I like these "what if" scenarios.
I'm always telling myself I can't afford things, but that is because I have certain rules for myself and certain goals in mind. What if I didn't? What if I lived by other rules?
First off, basically a lot of Americans save NOTHING. Let's say I make somewhere around $85,000 with bonus, gross. If I didn't have any 401k deductions, didn't use a flex spend account, I estimate my spendable income would be about $4332 per month after taxes.
Many New Yorkers spend more than 30% of their income on housing. But let's just say I spent about 28%, or $2000 a month. That might get me a studio in Manhattan or a 1-bedroom in Brooklyn, maybe a small 2-bedroom in parts of Brooklyn, if I was renting.
If I was buying, with 20% down and a 5.5% interest rate (which would probably have to be one of those interest-only ARM deals), I could buy an apartment priced at about $350,000, assuming the maintenance would be $500. If I put 10% down, I could only spend about $300,000. $300,000 is about the minimum going rate for studios in the more desirable neighborhoods of Brooklyn. In Manhattan, maintenance charges tend to be higher, so I really wouldn't be able to find anything at this price beyond the tiniest of unrenovated studios (with a hotplate for a kitchen) unless I went way uptown, which would be a longer commute than being in Brooklyn.
In any case, I'd be left with about $2332 to spend on the rest of my expenses:
Food: as it is, I sometimes spend over $800 a month on food, without eating in restaurants more than once or twice a week. Most New Yorkers eat out a lot more often than that. $1000 a month is probably still quite conservative compared to a lot of people at my income level or less, who buy their lunch every day and eat dinner out 3-4 times a week and order in Chinese food the rest of the time. So that leaves me with only $1332 for everything else:
Subway pass would be $76 a month
Gas/electric maybe $80 a month
Telephone is around $120 a month
Renter's insurance about $13 a month
AOL about $24 a month, but if I had DSL that could be more like $50 a month, I think.
And what if I had cable TV with premium channels? Say another $60 a month? (Maybe a cable modem package deal would be less, I admit I'm not that well informed about it!)
Now I'm down to $1173 a month.
Haircuts are $80, almost every month. (I could easily spend more than that, especially if you also accounted for things like makeup, manicures, laser hair removal, etc.)
Clothes: I managed to spend an average of $300 a month last year on fairly basic things like a couple of suits, a couple pairs of shoes, some basic jeans, pants and tops from stores like Ann Taylor, the Gap and J.Crew, often on sale. What if I'd thrown in the almost obligatory Seven for All Mankind jeans at $180 and a pair of Manolo Blahniks at $600? A handful of designer items at full price could easily double my clothing expenses to $600 a month.
What if I had a car? I guess I could lease one for a couple hundred dollars a month. Parking in Brooklyn would probably be $150 a month or more. And car insurance must be a fortune here, though again, this is not an area I really have a clue about!
Suddenly I'm pretty much out of money, without covering all these things I haven't even talked about:
Entertainment (a movie every other weekend is already $20+ per month)
Gym (easily $100 a month and more in NYC)
and good old "miscellaneous"
Of course this is very New York-centric view. If I lived outside NYC some of these expenses (food, rent, gym, clothes) could be a lot less, but I still think I wouldn't be able to afford a lot of things that most people take for granted. And of course it's hardly a sob story if someone making $85,000 a year can't afford Manolos and Seven jeans. But the things I'm describing are how a lot of people live here, and as always, that keeping-up-with-the-Jones thing comes into play. Not everyone might do all of these things, but I bet there are plenty of $30,000 a year assistants who are eating PB&J for lunch every day, not just because they heard Anna Wintour does it, but so they can afford to buy clothes, do Pilates, have a dog and drink $12 cosmos all night, just like everyone else they see. The idea of putting a few dollars in the bank is the last thing anyone thinks of, because it's not a conspicuous marker of status in any way. If we all had to display our net worth on our foreheads, it might be a different story! This is one of the ironies about the way people deal with money. It's considered inappropriate to publicly discuss how much money one earns and has in the bank, but it's practically required to discuss or at least display how much money one spends.
Friday, October 14, 2005
I like these "what if" scenarios.