The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: RHINO on April 29, 2013, 09:02:05 PM
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I'm currently living in Washington D.C. and working in Real Estate Finance. I want to get out of DC though, and would love to live in Manhattan. Finding a 1bdrm for less than $2k per month seems impossible though (and I want to live alone). I know NYC jobs pay more in most industries, but does anyone know how much more? I'd like to see if there's an average income to cost of living ratio between cities or something. I know forcing such a diverse economy into a simple ratio might not be all that useful, but I'm not sure the best way get a general sense of how much my retained earnings might change if I were to make the move.
Also, the 30% rule for housing expenses is based on gross income, not net, correct?
Thanks so much...
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I don't think that most people here follow a set rule of 30% for their housing. It sort of goes against the whole "save as much as you can" idea. Some people spend less than 30% of their income with their entire budget. However, if that's what you feel is right then I suppose go for it.
However, I would suggest finding companies that you would like to work for in the area and checking out salary reports from them at a place like Glassdoor.com (http://Glassdoor.com) I've been doing that for a while looking at Chicago because I thought about moving there next Spring, but knew that housing and such were much more expensive than in Indianapolis. Between that and real estate websites, you should be able to come up with pretty good estimates of both salary and rent figures long before a potential move.
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Also, the 30% rule for housing expenses is based on gross income, not net, correct?
It's gross. And in my apartment hunting for the area, it was fairly strictly enforced.
I don't think that most people here follow a set rule of 30% for their housing.
A vast majority of NYC rentals enforce a clause that your yearly income be at least 40x your monthly rent, which equates to no more than 30% of your income. Some have even more strict multipliers of 45x or 50x (27% and 24%, respectively). I assume this is what the OP is referring to?
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Hi RHINO,
Would you be open to living in Brooklyn. I know rents are going up there too but you may be able to find a better deal. Not sure what age you are but my 30yr old brother lives in GreenPoint and loves it. He takes the L subway train into Manhattan and it really is not that big of a deal.
Good luck. NYC is pretty expensive. I just got back from a trip visiting and totally blew my budget. If you are on your game you could do stuff on the cheap but I would find it very hard.
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Thanks all. Yes, I would be open to living in Brooklyn.
I know that most people on here don't subscribe to the 30% housing cost rule, but it's pretty tough to go below 20-30% in DC, NYC, or SF. In general, I can't see how a single person with fairly normal income can save 50% of their take home pay in these cities unless they choose to live in a frat house and only spend $ on what's necessary to stay alive.
Re: Glassdoor.com -- I'm familiar with the site, but when I've looked in the past it didn't seem all that accurate. I just looked again and it does seem fairly accurate now, but maybe a little bit on the high end (unless I'm getting hosed by my boss!). I'll take a look at NYC...
Thanks again
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In New York, the main driver of high cost of living in the huge demand for space within a short distance of Midtown and Lower Manhattan. The further you get from that area (in time via mass transit), the cheaper space gets, and commercial rents are lower too, which makes for cheaper goods and services, probably no different form many other major metro areas, and sometimes cheaper due to the bigger market.
Living in Manhattan, other than, say, Inwood, is choosing to purchase a luxury product at a steep price. Likewise living in a 1 bedroom apartment as opposed to a studio.
Much of Queens is cheaper than parts of Brooklyn, indeed. Whether Queens is a good option depends on whether you're likely to work in Midtown or Downtown; Queens is better for Midtown, Brooklyn (and Hoboken and Jersey City) downtown.
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I don't think that most people here follow a set rule of 30% for their housing.
A vast majority of NYC rentals enforce a clause that your yearly income be at least 40x your monthly rent, which equates to no more than 30% of your income. Some have even more strict multipliers of 45x or 50x (27% and 24%, respectively). I assume this is what the OP is referring to?
No. The 30% rule IS the rule of thumb advice for the financially unenlightened by the financially unenlightened. Along with "save around 5-15% of your paycheck". Following the 30% "rule" might be enough to provide some small cushion against delinquency when the other 70% is spent in the typical spendy fashion. Assuming you don't lose your job, your income never goes down, you don't incur sudden unexpected expenses, etc. that is.
It's a great way to ensure you remain a corporate tool, dependent on the boss man for your paycheck, chained to your desk until you're old enough to no longer be useful and can go home and keel over.
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Not sure how helpful these are, but they're fun to play around with/peruse (note in particular, the last link which provides an interactive map of median income based on census data):
http://money.cnn.com/calculator/pf/cost-of-living/
http://www.bankrate.com/calculators/savings/moving-cost-of-living-calculator.aspx
http://project.wnyc.org/acs2011/income.html#12.00/40.7310/-73.9809
For getting a sense of how much $X in rent will get you, I recommend playing around with:
http://streeteasy.com/nyc/rentals
I have lived all over Manhattan for about a decade. I now live in Queens and work in midtown. I have generally found that the median income of the neighborhood you live in will noticeably affect your COL experience. For example, when I lived on the UWS (70s and Columbus) and UES (60s and Lex), I had a "good deal" in terms of rent, but EVERYTHING in the surrounding area was ridiculously expensive. Groceries, laundry services, drug store/convenience store supplies -- all of the little day to day things that one commonly purchases were wildly more expensive. Coincidence that the median income for both of those areas is $150K+? Maybe...?
If you're looking to grow your 'stache and want to live in NYC, here are my basic suggestions for going about it in a relatively comfortable way:
1. Rent in a neighborhood where the median income is lower, preferably much lower, than your own.
2. Live within walking distance to as many grocery stores as possible so that you can price compare and benefit from the competition between stores.
3. Live within a 10 block radius of MORE THAN ONE subway line if you cannot walk or bike to work. On this point, if you are going to commute by subway, I also recommend not shouldering a 1+ hour commute. To each his/her own, I know, but IMHO a long subway commute gets really old really fast.
4. Do your diligence on the safety of different locations.
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I know that most people on here don't subscribe to the 30% housing cost rule, but it's pretty tough to go below 20-30% in DC, NYC, or SF. In general, I can't see how a single person with fairly normal income can save 50% of their take home pay in these cities unless they choose to live in a frat house and only spend $ on what's necessary to stay alive.
NYCer here, and it's debatable as to whether or not my salary is even "fairly normal," so I work at a cultural nonprofit. It's absolutely possible to save 50% of your salary as a single person, but perhaps not if you want to live by yourself in Manhattan below, say, 125th Street.
There are many, many, many expensive options in NYC that I think skew cost averages and comparisons. There are vastly cheaper if fewer/slightly more effort options for almost everything--biking vs. subway; grocery shopping in Chinatown vs. grocery shopping at Whole Foods; $10 jeans at Uniqlo vs. $250 jeans at Barneys; free pizza with every beer happy hours vs. $18 cocktails at The Standard, etc., etc.
FWIW, we spend 30% of our take-home on housing, and a 50% savings rate was a very attainable first-step goal, partly because of pre-tax contributions.