What do people spend money on, in the real world?

August 7, 2010 1:52 PM

I'm living and working in the "real world" for the first time, namely Manhattan. Help me figure out my budget, and thus how much I should spend on rent.

(For previous questions in the "Jacen's new path in life" series, see 1 and 2.)

So somewhat suddenly I've found myself working and living in Manhattan, earning $65K/year, and pretty happy with things. I'm staying in a friend-of-a-friend's guest bedroom while I search for apartments, and that's all working out pretty well. I basically have a few options for apartments, the most interesting of which are at $1100, $1550, and $1800/month. (All are with roommates.) And now I probably need to decide.

What I need your help with is figuring out what a real-world budget looks like, for someone who wants to have fun in Manhattan. I've got that my $65K income will probably become $45K after taxes. And I've got good figures for utilities, MetroCard, and other bills.

But, how much will I be spending on food? In Pasadena I spent about $300/month, eating out about thrice per week, but I could see that swinging wildly if I eat out as much as I have been during the first week. And more vaguely, what other things regularly sap one's income? Maybe going out for drinks with coworkers?

Basically, if you're in a somewhat similar situation, I'd love to hear how your money gets budgeted, and where it goes. When I do the math, even at the $1800 rent, I end up with about $1500/month left, which seems like a lot---and indicates to me I'm probably missing something.

posted by Jacen Solo to Work & Money (24 answers total)

Which neighborhoods are your options in? This will help us will help you give better advice on your budget. Trying to feed yourself in, for instance, the West Village or Midtown or Harlem are different animals.

Find out if your job has a pre-tax Metrocard plan; they go under different names but all do the same thing. This will drop the $89/mo to a little over $60/mo.

Going out for drinks is expensive. Unless you're in dives, you'll be paying no less than $6 for a mixed drink during non-special hours. Oh, and tip on every single drink.

$1500 will get you farther than you think, depending on your habits? Are you a big shopper? Are you a social butterfly? Or an ascetic homebody?
posted by griphus at 1:59 PM on August 7, 2010

Also: Please consider moving to an outer borough. Unless you've scored the Deal of the Century (as opposed to a refitted tenement apartment older than indoor plumbing), I have never heard a single good argument for living in Manhattan when you can live, say, fifteen minutes outside of Manhattan.

Then again this depends on how old you are and where do you want to hang out and with which sort of people? Young rich types? People with families? Hipsters?
posted by griphus at 2:04 PM on August 7, 2010

For starters, to be eligible to sign a lease without a guarantor, most landlords will require your salary to be at least 40 times your monthly rent. In some cases, it's 50. That puts your maximum rent range at 1300 - 1625. I've lived in NYC for over a decade now, and I definitely wouldn't want to be making less than 40 times my rent. (I've tried it, in college, and I didn't enjoy it.)

I've also lived in NYC at 65k, and I definitely didn't have 1800 left over every month, though I wasn't hurting for cash either. For me, the biggest money pit is definitely going out with friends. Those $9 cocktails and $20 late-night cab rides add up.
posted by miskatonic at 2:07 PM on August 7, 2010

Best answer: $1800 seems like a lot of rent for your income. In comparison, I earn about twice as much and currently spend only $1200 -- wouldn't go over $1500 if I could help it.

Does your budget include big-ticket items that only come up a few times per year -- Christmas, trips home, vacations, home furnishing and appliances, winter clothes shopping, etc? Those will kill your budget if you don't plan for them. And don't forget to max out your retirement accounts and build up your emergency savings account to 3-6 months' expenses.

And in New York, you'll positively bleed money on drinks and eating out if you're not careful, so you should definitely plan for and keep tabs on that. In my opinion, you'd be better off getting the $1100 apartment and using your extra cash to enjoy New York culture and social life.
posted by yarly at 2:07 PM on August 7, 2010

Seconding the suggestion for an outer borough. With roommates in Brooklyn or Queens you can spend well under $1000/month on rent. At your income level, not having to spend most of your paycheck on rent will make a huge difference. I was living in NYC on a salary similar to yours, and moving from Manhattan to an outer borough and literally halving my rent was one of the best decisions I made. I had enough of money after paying rent to enjoy myself on some frivolous things but also enough to save every single month.
posted by lettersoflead at 2:14 PM on August 7, 2010

Best answer: Ha. If you plan on eating out x times a week, multiply that number by 5-7. I tried the whole limiting eating out and not eating out thing and it did not work. Busy life + great restaurants = eating out. My tastes are locavore gastropub and I spend about 25-40 a meal, eating out 7 times a week. It's an expensive habit, but the restaurants in NYC were a big draw for me.

What kind of alcohol do you like? Do you have a taste for craft beer, fine wine, or fancy cocktails? Are you in danger of developing such a taste? I certainly did. Add on $50-$200 a week.

I do Freshdirect for many of my groceries, which ends up being $80-100 a week. Considering what a pain grocery shopping is in the city, that's OK with me.

I also spend money on laundry. There isn't a good laundromat in my building, so I use a wash and fold service. $12-$20 a week or so.

Do you like music? Do you plan on going to concerts? Add $10-$40 a week.

Metrocard? I would get the monthly pass if you commute at all, and that's I think $90 a month. I am a telecommuter and spend about $60 a month.

If your apt is cheap in Manhattan, expect to spend money on pest control too...

I make about what you do. It's on the lower side of salaries that allow you to enjoy the city, but it's manageable.
posted by melissam at 2:17 PM on August 7, 2010 [1 favorite]

Response by poster: These are great so far; thanks a bunch. I could more monthly numbers if at all possible, although the general trend of advice toward spending less on rent is also reasonably helpful. It's just that I've kind of heard that advice before, but am entirely unclear on where the rest of that money ends up going.

Just to answer some questions:

• Looking for downtown, with the most appealing neighborhoods being East Village, Chelsea, West Village, Gramercy, and Flatiron. Not interested in living in an outer borough, in part based on this question.
• I'm 22 and want to hang out with other people within the 18--30 range, either students or professionals.
• I'm not a "big shopper," I'd say, but I do like buying myself things when I can. Mint.com says between $50 and $400/month, maybe average $150?
• I've become much more social over the last few years and would like to continue that upward trend, perhaps even into "social butterfly" territory as much as time allows.

posted by Jacen Solo at 2:26 PM on August 7, 2010

what other things regularly sap one's income?

One of the biggest expenses I have is buying the appropriate wardrobe for work and socializing. You can approach this as a regular monthly line-item in your budget, like rent, or you can approach it as more of a once-in-a-while larger item, like taxes or insurance premiums. It just depends on your shopping style. But it's definitely a large expense that ate into my wonderful new salary faster than I expected when I got my most recent job.
posted by SuperSquirrel at 2:37 PM on August 7, 2010 [2 favorites]

I'd go for Alphabet City (< Ave. C) over the East Village, which is now pretty much an extension of the NYU campus with unnaturally hiked rents. Also, consider throwing the Lower East Side into the mix.
posted by griphus at 2:38 PM on August 7, 2010

Set up an account for vacations. Now that you are in the working world people are going to start asking you to go to go on trips with them, from splitting a beach house for the weekend to a month in Australia. I have a credit card that gives me miles and I also have a bank account that I put some money in each month for doing just this.
posted by fshgrl at 2:43 PM on August 7, 2010 [1 favorite]

Best answer: In terms of shopping, with a new job you might want to budget on the higher side ($400 a month), depending on your office culture. You might find yourself needing new shoes and shirts for the job. I'd consider $400 for your groceries and then whatever you chose to spend on top of that for eating and drinking out. Also even with the metrocard a little taxi budget never hurt. I have to agree with yarly that it's the big ticket items that blow the budget. Putting aside for savings, travel, and gifts is essential.
posted by gillianr at 2:53 PM on August 7, 2010

You can have a great time in NYC at any price point; it's actually liberating to know that there will always be places you can't afford, so everyone has to pick their level, not just you. The trick is not getting too aspirational, and knowing the spots that offer the most fun for your dollar. Ippudo for incredible $13 ramen, Café Habana for taquitos and beans and rice with the sexy people. Ina for consignment couture. Free Thursday night rock show (and open bar) at the Varvatos store — this week it was the London Souls!

I have something I call the Batali Method of regulating expenses while still living large in lower Manhattan. When I was making $200K+, I ate at Babbo and Del Posto. When my consulting business contracted but I was still making $100K+, I ate at Lupa and the Spotted Pig. When my venture-backed startup ran low on money to pay us founders, I ate at Otto and Bar Jamon. Now, while I'm ekeing out a living and trying to rebuild my old company, I cook at home from his books — and wave at him when I see him, since we live across Fifth Avenue from each other.

Do it like that, and you can have a great time for $1000 a month or so. It's still hard to go out at night without spending $50-$100, and it's hard to stay in when you get the 11 PM "we're at the bar a block from your apartment!" call. Just don't do it every night!
posted by nicwolff at 3:34 PM on August 7, 2010 [1 favorite]

Oh, I forgot about dating. If you are a hetrosexual dude...NYC is obviously kind of liberal, but you are still expected to treat once in awhile, esp when you first start out.

How much do you care about travel? Do you like to go international? Or would you be satisfied by traveling to a lodge in New England or a beach on Long Island?
posted by melissam at 3:41 PM on August 7, 2010

Looking for downtown, with the most appealing neighborhoods being East Village, Chelsea, West Village, Gramercy, and Flatiron. Not interested in living in an outer borough, in part based on this question.
I'm 22 and want to hang out with other people within the 18--30 range, either students or professionals.

*reads previous question* Huh.

All of the 18-30 year olds I know who live in New York live in either Brooklyn or Queens--including my sister, who lived right on Union Square for a bunch of years during college. There's no way she--or anyone else I know, really--would be able to afford a really decent living space in Manhattan. None of them pay $1800 to live with roommates. And these are all working professionals.

And they're happy--overwhelmingly so. They meet up with their friends for brunch every weekend and spend their weekend evenings out drinking and go to cool cultural things and take the train to Coney Island etc etc. I'd submit that the answers to the previous question lean the way they do because it was someone already contemplating the move and looking for confirmation. Based on your posting history, I highly suspect you'd be super happy in Brooklyn.
posted by PhoBWanKenobi at 3:43 PM on August 7, 2010

If I were making $65k in NYC and I decided to splurge on a $1800 apartment, there's no way I would live with roommates. Anyway, you're not making quite enough money for that apartment. You should make at least $72k to be paying $1800 (monthly rent * 40 = minimum annual salary).
posted by Jaltcoh at 4:02 PM on August 7, 2010

Best answer: Ramit somebody has a great book on finance for young people. I think it is called 'I Can Teach You to be Rich.' He suggests using percentages for figuring out how much money you should spend in each category. For example, let's say your 45k after taxes works out to $3750 a month. Your breakdown might look like this:

60% for fixed expenses ($2250)
This covers rent, phone/cable/internet, student loans, bus pass and any fixed bills you get every month. It also would cover necessary groceries, but not meals out. You can bump this to 65% ($2437.50) and take a hit on the fun money (reducing it to $937.50) if you need more money for this area.

15% for savings ($562.50)
15% for investing ($562.50)

Savings is for emergencies and building up a fund for big-ticket items. Investing would be a basic retirement fund of some kind.

30% guilt-free ($1125)

This is where he differs from other books in that he does not suggest you should never buy a latte or fast food meal. This is your fun money and you can do whatever you want with it (but of course if you spend it all on movies, or lattes, or shoes or whatever your particular poison is, you might not have enough for vacations or other desired items!)
posted by JoannaC at 4:35 PM on August 7, 2010 [4 favorites]

Bit of a problem, JoannaC--your numbers work out to 120-125%.
posted by PhoBWanKenobi at 5:12 PM on August 7, 2010

You can have a great time in NYC at any price point; it's actually liberating to know that there will always be places you can't afford, so everyone has to pick their level, not just you.

This is a really great point about NYC -- and another reason why you should live in Brooklyn or Queens or a cheaper Manhattan neighborhood (they do exist), around friends at the same income level and the businesses that cater to them.
posted by yarly at 7:40 PM on August 7, 2010

Jacen Solo: "Basically, if you're in a somewhat similar situation, I'd love to hear how your money gets budgeted, and where it goes."

The general rule of thumb is that landlords won't rent to you if you don't have 3x or 4x rent in income. Hopefully you're getting proof of income (and income!) now or soon.

I was going to go over my expenses in GNUcash, but then I realized that the closest I've been to Manhattan is Manhattan KS. I'm not sure if NYC counts as the 'real world', because it seems many young people go but leave in a few years, jaded about the difference between what they were sold and what happens.

The majority of advice I would give from a Midwestern metro doesn't really apply to KC, so here's the few nuggets that hopefully stand the test of geography:
* Web hosting (20 bucks a month)
* Video games (a sad note: 50+ hours a week really cuts into that time)
* Family gifts. Now that you're not a broke student, people expect these from time to time.
* Furniture. You spend a third of your life asleep. I recall a study where people were asked to list the top biggest expenses in their life, and things they value most. Good beds were among those expensive things people liked, and boats were among the least. Get a good comfy bed, skip the yacht.

There's also saving and retirement investments:
* Roth IRA ($5k max per year, for people with lower income, it's a great plan. you may want a pretax IRA though, or 401k)
* OA and FICA. Technically expenses, but hey, they could possibly fix these before I retire.
* Short term liquid cash. Checking and Savings. Don't keep your bank account near empty, it's a recipe for one unexpected expense away from a very expensive loan. Consider opting out of debit overdrafts. How much you keep on hand depends on mandatory monthly expenses and your access to credit if an opportunity arrives.
posted by pwnguin at 8:02 PM on August 7, 2010

err, the majority of advice I would give from a Midwestern metro perspective doesn't really apply to NYC. It applies to KC because I live there. *sigh*, perhaps its time to cook up a fake 3 minute edit window.
posted by pwnguin at 8:04 PM on August 7, 2010

It would be really helpful to know what types of bars and restaurants you hope to be frequenting. There is a huge range in New York and depending on what kind of scene you're into, you might be spending $3 or $10 on a beer, or eating $5 noodles in Chinatown or spending $50 on dinner in the Village. I know a lot of people in their early to mid-20s in NYC, some are artsy, some are non-profit or government folks, a few are in finance, and their lifestyles are all so drastically different. And there's no shame attached to any of them. Actually, being young and cheap is sort of a hip pastime in New York.

For what it's worth, I moved to New York straight out of college a few years ago. I was making $33k. My first apartment share was $875 and I moved out after six months because I was living paycheck to paycheck. I couldn't afford to eat out or go out to bars as much as I wanted (money restricted me to about twice a week each, and not at expensive places). Little things were stressful, like, say, realizing I needed to own more than three dress shirts. I moved into a place that cost about $200 less a month. It was like night and day for my emotional well being to go to work every morning knowing that I could afford to go out and do something on the weekend.

I got a substantial raise the next year and promptly went out and rented a new apartment for $1100. It wasn't worth it. I used the extra space to store a bunch of empty boxes and went back to living paycheck to paycheck.

So those are my two pieces of advice: Your food/drink/entertainment budget will vary wildly based on your choice of lifestyle and who your friends are; and, follow the conventional wisdom to spend less on rent because it's really just not worth it.

Oh, and piece of advice number three: Move to Brooklyn. Seriously. For my money it's the best place in the world to be in your twenties right now. There are great bars and restaurants and parks and it's beautiful and there's space to think. I actually feel bad for my (few) friends who live in Manhattan.
posted by dixiecupdrinking at 11:20 PM on August 7, 2010 [2 favorites]

Brooklyn Brooklyn Brooklyn Brooklyn Brooklyn. $1800 to share an apartment is significantly more than I pay to live alone (very comfortably) in Greenpoint. My commute to midtown is 20 minutes, and I don't generally go to Manhattan on the weekends, because everyone lives in Brooklyn.
posted by pollex at 6:42 AM on August 8, 2010

Oops! Okay, knock the 15%s down to 10-12% and take the rest out of the fun money. I was using his number, which is much higher than my take-home number, so I had to re-do everything. Sorry for the bad math! But the concept really does work.
posted by JoannaC at 3:38 PM on August 8, 2010

So I'll be counterpoint. I moved into the city when I finished gradschool a bit more than 2 years ago. I weighed the other borough options and when I realized that thanks to this economy Manhattan rents aren't what they once were and I stayed in the City. Wouldn't trade it for the world. You don't necessarily have roaches if you don't pay through the teeth. I'm on the Upper East Side paying about $1150 for a nice walk up with hard wood floors and exposed brick. Love it, moved from another apartment and love having my own space.

I work long hours, think 9-7 and like being 15m from my office. It also cuts down on the late night cab rides because you're so close. So many more free things to do here based on volume of activities available.

I won't stay here forever, but I'm enjoying it at the moment. I long one day for reasonable cost of living, but that's not Brooklyn or Queens either
posted by TravellingCari at 6:43 PM on August 8, 2010