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What Can I Realistically Afford?

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rated:
Hi guys, first post here. I've been a lurker for a while.

I'm looking to move into my first place and want to get some feedback on what I can realistically afford. I know the 30% rule and all of that stuff, but I figure each situation has to be somewhat unique. I live in Southern New Jersey, just outside of Philadelphia.

I'm 25 and making $84,000 a year currently. There are beautiful apartments about five minutes from my office (I currently drive about 45 minutes both ways, so that would be nice...) that I really like, but they are definitely on the pricey side with a lot of amenities (pool, gym, etc.). There are a few units available there that range from $1700-2100/month. They are also offering two months rent free currently.

I have about $44,000 put away in a savings account, $17,500 in a Roth IRA and $17,000 in a 401k. I also owe about $14,000 on an auto loan and about $9,000 in student loans.

I know this is a lot to spend in rent (this isn't including utilities). I'm trying to justify it by telling myself that the two months rent free knocks down the actual cost and by the time the lease is up I should be due for a nice raise... but I know that's definitely not the best kind of thinking, and it certainly isn't the type of financial thinking that has gotten me this far.

I'm mainly just looking for some feedback/advice/experience. If I can't afford this, what would be the highest I should really look? Is there anything else that I should be doing with my money?

Thanks for your time.

 

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Money topic aside, I used to do the long commute with train/subway/driving for about a year before I realized there is a... (more)

sclantw (Jan. 27, 2017 @ 11:32a) |

I think it's much less than an extra 250 hr/yr. Assuming an extra 20 minutes each way, it's an extra 40 minutes RT. 40 m... (more)

samko (Jan. 27, 2017 @ 4:36p) |

True i just used 50×1hr day (30 each way, not the difference and not considering vacation). OP mentioned 45 minutes eac... (more)

Bend3r (Jan. 27, 2017 @ 4:58p) |

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rated:
Can you afford it..Yes

Would you be better off renting something cheaper and saving or investing the rest in the long run... Yes

rated:
Do you currently pay for access to a pool or gym? If not, although those are nice amenities, it won't offset the cost of the rent.

Could you see yourself selling your car and taking public transportation since it's only 5 minutes away? Your car payment COULD help offset that cost.

rated:
What is your current rent?

rated:
PhDeez said:   Do you currently pay for access to a pool or gym? If not, although those are nice amenities, it won't offset the cost of the rent.

Could you see yourself selling your car and taking public transportation since it's only 5 minutes away? Your car payment COULD help offset that cost.

  No to both the pool and the gym currently. And realistically I would not sell my car.

rated:
BWS said:   What is your current rent?
  Free!

rated:
itsjimmy said:   
BWS said:   What is your current rent?
  Free!

  How about the rate on your auto loan?

You're on the right track.  If it were me I'd probably live rent free until any debt I had was paid off but still a nice cushion in the bank like you have.

Are you maxing out your 401k and Roth?

How about getting a roommate at the new spot?  Is that an option?

rated:
BWS said:   
itsjimmy said:   
BWS said:   What is your current rent?
  Free!

  How about the rate on your auto loan?

You're on the right track.  If it were me I'd probably live rent free until any debt I had was paid off but still a nice cushion in the bank like you have.

Are you maxing out your 401k and Roth?

How about getting a roommate at the new spot?  Is that an option?


The interest rate on my auto loan is 2.29%. 

Would it make sense to use the cash I have saved up to pay off the auto loan and student loans today? I could do it, but I like having that stash in the bank for whatever reason..

401k and Roth are being maxed out. 

I'd much rather prefer to live alone.


 

rated:
itsjimmy said:   
BWS said:   
itsjimmy said:   
BWS said:   What is your current rent?
  Free!

  How about the rate on your auto loan?

You're on the right track.  If it were me I'd probably live rent free until any debt I had was paid off but still a nice cushion in the bank like you have.

Are you maxing out your 401k and Roth?

How about getting a roommate at the new spot?  Is that an option?


The interest rate on my auto loan is 2.29%. 

Would it make sense to use the cash I have saved up to pay off the auto loan and student loans today? I could do it, but I like having that stash in the bank for whatever reason..

401k and Roth are being maxed out. 

I'd much rather prefer to live alone.


 

  What is the rate on the student loans?

rated:
bc3000 said:   
itsjimmy said:   
BWS said:   
itsjimmy said:   
BWS said:   What is your current rent?
  Free!

  How about the rate on your auto loan?

You're on the right track.  If it were me I'd probably live rent free until any debt I had was paid off but still a nice cushion in the bank like you have.

Are you maxing out your 401k and Roth?

How about getting a roommate at the new spot?  Is that an option?


The interest rate on my auto loan is 2.29%. 

Would it make sense to use the cash I have saved up to pay off the auto loan and student loans today? I could do it, but I like having that stash in the bank for whatever reason..

401k and Roth are being maxed out. 

I'd much rather prefer to live alone.


 

  What is the rate on the student loans?

  
It's split into four different loans. Two are 3.86%, one is 3.4% and one is 6.8%. 

rated:
Rather than going from rent free (living with parents?) to 1 bedroom apartment on your own, get a 2 bedroom place with a roommate.  You'll pay less than you would living on your own in the 1br but could still get out from the parents house  When you are single and 25, having a roommate isn't a bad thing. 

rated:
itsjimmy said:    
It's split into four different loans. Two are 3.86%, one is 3.4% and one is 6.8%. 

  I will pay at least the 6.8% loan off from the savings. If you dont have any immediate need for a large sum of money and have a reasonably stable job, I would even pay all the student loans off. It is only 9k and you would still have 35k in savings left.

rated:
itsjimmy said:   I'm 25 and making $84,000 a year currently. There are beautiful apartments about five minutes from my office (I currently drive about 45 minutes both ways, so that would be nice...) that I really like, but they are definitely on the pricey side with a lot of amenities (pool, gym, etc.). There are a few units available there that range from $1700-2100/month. They are also offering two months rent free currently.
 

  At the lower end of your range, 17k in rent per year (with the 2-month discount) is about 20% of gross income. If it will significantly help you get laid, I say go for it!. As mentioned earlier, you can afford it. Just try to be cautious with your spending overall and keep saving.

rated:
There must be cheaper apts to rent. That's the price of many people's mortgages.

rated:
fwuser12 said:   
itsjimmy said:    
It's split into four different loans. Two are 3.86%, one is 3.4% and one is 6.8%. 

  I will pay at least the 6.8% loan off from the savings. If you dont have any immediate need for a large sum of money and have a reasonably stable job, I would even pay all the student loans off. It is only 9k and you would still have 35k in savings left.

  
With $44k sitting in a savings account making .1-1% why not pay off the entire $23k? Doesn't sound like OP is looking to buy a house since he's considering renting so I would think paying off all debt would be wise here.  That or investing some of that $44k.

rated:
While there is value in not living with your parents and in not communing 45 minutes each way, you would be living large if you spent that much on rent. I'd aim for spending as little as possible. Maybe 15 minutes from work instead of 5, fewer or no amenities (since you don't go to the gym anyway), or as already suggested above find a 2-br with a roommate.

rated:
This one is easy, Stay with parents and keep maxing out 401k / ROTH. If you must move out, stay a little further out and reduce the monthly rent. This assumes you would like to have a choice to retire early if you so desire down the road. It appears that you might so why not take full advantage as long as you can? Living a little frugal now, pays of exponentially in the future. My 2 cents.

rated:
how much are nice places renting for 5-20 mins away?

rated:
You need to decide your priority and act based on that.

Do you want to be financially independent as soon as possible? If so - keep doing what you are doing - and save every penny while living with parents. Move out only when you can buy a house outright (at that point it is an investment decision - stock market vs. real estate, and not an affordability decision).

Do you want a certain lifestyle - at the cost of delaying financial independence? Well, then you can go for that!!

Like other's have said above - you have the income so that you have options in front of you. Each of those options have pros and cons and consequences. You, as an adult, need to weigh them and choose!!

rated:
I couldn't imagine living with my parents in my 20's, so I am all for you finding a place to move into. I would also see if you can find something under 1k/month a little farther out.

You could easily afford the 1 bedroom near work, if you want to make that a priority. Just make sure you continue to put money towards retirement, and always spend less than you make. Pay off all of your loans, that will still leave you with aroudn 24k, which even with the high priced apartment should be over a 6 month emergency fund.

rated:
Keep in mind other expenses that you may not be paying for now: utilities, cable tv/internet, food (I assume you eat some home cooked meals.

rated:
1. Pay off both loans
2. Find a cheaper place. Ignore the free months of rent, think about why the company might be offering free months rent (hint - they can't fill the apartments otherwise as they are too expensive)

Find a place to rent closer to $1k/month. Get a roommate and you will get a nicer place

rated:
You get two months free rent but also consider that rent could very well increase every year you stay there, eating up a portion of any raises you get.
If it were me at your age I'd definitely want to move out of the current arrangement but that much rent would put me off. I'd look for something cheaper in the 10-15 minute commute radius.

rated:
Man, you can afford it, but be careful biting off that big of a rent check so early in life... my rent is higher than that -- but I can afford it now. A few thoughts:

1. Once you live in a 'premium' apartment you won't want to scale down, so you're essentially committing to this level of rent going forward.
2. Many people (mostly younger girls) in the complex I used to live in would get a two bedroom and split it. Essentially it would end up being about $1200 a month for each of them... Is that a possibility (the roommate or the younger girl)?
3. I second the notion of slumming it in a cheaper place if you can. Next you'll be wanting that M5. Carefully consider the cost of having nicer things, and the nicer things those nicer things make you want to have.

rated:
It would make sense to pay off the 6.8% student loan from your savings.
A lot of higher-end apartments offer units that basically have 2 master suites, which would make a roommate situation a lot more palatable.
I hate commuting. I get very anxious when stuck in traffic. I personally put a very high value on living close to work.

I'd put a dollar amount on your commuting time and then do a cost comparison. If you compare living 25 minutes away vs. 5 minutes, that adds 40 minutes per day. 40 minutes per day @ 21 work days per month=~14 additional hours per month of commuting. at $40 per hour (close to your current pay rate, you may value your commute time differently) that would be $560 a month.

rated:
You could check if shannonharding still has a roommate opening.

rated:
fwuser12 said:   You could check if shannonharding still has a roommate opening.
  watch out when her cousin tonya comes over though

rated:
These early years are the time to scrimp, save & invest. Op imo go as low as you can go considering your safety (neighborhood), travel time (so you're not exhausted) & optional: not being a stick in the mud or a hermit.

rated:
ryoung81 said:   Man, you can afford it, but be careful biting off that big of a rent check so early in life... my rent is higher than that -- but I can afford it now. A few thoughts:

1. Once you live in a 'premium' apartment you won't want to scale down, so you're essentially committing to this level of rent going forward.
2. Many people (mostly younger girls) in the complex I used to live in would get a two bedroom and split it. Essentially it would end up being about $1200 a month for each of them... Is that a possibility (the roommate or the younger girl)?
3. I second the notion of slumming it in a cheaper place if you can. Next you'll be wanting that M5. Carefully consider the cost of having nicer things, and the nicer things those nicer things make you want to have.

  Resist the temptation of the ​​///M ///M Thread...

rated:
zapjb said:   These early years are the time to scrimp, save & invest. Op imo go as low as you can go considering your safety (neighborhood), travel time (so you're not exhausted) & optional: not being a stick in the mud or a hermit.
  Agree. It's much more difficult to do so when you get older as you climb the hedonic treadmill. 

Although you give up a convenient social scene when you live out in the burbs. I'm presuming his work is in the city and the parents house is 45 min away. Whether it's worth the money is up to him. 

Edit- 17-2100 seems like an awful lot for renting a 1 br in Philly. Try south or west philly. You could probably get an entire row house for that.

rated:
TravelerMSY said:   
zapjb said:   These early years are the time to scrimp, save & invest. Op imo go as low as you can go considering your safety (neighborhood), travel time (so you're not exhausted) & optional: not being a stick in the mud or a hermit.
  Agree. It's much more difficult to do so when you get older as you climb the hedonic treadmill. 

Although you give up a convenient social scene when you live out in the burbs. I'm presuming his work is in the city and the parents house is 45 min away. Whether it's worth the money is up to him. 

Edit- 17-2100 seems like an awful lot for renting a 1 br in Philly. Try south or west philly. You could probably get an entire row house for that.

  Might be able to get almost two row houses for $2100/month.

rated:
Is the job close to Philadelphia or in Jersey? $1700/month is a lot for a 1BR in Philadelphia (I pay less than that for a 1BR + Den), but the city tax will cost you ~$3000/year.

rated:
You're going to save 90 minutes a day. how can you invest that time in yourself to increase your future income? Could you do training to become more skilled at your job. Could you start a side-gig?

rated:
> Would it make sense to use the cash I have saved up to pay off the auto loan and student loans today? I could do it, but I like having that stash in the bank for whatever reason..

> I'm trying to justify it by telling myself that the two months rent free knocks down the actual cost and by the time the lease is up I should be due for a nice raise... but I know that's definitely not the best kind of thinking, and it certainly isn't the type of financial thinking that has gotten me this far.

Pay all the loan off so you're debt free. Don't do the debt-leverage thinking. It only makes your life more complicated with higher risks.

I would set a mid- and a long-term financial goal such as aiming for $1million saved in maybe 8 years, then create a year-by-year savings/invest forecast plan on spreadsheet to see how to reach that goal in practical sense. Then you may have better handle on your rent decision.

You have been doing fairly well considering your age with your existing thinking. That is also something to think about: Saving early always beats saving late due to compound interest from investment. Your income and saving rate are the best tools to build wealth. I would move out of the parents house but get something as cheap as possible (longer commute time, but saving more comparing to the 1.7k/mo rental close to the office), then do aggressive saving if I were in your shoes.

rated:
First off... start paying your parents rent that is close to the market rate for them if they rented out your room. You're 25 with a job that pays $84,000. How can you justify living off them for free? It's one thing if you've fallen on hard times or couldn't find a job after graduation, but you're pretty damn successful. What you're doing is extremely selfish. Honestly, you should consider giving them a huge gift to make up for the past 3 years you mooched of them while making enough money to afford rent.

Then, when you realize it's pretty lame to pay money to live somewhere that isn't yours, find a place to rent on your own. You can afford the apartments you mentioned, but maybe consider something a bit more modest to start out. Like another poster said, once you get a taste of the sweet life, it's hard to go back.

Once you have a budget with the new rent factored in, then you should start paying off your loans.

rated:
meade18 said:   Like another poster said, once you get a taste of the sweet life, it's hard to go back.
 

  This part is worth repeating a third time. It is easy to upgrade your lifestyle but lot more painful to downgrade it.

Especially for your residence (rental or owning) since you typically make a year's lease commitment or long term mortgage commitment and cannot reduce your housing expenses at short notice. Besides, there are transactional costs involved for moving.

rated:
meade18 said:   How can you justify living off them for free? It's one thing if you've fallen on hard times or couldn't find a job after graduation, but you're pretty damn successful. What you're doing is extremely selfish. Honestly, you should consider giving them a huge gift to make up for the past 3 years you mooched of them while making enough money to afford rent.You know nothing about this guy and you're ranting about his "free" ride?

Maybe his parents (edit: we don't even know if he is living with his parents) WANT him to stay?
Maybe he mows the lawn, shovels the snow, runs errands for them, does home maintenance, etc.?

Or maybe he is mooching?
  

rated:
The 30% rule is a guideline from a lender. Lenders are not your friend so feel free to ignore that guideline.

Max for 401k and IRA is $23k/yr. How could they be maxed out? 

As a single person, no dependents, your taxes are probably >13k/yr. You can reduce this ($5k or so) by really maxing out your retirement accts. instead of stockpiling money in the bank.

Why are you paying interest on debt with $44k in the bank? Seems crazy.

I don't think you can afford it without sacrificing saving money, which must provide a lot of security for you given that you chose saving over paying down debt, retirement savings and lowering your taxes.

My advice is look for a cheaper apt and keep adding to your savings and save the dream of a really nice place for a house/condo that you can actually own.

Good luck.



 

rated:
NoMoneyInMyWallet said:   
meade18 said:   How can you justify living off them for free? It's one thing if you've fallen on hard times or couldn't find a job after graduation, but you're pretty damn successful. What you're doing is extremely selfish. Honestly, you should consider giving them a huge gift to make up for the past 3 years you mooched of them while making enough money to afford rent.
You know nothing about this guy and you're ranting about his "free" ride?

Maybe his parents (edit: we don't even know if he is living with his parents) WANT him to stay?
Maybe he mows the lawn, shovels the snow, runs errands for them, does home maintenance, etc.?

Or maybe he is mooching?
  

  
You're right. I only know what he posted. He said he makes $84k/yr and lives rent free. If he's living rent free with someone other than his parents, just substitute the words "benevolent landlord" for "parents" in my posts. If his benevolent landlords want him to stay and he wants to please them, then he wouldn't have posted this thread about moving out. I doubt that he does enough work around the house to justify the market rate for his rent considering he holds down a job making $84k/yr. I would assume that is a 45-55 hr/week job, if not more. If his benevolent landlords said he needed to do more work around the house to justify staying there rent free, he probably would have already moved out or started paying them.

Skipping 8 Messages...
rated:
samko said:   
puddonhead said:   
tinlizzy said:   The 30% rule is a guideline from a lender. Lenders are not your friend so feel free to ignore that guideline.

Max for 401k and IRA is $23k/yr. How could they be maxed out? 

As a single person, no dependents, your taxes are probably >13k/yr. You can reduce this ($5k or so) by really maxing out your retirement accts. instead of stockpiling money in the bank.

Why are you paying interest on debt with $44k in the bank? Seems crazy.

I don't think you can afford it without sacrificing saving money, which must provide a lot of security for you given that you chose saving over paying down debt, retirement savings and lowering your taxes.

My advice is look for a cheaper apt and keep adding to your savings and save the dream of a really nice place for a house/condo that you can actually own.

Good luck.



 

  
>> The 30% rule is a guideline from a lender. Lenders are not your friend so feel free to ignore that guideline.

Bingo!!

I can never, ever imagine paying 30% for housing!!

Folks that pay 30% - do they have kids? Family? Medical expenses? How do they manage to pay for everything? It has always been a huge mystery to me!!

I have never paid > 15% for housing. And when I was paying ~15% - it was a big stretch!! I now pay < 5%!!

And yet, I know many people who work with me or used to work with me who do it! They live in houses that cost them $800k to buy (of course, within an hour of commuting distance of NYC with fantastic schools etc), or rent apartments that are $5000/month!!

I don't get it! Sometimes I feel as if I am missing a budgeting trick or two that these guys must be using.

To each his own I guess...

  I think it's much less than an extra 250 hr/yr. Assuming an extra 20 minutes each way, it's an extra 40 minutes RT. 40 mins * 20 days * 12 months = 9600 minutes = 160 hours. That's still a lot of time to be in traffic, but if you can get phone calls done and listen to podcasts, it's probably not so bad. I have a less than 10 minute commute each way and I love it, but I wouldn't be opposed to a somewhat longer commute.

True i just used 50×1hr day (30 each way, not the difference and not considering vacation). OP mentioned 45 minutes each way though and puddon said 2hrs each way (!).

I actually like driving on vacations. I don't mind driving other times either but with work there are always some days that are bad even though it might be 15 minutes total (extra 6 minutes from traffic), but if im tired or otherwise focused in other thoughts it is not enjoyable. If I could just step out of my front door and be at work i would. Or work less, but that's a different conversation. I couldn't even imagine 2hrs each way, every day, on the same route to go to/from work.

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