, medical, and other deductions, it's about 60k take home (your numbers may vary with state taxes and benefits), 1.8k rent will leave you 2k to work toward goals...but with 3k (or more...) from cheaper housing, you can pay of loans and save SO FAST.

Opting for an inexpensive apartment is one of the easiest ways to cut your budget. You decide once and then lock in your rate for a year, and as long as there are no explicit annoyances (roaches, etc) you won't even think about it. Get a nice gym membership for $100 of you want a pool.

Mine is just about the same in NJ with that salary as well.

I'm currently renting a lovely 2br apartment in Lyndhurst that will be up for rent as soon as we close on my house, but I suspect that's too far for you to want to commute.

MonkeyJenga

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Re: New grad trying to decide where to live in high COL area
« Reply #13 on: May 11, 2019, 01:17:01 PM »
Hello,

OP here. After a lot of consideration, Iíve decided the cheaper apartment is the best choice because it seems obvious now. As a plus, I talked today to a co-worker about MMM and he was onboard and a few hours later he had already told somebody else!

Actually, I am even considering a cheaper route that might get me all the things I want. I could rent a room in a nice/luxury apartment for around $900 and save the rest. That way I donít have to buy my own furniture and I have a bigger living space; thatís at least for now.

I appreciate everyoneís time for replying to this post, and I appreciate this community for pushing some common sense to me. I could have made a $500k horrible decision!


Thanks for the update, and I'm glad you found a solution that works for you! I was going to suggest roommates, but figured you had reasons for not going that route. I prefer living with roommates to living alone, even aside from the financial savings, so that could be a great decision. I work out a lot more when there's a gym in my home or office, so that easy access is useful.

Once you find a place, sign up with Buy Nothing and look for free housing supplies. You can take your time with anything non-urgent, and the only really urgent stuff is something to sleep on. Especially if you have roommates, you can slowly build your own stash of kitchen supplies and smaller furniture for whenever you do get your own place.