Author Topic: Reader Case Study - DINKing in NYC  (Read 5167 times)

mo_money_mo_principal

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Reader Case Study - DINKing in NYC
« on: September 12, 2015, 09:50:13 PM »
Life Situation:
My SO and I are in our late 20s, unmarried. We live in NYC, both working at different tech startups. I bought a condo in 2010 when the market bottomed out, and now the value has almost doubled. Ideally, we'd like to work for 5+ more years before having kids, then possibly move to a city with a lower cost of living, using profits from the condo sale to buy a cheaper home. We also have 2 cats and will probably end up with 2 or so kids. Aiming to be FIRE by our mid 40s.

Gross Salary/Wages:
My Yearly Income: $100,000/yr
His Yearly Income: $75,000/yr + 15% bonus
Total Income: $186,000
Monthly Income: $15,500

Pre-tax Deductions:
Transit + Dental: $177
Pre-tax 401k: $3,000 (both maxing)
Taxes: $3,931
Total Deductions: $7,108

Net Pay: $8,392

Current Expenses (YTD Average from Mint):
Mortgage: $1,451
Property Tax + Insurance: $84
Common Charges: $276
Groceries: $288
Restaurants + Bars: $881
Shopping + Gifts: $421
Travel: $638
Parking: $175
Car Insurance: $138
Gas + Tolls + Taxis: $86
Phone: $70
Internet: $77
Netflix: $8
Electric + Gas: $167
Gym: $60
Tennis Classes: $172
Entertainment: $106
Pets: $28
Misc (ATM withdrawals):  $200
Total Expenses: $5,326

Savings Rate:
Net Savings after expenses: $3,066
401k Contributions: $3,000
Mortgage Principal: $583
Total Savings: $6,649 (58% of Net Pay + 401k)

Assets:
Cash: $20,000
Taxable Brokerage Account: $40,000
401k: $73,000
Roth IRAs: $23,000
HSA: $5,000 (no longer eligible to contribute)
Total Assets: $161,000

Real Estate:
Condo: $600,000 (similar unit sold for this amount, originally paid $320,000)

Liabilities:
Mortgage: $230,000 remaining, 4.375% for 30 years, paying extra $200/mo to pay off 10 years sooner (by FIRE)
No student loans
No car payment

Net Worth: $531,000

Expected ER Expenses:
Want to try to keep the same. Home will be paid off, but well have more expenses due to kids and health insurance.

Specific Questions:
I wasnt sure if I should do this as a Case Study or Journal. Mainly just want to see if anyone relates to our situation of living in a high COL area and wanting to enjoy it while it lasts.

1) Is there anything glaringly obvious that we should be doing to cut expenses (other than the below)?

Having now written out our expenses, its obvious we arent the most frugal. We like to splurge on experiences like dining, travel, and tennis. Tennis has been a recent development that was hard at first for me to stomach the $172 per month. My SO has found that tennis is his only real enjoyable way to work out. Playing on NYC Parks public courts costs $30/hour (or $400 for yearly permits) and are first-come-first-served, so weve opted to take group classes that cost $30 per person.

Another glaring expense is $313 per month for the car. If we did the math, wed probably save by getting rid of the car and renting when we need to. We drive the car to the grocery store, go on hiking/ski/beach trips, and visit family 3 hours and 7 hours away (which saves on flights for us + cats). I feel like I would see family less if I had to decide each time to pay for a rental or airfare.

Its hard to say what all of the shopping expenses are for. Weve been to 3 weddings this year so that was $300 in gifts. My SO is into tech so he has some personal projects going on that require a bit of hardware. It seems like its mostly electronics, random Amazon purchases, clothing, and sporting equipment.

We do spend a lot on restaurants and bars, but we also cook most of our dinners at home. We also get about half of our work lunches for free, so we typically buy lunch out with coworkers on the other days. Unfortunately in NYC, dinner and drinks out is the best way to socialize with friends. When your home is teeny and your friend works in Jersey and lives in different borough, you tend to meet out somewhere. And as we see it, we are young and want to enjoy NYC for the short time that well be here. When we move to a lower COL, expenses like dining, housing, and parking will all be slashed.

Now on to some things we HAVE done to cut costs. We cut cable a few months ago, so that went from $137 to just $77 for Internet. Now we use Netflix, an antenna, and have a collection on Plex. We dropped SOs gym membership once we discovered he really hated it. My gym is super cheap ($30/month), but I also occasionally do a class like SoulCycle with a friend. We bought a Nest thermostat, and thats cut our electric and gas by about $12 per month (1 more year and it will have paid for itself). For the phones, this year we joined a family plan with friends.

2) Do you have any tips for ways to cut costs while traveling?

On our most recent vacation, I canceled our hotel reservation and rented a tent at a campsite. This cut the lodging cost in half. On our last overseas trip, we paid out of pocket without using any miles, so Ive recently gotten interested in churning so that we can do a nice trip next year using miles.

3) What would you change about our investments?

We recently upped our 401k pre-tax contribution to the max. We also intend to each contribute the max to our Roth IRA each year. For these we picked Vanguard Retirement Funds for different years. Since we want to be FIRE by about 2030, would it make sense to pick the Vanguard 2030 fund?

Any extra savings weve put into taxable accounts with VTSAX (65%) and VTIAX (35%). Not sure if we should be in Bonds and REITs, or if we are ok with just having those covered by the small percent in our tax-advantaged accounts. I guess I feel like we are so far away from retirement that Im ok with this risk.

I am excited to go from lurking to posting. Thanks for any input!

JLee

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Re: Reader Case Study - DINKing in NYC
« Reply #1 on: September 12, 2015, 09:57:46 PM »
How often do you visit family? I'm moving to north NJ in two weeks and I am debating going carless over the winter. I've found I can rent a car (via Costco) for ~$105 for 4 days, which pretty much solves my family-in-NH-visit-problem.

mo_money_mo_principal

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Re: Reader Case Study - DINKing in NYC
« Reply #2 on: September 12, 2015, 10:13:33 PM »
We visit family about 6 times a year, alternating whose family for the major holidays. When we do the 7 hour drive, we'll usually stay for a full week.

JLee

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Re: Reader Case Study - DINKing in NYC
« Reply #3 on: September 12, 2015, 10:27:33 PM »
We visit family about 6 times a year, alternating whose family for the major holidays. When we do the 7 hour drive, we'll usually stay for a full week.
So maybe three short drives and three long drives, maybe ~$1k in rental cars annually?

How would the numbers come out if you left the car at home, and just kept it for these trips? Removing frequent gas use, potentially lowering insurance costs (not sure if your insurance company will give you a reduced rate if you no longer commute in the car), potentially lowing parking costs (are the fees for home, work, or both?), etc.

I definitely approve of the CC churning idea. I'm flying for free these days. :)

mo_money_mo_principal

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Re: Reader Case Study - DINKing in NYC
« Reply #4 on: September 12, 2015, 11:04:47 PM »
Parking is for a spot in our building which is super convenient and almost unheard of in NYC. We don't use the car for commuting, just for travel and occasional trips to Costco, the grocery store, and tennis.

I'd estimate about 3 weeklong family-visit trips for $900 total, 3 smaller family-visit trips for $300 total, 4 weekend vacation trips for $300 total, and several day trips to the beach or hiking for maybe $500. So my rough guess is that we'd spend $2,000 total for a rental car, which is well under our current car costs, so that's why it's tempting to get rid of the car.

It just feels so much easier to say yes to travel when you already have the car rather than decide to take on another $100-$300 rental expense. We get utility from the convenience of having a car that can't be quantified, plus we don't care if our cats destroy our own car :). That actually would be a huge problem with a rental.

MonkeyJenga

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Re: Reader Case Study - DINKing in NYC
« Reply #5 on: September 13, 2015, 05:40:41 PM »
Hey there! I'm also a late twenties New Yorker, and there are a ton of ways to socialize in the city without dropping a lot of cash. It all depends on whether you want to change, though, and you mention wanting to live it up.

Electric and gas also seem high for a small place. What temps do you keep the apartment? Is there any chance there are air leaks somewhere?

You should come out to a meetup, there's a pretty big group in the city. You can get lots of ideas and NY specific tips from them.

csprof

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Re: Reader Case Study - DINKing in NYC
« Reply #6 on: September 14, 2015, 11:30:25 PM »
Parking is for a spot in our building which is super convenient and almost unheard of in NYC. We don't use the car for commuting, just for travel and occasional trips to Costco, the grocery store, and tennis.

I'd estimate about 3 weeklong family-visit trips for $900 total, 3 smaller family-visit trips for $300 total, 4 weekend vacation trips for $300 total, and several day trips to the beach or hiking for maybe $500. So my rough guess is that we'd spend $2,000 total for a rental car, which is well under our current car costs, so that's why it's tempting to get rid of the car.

It just feels so much easier to say yes to travel when you already have the car rather than decide to take on another $100-$300 rental expense. We get utility from the convenience of having a car that can't be quantified, plus we don't care if our cats destroy our own car :). That actually would be a huge problem with a rental.

"$313 per month for the car." - isn't it a little more when you factor in registration + use taxes, oil and tires, "ah crap something broke", and -- most importantly -- the investment returns if you sold the car and either threw the money into the market or used it to pay off more of your 4.75% mortgage?  You didn't include it in your assets, but if it's worth $7k, that's about $200-$300 more per year you can "charge" against the car when weighing whether it's worth keeping or not.  Not a huge increase, but maybe it pushes it closer to the "worth it" line.

LadyMaWhiskers

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Re: Reader Case Study - DINKing in NYC
« Reply #7 on: September 15, 2015, 12:59:50 AM »
No specific suggestions but just a shoutout. You're killing it, saving over $3000 per month on top of principal payoff an 401k. You may not get a ton of accolades here, because Mustachianism is a cult of optimization, among other things. $800 on eating out and bars for 2 people is pretty thrifty by NYC standards.

I'm guessing with the $230k - > 600K condo that you're not in Manhattan, which makes a car much more reasonable. Totally understandable to have a car even though you don't commute in it. If it's worth much, you might think of downsizing that. Or, if it's not worth too much and you could street park it, that would be some savings. It can be hard to get motivated about small savings in the scope of your size budget (at least I have a hard time with that sort of thing.)

Also you mentioned you have a cat. Can you rent it out, or does it just sit there all day?

mo_money_mo_principal

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Re: Reader Case Study - DINKing in NYC
« Reply #8 on: September 15, 2015, 08:19:10 AM »
Quote
Also you mentioned you have a cat. Can you rent it out, or does it just sit there all day?

Lol my cats are useless, but we love them so much! And thanks for the shoutout. I expected we wouldn't get much love for how much we spend, but I'm pretty happy with how we're doing. Forgot to mention that I had to get my SO on board, so we've found a good middle ground between frugal and enjoying the city.

You're also right about not being in Manhattan. Having a car is definitely nice in the outer boroughs, and I would never consider it in Manhattan.

@csprof you're right that there are other costs to the car that we should consider.

@MonkeyJenga my SO and I compromised on cooling. That's why we got the Nest - to have a wider range of allowed temps and to take advantage of auto away. I haven't heard of NYC mustachian meet ups! Where do I find more info?

2Birds1Stone

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Re: Reader Case Study - DINKing in NYC
« Reply #9 on: September 15, 2015, 08:33:14 AM »
You guys are doing great!

Being in your 20's with $500k+ net worth and that kind of income in nothing to sneeze at.

With a 58% savings rate you are on path to FIRE before 2030 I would say. If you save your SO's bonus and cut your expenses just a hair, you could likely get savings rate to 65% without much effort.

That would mean with your current net worth you would be FI ~ 35 years old.

Keep it up =)

MonkeyJenga

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Re: Reader Case Study - DINKing in NYC
« Reply #10 on: September 15, 2015, 10:34:03 AM »
@MonkeyJenga my SO and I compromised on cooling. That's why we got the Nest - to have a wider range of allowed temps and to take advantage of auto away. I haven't heard of NYC mustachian meet ups! Where do I find more info?

Gotcha. It still might be worth it to look into leaks and the efficiency of your apartment/appliances. I'm in a not very well insulated apartment with an SO who looooves air conditioning, and we're around $110 in the summer. We can't make any real changes because we rent, though.

Meetups thread: http://forum.mrmoneymustache.com/meetups-and-social-events/nyc-meetup-on-sunday-june-22nd/300/

You're clearly in a great position regardless, with your incomes and condo appreciation. Those give you a lot of leeway.

Leanthree

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Re: Reader Case Study - DINKing in NYC
« Reply #11 on: September 15, 2015, 10:44:59 AM »
Agree you all are doing well. That condo is gold: between the mortgage payment and the low (by NYC standards) condo fee. I am a NYC renter and the condo fees are what normally kill the idea of ever buying for me.

I'd focus on continuing to improve in your career and getting rid of the car. Not sure where you are going but there are more frugal solutions including just renting a car for those trips (get them outside of NYC, Stamford has good rates that you can Metro North to or Newark Airport if headed that direction). Find a friend with a cat to do a cat sitting exchange so they don't have to come with you. Get a bike for the local trips. Zipcar or similar for Costco.

Just as a heads-up, you all are in the ballpark for hitting the RIRA contribution limits for your MAGI (modified adjusted gross income). When you get your W2s just make sure  http://www.irs.gov/Retirement-Plans/Amount-of-Roth-IRA-Contributions-That-You-Can-Make-For-2015

mo_money_mo_principal

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Re: Reader Case Study - DINKing in NYC
« Reply #12 on: September 15, 2015, 07:42:58 PM »
Quote
Just as a heads-up, you all are in the ballpark for hitting the RIRA contribution limits for your MAGI (modified adjusted gross income). When you get your W2s just make sure  http://www.irs.gov/Retirement-Plans/Amount-of-Roth-IRA-Contributions-That-You-Can-Make-For-2015

Oh dang, thanks for the heads up! We're not married, but seems like you get penalized for marriage on the limit there. At least there is the backdoor option once you hit it.

bb11

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Re: Reader Case Study - DINKing in NYC
« Reply #13 on: September 16, 2015, 12:33:42 PM »
Hey, I'm also in my twenties in NYC. One question and then some of my thoughts.

What is your property tax rate on the condo? And is it limited by the (I think) 6% increase cap? If so, what will it be once it's normalized to the actual property value? I'm always so curious about this subject, and it's hard to find much info online.

Thoughts:

You spend too much on restaurants/bars. I go out to eat about once a week, I feel like that is a decent amount to enjoy it while not going too crazy. I also drink some although admittedly rarely at bars. My all-in food budget is $300. I would imagine you could get your restaurant budget down to that price even for two people.

Your gym membership is expensive. NYC public rec centers are only $100 a year, and most have weight rooms and pools. If that's not fancy enough for you I think Crunch Gym and Planet Fitness are in the $15-20 a month range.

You spend a lot on travel. Maybe try fewer longer trips? Also look into Couchsurfing, or if you're not comfortable with that then Airbnb.

Don't take taxis. Do you ever really need them here?

All in all though, you're still golden with that condo. I spend less than 30% of what you do yet you have 5x the net worth. Great job!

mo_money_mo_principal

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Re: Reader Case Study - DINKing in NYC
« Reply #14 on: September 19, 2015, 12:29:24 PM »
Quote
What is your property tax rate on the condo? And is it limited by the (I think) 6% increase cap? If so, what will it be once it's normalized to the actual property value? I'm always so curious about this subject, and it's hard to find much info online.

Our rate is 12.855%, but not sure about the increase cap. We have a tax abatement with about 25 years left, so our taxable value is only $4,500 for the year, which puts our yearly taxes just under $600.

Quote
Your gym membership is expensive. NYC public rec centers are only $100 a year, and most have weight rooms and pools. If that's not fancy enough for you I think Crunch Gym and Planet Fitness are in the $15-20 a month range.

My SO just dropped his gym membership (but we still have to pay another month), so gym will only be $30 for me. I think it's pretty reasonable, especially because we don't have a lot of cheap gym options that are within a short walking distance.

Quote
Don't take taxis. Do you ever really need them here?

I just lumped taxis into the rest of auto stuff (Mint was including yearly registration as well), but we don't take them that frequently. I actually walk to and from work about 95% of the time (1 hour each way), or I'll take a Citibike (membership paid by work). My subway costs come out to about $10 per month, so I bank most of that savings but might take an Uber or taxi every once in a while if I'm coming home super late and feel unsafe.

bb11

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Re: Reader Case Study - DINKing in NYC
« Reply #15 on: September 19, 2015, 04:08:42 PM »
Quote
Our rate is 12.855%, but not sure about the increase cap. We have a tax abatement with about 25 years left, so our taxable value is only $4,500 for the year, which puts our yearly taxes just under $600.

So you're rate is only 0.1% of the total condo value? Wow.... I thought property taxes were usually around 1% in NYC. How does the tax abatement work?

jacksonvasey

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Re: Reader Case Study - DINKing in NYC
« Reply #16 on: September 21, 2015, 06:15:51 PM »
Before we had our daughter, we had planned on renting a vehicle to drive from CT to VT the 6 or 8 times a year we go to visit DW's family.  We were worried that we would question visits due to the in-your-face expense of renting a vehicle, vs. always paying it, where you don't really notice it.

So our compromise was going to be that we would auto-debit $200 a month into an ING account specifically for renting cars, and pay out of that when we rented.  We would have periodically transferred excess cash elsewhere, but the point was to not worry so much about incurring the expense, since we were already allocating the money for that purpose.

We never got to test that idea, but I think that's the only way it would have worked out for us.

Sibley

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Re: Reader Case Study - DINKing in NYC
« Reply #17 on: September 22, 2015, 01:41:03 PM »
No suggestions, but YAY CATS!

LadyMaWhiskers

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Re: Reader Case Study - DINKing in NYC
« Reply #18 on: September 22, 2015, 11:42:18 PM »
Quote
Our rate is 12.855%, but not sure about the increase cap. We have a tax abatement with about 25 years left, so our taxable value is only $4,500 for the year, which puts our yearly taxes just under $600.

So you're rate is only 0.1% of the total condo value? Wow.... I thought property taxes were usually around 1% in NYC. How does the tax abatement work?

Tax abatements are a construction incentive. Very arguable whether construction needs external incentives in NYC, given the market prices, but abatements blossomed under Bloomberg after nearly a decade of almost no new housing units under Giuliani (due to restrictions on building, not market forces.) Good thing the tide turned on that! For all that prices are astronomical in NYC now, when I graduated in January 2001, you basically couldn't get an apartment. Vacancy rates were like 0.001%. I did two dangerous sublets, followed by a 4-person share upstairs from the landlords in their duplex, and we paid 3 months rent upfront in fees but got only a month-to-month lease.

So tax abatements work by not collecting much property tax from the owners of new construction. Since the city needs money to run, the slack is made up by the owners of old construction. The abatement allows the developers of the new construction to charge more in purchase price for the units, and thereby get more profit. You might say that profit is skimmed from the city's future coffers. Sorry if this sounds bitter...I'm just sayin', there's no more magic to it than that. That said, across the board, NYC property taxes are cheap relative to purchase prices.

When I lived in NYC I was never really in the market for new construction, but I always wondered/worried what would happen to market value when taxes came up to par with non-abatement units.