^That is my husbands thinking too re $500/month. I think we should at least wait to see how things shake out before supplementing him. I just don’t see how, with a take home of approx $3000/month a single guy with no debt, no car payment, no insurance costs, no cell phone bill, cannot live on that amount of money.
Seems simple enough to spreadsheet it out! My D and I were doing that today - taking her pay, subtracting health insurance, taxes, what she plans to put in 401k (at a minimum, what the company matches), food, etc to figure out what rent is reasonable.
Love this thread for a variety of reasons.
First, D2, living in Boston, just became a permanant employee, after being a temp, at a wage more than twice as much as the job she moved to Boston for a year ago. The job she moved to Boston for was a non-profit that paid little and worked her to death. She is still living in the house she moved into in her last job. Although it has improved, cleaned up and have house rules, she wants to move.
She had some opportunities, but I thought they cost too much given her gain. Where she lives now is very cheap, has parking and is close to the T. She just doesn’t like the roommate that has the lease.
My thought is to stay and save money for–grad school, traveling, buying a place?? But if she is unhappy. Now I have an idea how much she should pay max. BTW, she is only paying $400 plus some utilities with four roomates… Each have a bedroom and there are two floors and two baths.
So D2 is another city. Haha. She lives in Manhattan and has, since she graduated 5 years ago. She was making the same salary as some other graduates mentioned on this thread when she graduated. She lived with two roommates in a full service building in Manhattan with 24/7 doorman and concierage. We gave her no supplement.
After two years, she moved into her own 1 bedroom apartment on the UES on 86th and 5th, a half block from Central Park and two or three from the MET. Wonderful location. Her current rent, living alone, is a bit more than 25% of her salary. But that is okay, because her bonuses have been more than twice her salary. So even if they went down, she could easily cover her rent.
That is part of why she is looking to buy right now. But it is a sellers market in Manhattan.
<<<
We had always said we wouldn’t do allowance anymore once they had jobs but H came up with this idea - whatever they put away in company 401k/match, we would give them back in cash. This would encourage them to put away the max for the future and take advantage of compounding, but not decimate their budget. This would also be a way of transferring $ to each kid without gift tax. Thoughts?
<<<
Sounds fine, but I’m not sure I understand the gift tax concern. Can’t you (as a married couple) give each child up to about $26k per year and avoid paying Gift Tax? Would either child be putting more than $26k per year in a 401k?
I like your idea of encouraging the 401K /match and giving them the cash. Should not be an issue with gift tax (which I think is now $28K/year).
D lives in an expensive city and in addition to keeping her on our cell plan, she is also on my health insurance. I can do this very inexpensively and it saves her quite a bit. My insurance plan is excellent and has in network providers where she lives.
Congratulations on your kids’ graduations and getting jobs.
If they are considering roommates then that should give the opportunity to use a smaller % of their income for housing. I mean, if you are splitting the costs, is it necessary to buy as much as you can afford or is it better to save the extra $$ for entertainment, extras or a nest egg for when they DON’T want roommates???
If they are working and planning on a reasonable social life, they will not be spending that much time at home anyway! For a first apt., get someplace safe, clean, reasonable storage and aesthetically decent (remember, it doesn’t have to look like your home - this is their first apartment - they can be happy with less!)
And also PG, you mention helping them out first year with a couple of expenses - they should choose an apt. that will allow them to pick up those additional costs (phone/insurance, etc.) AFTER a year or so. IMO, it’s healthy to make them gradually take over those costs so they DO learn to budget.
My D pays more in % of her income for rent than her brother does. Brother has a roommate, his gf so they are able to split their expenses. But they want to buy a house or condo because they think buying will be even less expensive.
D wanted to live alone although I am sure her BF is there much of the time. It was important to her to have a building that is secure, has dedicated parking and a washer and dryer. She can also walk to restaurants and bars so she pays more to have those things. She drives an older used car so she can pay more in rent.
I guess I have to say that the things I think are important are different based on if the young person is male or female. I want the D to be in a secure location more than I worried about my S.
Both my sons live in NYC and make good, but not great salaries by NYC standards. They have chosen to live with roommates in not hot Brooklyn neighborhoods and have been able to keep their rent/utility expenses below 20% of gross income. I have kept them on our cell phone plan and gifted clothes for birthdays.holidays etc., but both are now living on their own dimes beyond that point. Now, my D will hopefully be moving back to NYC after she graduates law school next year, and for her I think I will be more concerned about the safety of the neighborhood/building, though I’m not sure how high that will be on her priority list. She’s working here (NYC) this summer and will be living in a walk-up with only a buzzer for security, so I will be holding my breath. My kids make me hold my breath a lot! As for rules of thumb, I also think it depends on the sensibility/goals of your kid. For all of mine, saving money is paramount, and I think they often choose to go without or to live in less than I think would be desirable circumstances to pad their savings accounts.
I live in NYC and currently spend ~35% of my take home on rent in an apartment shared with roommates, but that percentage will likely go up to 50% because I’m trying to move to a nicer/safer area. It really depends on spending habits. I spend very little money outside of groceries, which means that I can afford to put more money towards rent. YMMV
This thread made me curious. Both my working kids make over the amount mentioned up thread. One of mine went to college in a inexpensive location. She was able to have a 2 bedroom apartment with a full size washer and dryer in the unit for $650. She used the 2nd bedroom as her study space. Her first job included housing. She had a real shocker when she took a job at a decent salary in San Fran. She started looking with one budget but it kept creeping up as she realized she had to pay more. She ended up in a good sized studio in a safe neighborhood within walking distance. She spent almost 50% of her income on rent. We supplemented her with 300 a month. She did fully fund her 401k. It was important for us that she was in a safe area and that she not have a really long commute. She stressed about money the 2 yrs she lived in SF. We reminded her she could have lived with a roommate and saved. It was her choice to live alone. She looked into living outside the city but felt by the time she added in commute cost and loss of time it wasn’t worth it.
She now lives in another high cost of living city but not as high. This area doesn’t have many studio or 1 bedroom options. She is moving into a house and will have a housemate. This will cost her about 25% of her gross.
S also lives in a fairly high rent area. He only spends 15% of his income but he lives with a GF and also another housemate.
One additional benefit of shared housing is that the utility costs are spread out over more people. My D will save a bit since she will now be able to split utilities.
My D is also lucky she is student loan free. If she had a loan payment she would have had a mucher harder time. S lived at home his first year working and was able to pay off his loan early.
It is probably under your “etc” but be generous for utilities, cable, telephone and calculate the expected cost of transportation. For instance, one might have to rely on taxis or Uber if working late in an area that is not well served by public transportation. Having a car can also be expensive if one has to account for parking and tolls. As a reference, my “etc” runs as high as my 1/2 share of the apartment in San Francisco. Young graduates might be surprised at the cost of paying for cable, internet, and the many things that appeared magically in college.
I do think young adults, when they’re working hard at early career jobs, should have some fun money. It can be encouraging when they have some “fruits of their labor,” not just the drudgery. It just needs the right balance.
Some places like SF or NYC are fun just to be in, wander, people watch. Museums have free days, maybe you love cheap ethnic restaurants or meet for happy hour, but eat at home. Or to afford thode concert tickets, you do potlucks with friends. But I think fun helps. And the memories are good.
The large city will have more of that free / low cost entertainment. The smaller city, not so much, but there’s nothing I can do about that!
Thanks, xiggi - I did count in utilities, including waste management if not covered by the apartment, laundromat if not in the building, etc. The one who is working in the large city will be in an office that is extremely well served by public transportation and proximity to that will be a key part of that one’s choice.
Also congrats PG for what sounds like both kids launching! Double congrats if they have something to “do” lined up!
From your mouth to God’s ears! Yes, they both got jobs within 1 day of one another - reminiscent of their Early Decision date in which they each got acceptances within 10 minutes of one another!
<<
laundromat if not in the building,
<<
Is it difficult/impossible to find affordable housing with either in-unit laundry or at least in the building?
Not in real apartment buildings. In old houses that have been carved up into apartments, possibly.
At least in all the cities I’ve ever looked (NOT major metropolitan areas like Boston, NYC, etc)… the answer to this question is yes.
I did some recon for her, and the first apartment I looked at was a 3 flat (retail on the bottom, 2 identical apartments on top) and no, no washer/dryer available. There are nearby laundromats and a “pay-by-the-pound” cleaner.