Millennial trying to build up some Badassity (Help)

[MMM18]

Hello MMM family,

I have been a silent member of this forum starting summer last year. I have been reading the posts MMM posts since the very start of this website (curse my neurotic nature to always read things in chronological order). However, I am only halfway through (almost 200 articles read and lessons applied) but I need some advice on something. I don't think I will be able to finish all the articles before this deadline for this decision I need to make. This is the reason I decided to make an account to ask you nice people (Veteran MMMs), what you think I should do.

Background: I am in my mid-20s and currently work full time. I make about $1800 every two weeks from this new job I currently got in April. I just got off orientation 1 month ago and am still on probation until October.

Expenses:
- rent - $1500 (i like in a one bedroom apartment in NYC)
- health insurance: $120/month
- Con Ed: $100/mo
- Groceries: $400/mo
- Metro-card: $123/mo 
- Wifi:$50/mo
- Phone: $200/yr (~$17/mo)
- Roth IRA: $6000/yr ($500/mo).
- 403b Savings: ~$130/mo

Total expenses: 2940/month
Other:
School: 6 courses this year:  $8,500 (100% out of pocket)
Misc/Unexpected: $100/mo

*I have no emergency fund currently, and only 10K in my vanguard account. I don't have any luxuries besides food. I make a majority of my meals and only go out to eat with friends and coworkers occasionally*

I think that is about everything.
So after looking at my expenses over and over again, I thought it's just ridiculous how my expenses have added to so much. So here if what I need help with:

1. Do you think it would be a good idea to move into an apartment with a roommate? This would cost me about $1100 a month (as opposed to the $1500 I currently pay). I was thinking of doing so far about a year to save up and put a down payment on an apartment. However, this is where I am very incompetent.
2. What type of apartment would I buy? A condo? Co-Op? All these terms have confused me. I hear people saying "oh I bought a place here and there" or "I own an apartment in this street." So I thought I should buy my own apartment. But is this actually possible?
3. Do you think it is a good decision to buy an apartment in NYC? I ask because I see myself living in this city for a least a decade more (if not forever). I just feel like pay rent is a losing game in this city.

[MrThatsDifferent]

1. Yes, move in with someone and keep having roommates (or a partner) while living in NYC. Invest your extra money.
2. Don’t worry about buying property. You don’t need it. Read Go Curry Crackers never buy article
3. No, don’t buy in NYC. Don’t waste your money saving for that. Follow the investment order, build your wealth through index funds, especially if living in NYC.

There’s so much free stuff to do in NYC, take advantage of all of that. Make sure you have a full life, don’t stay stuck inside because of your financial journey.

[Freedomin5]

I agree with MrThstsDifferent. Get a roommate. Don’t buy in NYC. The only reason why I might buy in NYC is if I find some kind of deal where I can rent out a bedroom/other unit, and the rent covers the the mortgage. Highly unlikely given NYC prices but there may be a magical unicorn out there.

Live with roommates for as long as possible.

Also, your expenses aren’t as high as you listed. Your Roth IRA and 403b are considered savings/investments, not expenses, so your true expenses are only around $2300/mth. If you want to try to lower that, see if you can get your grocery bill under $200/month. There’s a thread in the forum
about that, and you should check out www.budgetbytes.com for healthy meal ideas.

[MMM18]

1. Yes, move in with someone and keep having roommates (or a partner) while living in NYC. Invest your extra money.
2. Don’t worry about buying property. You don’t need it. Read Go Curry Crackers never buy article
3. No, don’t buy in NYC. Don’t waste your money saving for that. Follow the investment order, build your wealth through index funds, especially if living in NYC.

There’s so much free stuff to do in NYC, take advantage of all of that. Make sure you have a full life, don’t stay stuck inside because of your financial journey.

Thank you so much for your advice! I definitely won't get much chance to see the sun for a few months as I will be full time in school and work this coming fall semester but your words will stay with me. I'll try to actively not stay cooped up indoors XD

And I read the Renters For Life article by Go Curry Cracker (thanks to your suggestion) and what I got from it is not to buy; esp in CA and NYC since due to future environmental changes. This has been in the back of my head for a while now (esp since the whole CA fire issues and drought issues, etc.) But in NYC, it's so hard to find an apartment at a good/reasonable price. As I said, I am in my mid-20s. In a decade from now, I want to be settled down in my own place (probably with my own family). But if I'm a renter then, I can be losing money as rent here is ridiculously high and only goes up higher by the year (the same with public transportation but that's for another forum). So thinking about the future was what brought me to want to buy a place. I was thinking, if I do buy a place, I don't plan on doing the normal 30 years pay off thing people do. I don't like debt so I would pay off the place in 5-7 years as a goal (I am thinking of getting a second job once I get off probation).

for an example, if I get a one-bedroom apartment for 2K a month (this is the usual price; if one strikes a one-bedroom for a lower price, they hit pot gold). Multiply that by 10 years and that's 240K. With no ownership of the property. If I buy a one-bedroom for 200K, I would not only save 40K but also have an asset in just one decade.

This was my thinking as I don't currently see myself moving out of this city. What do you think? Should I still not even have buying in NYC as a goal?

[MMM18]

Agree with other poster.

1.  Yes: roommate, house-hack etc.  FWIW, I did that as a young single person and got an *amazing* rent that never went up.  Once you get married, have kids, etc., your options diminish severely: it's harder to live with random weirdos when you have a two-year old around, and a wife, etc.  Now is your best chance to save on housing for your entire lifetime.  Save, save, save. 

In fact, I would see if you can beat your proposed plan.  It's easier to live cheaply now than at any other time in life. 

2.  Too early to worry about property.  First, build an emergency fund.  Life happens.  Right now, you're going to be in a hole if you have an emergency medical situation.  Or if you get hit in a car and need to suddenly replace yours before negotiating the replacement.  (Insurance companies know this and prey upon those who need money immediately by shorting them on settlements.  It PAYS to have an emergency fund.) 

Invest after that, and you don't need to evaluate the property purchase for a while.  Personally, if I could go back, I wouldn't buy a condo (i.e. an apartment), I would buy an awesome rental, rent it out to friends, and then turn it into a permanent rental once I had a family and needed to move on.  But, that's only if you have the aptitudes for that (e.g. you're somewhat of a handyman, or able to be) and once you have the capital built up to do it.  Houses are far more expensive than advertised.  See the RE investing forum once you're to the point of considering real estate or at least saving in that direction.

Thank you so much for your word of wisdom. My priority goal will now be to get an emergency fund down before anything else.
Also, what do you mean by buy a rental? Which would "rental" fall into? Condo? Co-Op? Can't you rent out your condo?

[MMM18]

I agree with MrThstsDifferent. Get a roommate. Don’t buy in NYC. The only reason why I might buy in NYC is if I find some kind of deal where I can rent out a bedroom/other unit, and the rent covers the the mortgage. Highly unlikely given NYC prices but there may be a magical unicorn out there.

Live with roommates for as long as possible.

Also, your expenses aren’t as high as you listed. Your Roth IRA and 403b are considered savings/investments, not expenses, so your true expenses are only around $2300/mth. If you want to try to lower that, see if you can get your grocery bill under $200/month. There’s a thread in the forum
about that, and you should check out www.budgetbytes.com for healthy meal ideas.

Thank you for your great advice~! Everyone needs a magical unicorn in their life indeed. ^^
Also, you're absolutely correct. I just have a habit of thinking of those investments as bills; as in I have to pay them. ^^:

And what do you mean the rent covers the coverage?

[terran]

for an example, if I get a one-bedroom apartment for 2K a month (this is the usual price; if one strikes a one-bedroom for a lower price, they hit pot gold). Multiply that by 10 years and that's 240K. With no ownership of the property. If I buy a one-bedroom for 200K, I would not only save 40K but also have an asset in just one decade.

I have zero interest in or knowledge about NYC real estate, but I would be very surprised if you could buy an apartment for $200k would that would cost $2000/month to rent. You should do some research on the actual costs of buying and owning in the areas you're interested. Here's a good calculator to run the numbers through once you've gotten a handle on those costs: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

[mozar]

FYI my cousin and her husband bought a 1 bedroom apartment in Manhattan for $750,000. That is not a typo.

[MMM18]

I have zero interest in or knowledge about NYC real estate, but I would be very surprised if you could buy an apartment for $200k would that would cost $2000/month to rent. You should do some research on the actual costs of buying and owning in the areas you're interested. Here's a good calculator to run the numbers through once you've gotten a handle on those costs: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

Ohhhhh...now I see what MrThatsDifferent, Finances_With_Purpose, and Freedomin5 were talking about when they adviced against me thinking about buying in NYC...wow...I didn't know about the building maintenance costs, and taxes and stuff like that. I used the calculator (thank you btw~!) and it said I would be better off finding a rental for $1548 or less. I currently rent for $1500. So me thinking I'm already paying too much am actually still in a gold rental unit for the price I was thinking of buying. Wow.

So do you Veteran MMM not recommend buying at all? Or just not in NYC then? If I move to anywhere, it'll probably be Westchester area, PA or NJ. Are those places also a no-go?

[MMM18]

FYI my cousin and her husband bought a 1 bedroom apartment in Manhattan for $750,000. That is not a typo.

0_0 Waaaaat?! Three-Quarter of a million dollars...just for a One...uno bedroom?... You've got to be kidding...

[Viking Thor]

I have zero interest in or knowledge about NYC real estate, but I would be very surprised if you could buy an apartment for $200k would that would cost $2000/month to rent. You should do some research on the actual costs of buying and owning in the areas you're interested. Here's a good calculator to run the numbers through once you've gotten a handle on those costs: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

Ohhhhh...now I see what MrThatsDifferent, Finances_With_Purpose, and Freedomin5 were talking about when they adviced against me thinking about buying in NYC...wow...I didn't know about the building maintenance costs, and taxes and stuff like that. I used the calculator (thank you btw~!) and it said I would be better off finding a rental for $1548 or less. I currently rent for $1500. So me thinking I'm already paying too much am actually still in a gold rental unit for the price I was thinking of buying. Wow.

So do you Veteran MMM not recommend buying at all? Or just not in NYC then? If I move to anywhere, it'll probably be Westchester area, PA or NJ. Are those places also a no-go?

it really depends on the specific details and assumptions. Sometimes buying is a great deal, other times the opposite. I.E length of of house ownership, property appreciation, cost to rent vs buy, etc.

The NYT calculator is a good tool, plug your assumptions into that.

[Freedomin5]

I agree with MrThstsDifferent. Get a roommate. Don’t buy in NYC. The only reason why I might buy in NYC is if I find some kind of deal where I can rent out a bedroom/other unit, and the rent covers the the mortgage. Highly unlikely given NYC prices but there may be a magical unicorn out there.

Live with roommates for as long as possible.

Also, your expenses aren’t as high as you listed. Your Roth IRA and 403b are considered savings/investments, not expenses, so your true expenses are only around $2300/mth. If you want to try to lower that, see if you can get your grocery bill under $200/month. There’s a thread in the forum
about that, and you should check out www.budgetbytes.com for healthy meal ideas.

Thank you for your great advice~! Everyone needs a magical unicorn in their life indeed. ^^
Also, you're absolutely correct. I just have a habit of thinking of those investments as bills; as in I have to pay them. ^^:

And what do you mean the rent covers the coverage?

So, pretend I buy a two-bedroom apartment, and my mortgage + HOA fees = $1000 per month. If I can live in one bedroom and find a roommate who is willing to pay $1000/month to live in the other room, then the roommate’s rent basically covers all my housing-related costs and I’m basically living there for free. I’ve successfully househacked. That’s what I mean when I say ideally rent should cover mortgage.

[mistymoney]

FYI my cousin and her husband bought a 1 bedroom apartment in Manhattan for $750,000. That is not a typo.

0_0 Waaaaat?! Three-Quarter of a million dollars...just for a One...uno bedroom?... You've got to be kidding...

Manhattan? Sounds pretty reasonable actually.

[koshtra]

Buying property in a high cost of living area, especially one with sticky pricing and conceivably rent control, is a pretty high-risk undertaking. Plus, if we're thinking long-term -- how soon is NYC scheduled to be under water?

[Viking Thor]

I wouldn't worry about NYC going underwater any time soon. There are a couple low lying areas identified in flood map, those would be high risk of for example another Hurricane comes.

All real estate comes with risk and also high potential reward, that's the nature of it. Most people come out ahead if they own long enough.

I am in NYC suburb (Westchester) and owned a Condo for 10 years first then upgrade to a house for 6. I am much better off financially now then if I had a similar rental the whole time.

[Rosy]

Hello MMM family,
Background: I am in my mid-20s and currently work full time. I make about $1800 every two weeks from this new job I currently got in April. I just got off orientation 1 month ago and am still on probation until October.
SNIP

Expenses:
- rent - $1500 (I live in a one bedroom apartment in NYC)
- health insurance: $120/month
- Con Ed: $100/mo
- Groceries: $400/mo
- Metro-card: $123/mo
- Wifi:$50/mo
- Phone: $200/yr (~$17/mo)
Expenses - Other:
School: 6 courses this year:  $8,500 (100% out of pocket) = $708/mo
Misc/Unexpected: $100/mo = serves as mini EF

Total expenses: 2940/month = TOT EXP $3,118


  Savings/Investments
- Roth IRA: $6000/yr ($500/mo).
- 403b Savings: ~$130/mo
TOT SAVE/INV = $ 630/mo = $7,560/yr


NW = $10K inv - Vanguard
Debt - liabilities - Zero

Fixed that for ya:). Your savings and investments are not expenses!
Your school is currently an expense, but is also your ace in the hole since it is only temporary. This represents $8500/yr of your budget that in the future can be sent straight to savings and investments.

Since you only listed groceries but not other household expenses like cleaners or toilet paper or even clothing/shoes, shampoo, toothpaste or a bottle of aspirin:)/bandaid, I assume this represents household expenses in general, not just groceries?
Does the "other" expense category include things like b-day gifts or small one time expenses or the occasional entertainment expense? If so, that is still within reason.
You did not mention credit cards or other debt... ?

Sounds like you are off to a great start. My advice, stay put for two years if your apt is decent and convenient and you can afford it on your own. That is worth a great deal plus you have privacy to study. Not that a roommate situation isn't a great money saver, but you are not in a hair on fire emergency situation.
Far from it, you seem to have found a nice place in NYC - so I would not be too quick to let that go right now. You never know how roommate situations may turn out and with a new job and studies to stay on top of, you don't really have the time/energy and extra monies to deal with a potential fall out.

Sometimes what you have is just fine. You are smart enough to recognize the opportunities that FI will afford you. I don't think that a roommate is necessarily a must for you.
Your priority should be school, perhaps even speeding up the process so that you are ready to enter the workforce and land a well-paying job to help you reach a secure future and the luxury of FI. 

Yeah, I get that you are anxious about your cost of living - but it is fine. You'd like to speed up the process and have a nice stash - that takes time.
Fire is a marathon, not a sprint - give yourself credit for what you have done so far.
You are on the right track - time is on your side, you'll be fine.
Instead of buying property or moving in with someone else - concentrate on your studies and your job, just mho.

[koshtra]

:-) I didn't really mean underwater. I meant, sometime within the next generation or two, NYC is going to have to get serious about protecting itself from climate change, and (at least to an unschooled outsider) the obvious way to finance that is property taxes.

[MMM18]

I agree with MrThstsDifferent. Get a roommate. Don’t buy in NYC. The only reason why I might buy in NYC is if I find some kind of deal where I can rent out a bedroom/other unit, and the rent covers the the mortgage. Highly unlikely given NYC prices but there may be a magical unicorn out there.

Live with roommates for as long as possible.

Also, your expenses aren’t as high as you listed. Your Roth IRA and 403b are considered savings/investments, not expenses, so your true expenses are only around $2300/mth. If you want to try to lower that, see if you can get your grocery bill under $200/month. There’s a thread in the forum
about that, and you should check out www.budgetbytes.com for healthy meal ideas.

Thank you for your great advice~! Everyone needs a magical unicorn in their life indeed. ^^
Also, you're absolutely correct. I just have a habit of thinking of those investments as bills; as in I have to pay them. ^^:

And what do you mean the rent covers the coverage?

So, pretend I buy a two-bedroom apartment, and my mortgage + HOA fees = $1000 per month. If I can live in one bedroom and find a roommate who is willing to pay $1000/month to live in the other room, then the roommate’s rent basically covers all my housing-related costs and I’m basically living there for free. I’ve successfully househacked. That’s what I mean when I say ideally rent should cover mortgage.

Ohhh~ I see what you meant. Definitely something worth looking into. Thanks so much for sharing.

[MMM18]

Buying property in a high cost of living area, especially one with sticky pricing and conceivably rent control, is a pretty high-risk undertaking. Plus, if we're thinking long-term -- how soon is NYC scheduled to be under water?

No idea but I guess it was last year? ^^; aka the pandemic. But there are still environmental issues possible in the future with no set date of course. You are definitely right about it being high-risk buying in NYC though. After posting this thread a while back and reading all of your responses, it really opened my eyes to a lot. So thank you.

[MMM18]

I wouldn't worry about NYC going underwater any time soon. There are a couple low lying areas identified in flood map, those would be high risk of for example another Hurricane comes.

All real estate comes with risk and also high potential reward, that's the nature of it. Most people come out ahead if they own long enough.

I am in NYC suburb (Westchester) and owned a Condo for 10 years first then upgrade to a house for 6. I am much better off financially now then if I had a similar rental the whole time.

Wow~ Great for you!! Congrats, seriously. I hope to be on your level someday~

[MMM18]

Hello MMM family,
Background: I am in my mid-20s and currently work full time. I make about $1800 every two weeks from this new job I currently got in April. I just got off orientation 1 month ago and am still on probation until October.
SNIP

Expenses:
- rent - $1500 (I live in a one bedroom apartment in NYC)
- health insurance: $120/month
- Con Ed: $100/mo
- Groceries: $400/mo
- Metro-card: $123/mo
- Wifi:$50/mo
- Phone: $200/yr (~$17/mo)
Expenses - Other:
School: 6 courses this year:  $8,500 (100% out of pocket) = $708/mo
Misc/Unexpected: $100/mo = serves as mini EF

Total expenses: 2940/month = TOT EXP $3,118


  Savings/Investments
- Roth IRA: $6000/yr ($500/mo).
- 403b Savings: ~$130/mo
TOT SAVE/INV = $ 630/mo = $7,560/yr


NW = $10K inv - Vanguard
Debt - liabilities - Zero

Fixed that for ya:). Your savings and investments are not expenses!
Your school is currently an expense, but is also your ace in the hole since it is only temporary. This represents $8500/yr of your budget that in the future can be sent straight to savings and investments.

Since you only listed groceries but not other household expenses like cleaners or toilet paper or even clothing/shoes, shampoo, toothpaste or a bottle of aspirin:)/bandaid, I assume this represents household expenses in general, not just groceries?
Does the "other" expense category include things like b-day gifts or small one time expenses or the occasional entertainment expense? If so, that is still within reason.
You did not mention credit cards or other debt... ?

Sounds like you are off to a great start. My advice, stay put for two years if your apt is decent and convenient and you can afford it on your own. That is worth a great deal plus you have privacy to study. Not that a roommate situation isn't a great money saver, but you are not in a hair on fire emergency situation.
Far from it, you seem to have found a nice place in NYC - so I would not be too quick to let that go right now. You never know how roommate situations may turn out and with a new job and studies to stay on top of, you don't really have the time/energy and extra monies to deal with a potential fall out.

Sometimes what you have is just fine. You are smart enough to recognize the opportunities that FI will afford you. I don't think that a roommate is necessarily a must for you.
Your priority should be school, perhaps even speeding up the process so that you are ready to enter the workforce and land a well-paying job to help you reach a secure future and the luxury of FI. 

Yeah, I get that you are anxious about your cost of living - but it is fine. You'd like to speed up the process and have a nice stash - that takes time.
Fire is a marathon, not a sprint - give yourself credit for what you have done so far.
You are on the right track - time is on your side, you'll be fine.
Instead of buying property or moving in with someone else - concentrate on your studies and your job, just mho.

I took your advice to heart and have been studying really hard. I've been less stressed about buying a property and have just been saving what I can without spending mindlessly. ^^

[MMM18]

Agree with other poster.

1.  Yes: roommate, house-hack etc.  FWIW, I did that as a young single person and got an *amazing* rent that never went up.  Once you get married, have kids, etc., your options diminish severely: it's harder to live with random weirdos when you have a two-year old around, and a wife, etc.  Now is your best chance to save on housing for your entire lifetime.  Save, save, save. 

In fact, I would see if you can beat your proposed plan.  It's easier to live cheaply now than at any other time in life. 

2.  Too early to worry about property.  First, build an emergency fund.  Life happens.  Right now, you're going to be in a hole if you have an emergency medical situation.  Or if you get hit in a car and need to suddenly replace yours before negotiating the replacement.  (Insurance companies know this and prey upon those who need money immediately by shorting them on settlements.  It PAYS to have an emergency fund.) 

Invest after that, and you don't need to evaluate the property purchase for a while.  Personally, if I could go back, I wouldn't buy a condo (i.e. an apartment), I would buy an awesome rental, rent it out to friends, and then turn it into a permanent rental once I had a family and needed to move on.  But, that's only if you have the aptitudes for that (e.g. you're somewhat of a handyman, or able to be) and once you have the capital built up to do it.  Houses are far more expensive than advertised.  See the RE investing forum once you're to the point of considering real estate or at least saving in that direction.

Thank you so much for your word of wisdom. My priority goal will now be to get an emergency fund down before anything else.
Also, what do you mean by buy a rental? Which would "rental" fall into? Condo? Co-Op? Can't you rent out your condo?

Good question; I was ambiguous on purpose.  It could be any of the above, but I think of it as a small house, duplex, or so on.  They may make more condos, but they can't make more land.  But you live in a HCOL area, so that may not be doable, especially on current salary.  That said, you could do the rental idea with any of the above; the key would be a place where several folks could split it up and live easily (more baths per bed, e.g.).

Ahh~ I see I see. Thanks for sharing.

[wenchsenior]

FYI my cousin and her husband bought a 1 bedroom apartment in Manhattan for $750,000. That is not a typo.

0_0 Waaaaat?! Three-Quarter of a million dollars...just for a One...uno bedroom?... You've got to be kidding...

Manhattan? Sounds pretty reasonable actually.

Yes,, that sounds right. I have a friend who bought a 2 bedroom apt in Manhattan for about about a 900,000$, and that was about 20 years ago. They since moved to FL where they took their built up equity from the apt and ended up in starter mansion.

[ToTheMoon]

Yes,, that sounds right. I have a friend who bought a 2 bedroom apt in Manhattan for about about a 900,000$, and that was about 20 years ago. They since moved to FL where they took their built up equity from the apt and ended up in starter mansion.

What the heck is a starter mansion? I know (hope) you are being tongue in cheek but the imagery in my head of this (and the people involved) is really funny!

I took your advice to heart and have been studying really hard. I've been less stressed about buying a property and have just been saving what I can without spending mindlessly. ^^

On topic - this is really awesome @MMM18  Keep it up!

[wenchsenior]

Yes,, that sounds right. I have a friend who bought a 2 bedroom apt in Manhattan for about about a 900,000$, and that was about 20 years ago. They since moved to FL where they took their built up equity from the apt and ended up in starter mansion.

What the heck is a starter mansion? I know (hope) you are being tongue in cheek but the imagery in my head of this (and the people involved) is really funny!

I took your advice to heart and have been studying really hard. I've been less stressed about buying a property and have just been saving what I can without spending mindlessly. ^^

On topic - this is really awesome @MMM18  Keep it up!

Only a bit tongue in cheek. I was referring to the type of crossover house that is 5000 sq ft+, with 5-6 bedrooms and baths, a living room, kitchen, dining room, family room, and 'den/office' and a 3 car garage

The funny thing is that my friend is the most down to earth person...daughter of a liberal-protestant minister, very involved in education and helping the poor, etc.  It's just that she ended up married to a fairly well off Italian and their first place was in Manhattan, so they ended up with gigantic amounts of equity to burn when they sold. So they bought a modernist starter mansion in Florida, I guess just b/c they could.  And they only have ONE kid LOL.  I would not be surprised if this doesn't last, though.  Shit, I can barely motivate myself to clean our 1600 square feet...even with a house cleaner (which I assume they have), that would be a LOT to deal with.