Ask the Readers: Help for a Broke New Yorker?
Published on - December 27th, 2006 (Modified on - February 18th, 2008) (by J.D. Roth) Amanda is in a bind. She’s making all the right financial moves, but they’ve left her feeling broke. She’s come to the Get Rich Slowly readers for help.
I’m 23. I’ve been out of college and working for a year-and-a-half now. I have only $300 in credit card debt, which I will pay off this month. I also have an ING Direct account that I opened last month with $300 in it. Starting this paycheck, I’ll be putting $150 per month in that savings as an emergency fund. I’m hoping to get it to $5,000. (After that, I plan to start a Roth IRA). I also have about $14,000 in student loans, on which I pay $100 each month. (That’s twice the minimum, but I did decrease the payment from the max of $150/month to get my emergency fund set up. I figured that the loan was consolidated at a ridiculously low interest rate, and when I get a raise I’ll go back to paying the max on the loan.)
I live in New York City. My take-home pay (after taxes, health insurance, and 401k (which I’m funding up to the employer match at 5%)) is only $25,272. My rent is $12,000 per year. I spend more than half of my income on rent and utilities alone.
I’m living with two roommates in an incredibly cheap apartment (by New York standards — my rent is far less than the other modestly broke people I know), and I’m pretty good about not going out, buying expensive drinks and dinners, and not buying clothes/junk for myself. I treat myself once in a while, but I’m pretty frugal. But because of the cost of living in New York, I barely break even every month.
I definitely live paycheck-to-paycheck, and I hate it, but I can’t seem to get ahead! I take freelance work when I can to supplement, but it’s not steady by any means. Moving is not an option, as my industry is really only located here.
Do you have any advice for people living in cities where the cost of living is crazy-high? I feel like I have a good, solid financial footing, but I’ve already been living frugally and doing many of the things that you suggest to “find” the money to save. At some point I looked at my budget in Quicken and realized there’s just not a whole lot left over after the essentials.
Oy! What can I do!?!? Any advice?
First of all, Amanda is to be commended for her excellent choices so far. She’s way ahead in the financial game. But what are her best options here? What have others done to cope with high costs of living?
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Move.
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Seriously, sadly, moving is your best option. Think about why you live there to begin with, and why not move somewhere cheaper? I’ve got a friend that works near the Square and commutes from Brooklyn (a ~30-40 minute train ride), and currently is pondering moving to Jersey for a longer commute but cheaper living.
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I’m also in New York City, and I moved up here immediately after college, so I know *exactly* what Amy is going for.
You can lower your rent. I’ve lived in Manhattan for three years now, first at $850 a month and now at $600 a month. I’m not in a bad part of town, either. You can lower that by moving to a cheaper place or cutting out some of the utilities–get fewer channels on cable, use Internet only at work, or something like that.
Otherwise, Amy, I think you’re trying to do too much at the same time. You’re trying to pay off debt, save for emergencies, and save for retirement all at the same time, so you feel like you’re going nowhere fast. You sound like a disciplined person, so I think you can handle the steps I’ll lay out (which I’ve personally done).
1. Pay off the credit card debt, then cut up the card.
2. Stop investing for retirement (I’ll explain!)3. Save, save, save for an emergency fund like crazy. Save 3-6 months expenses. I keep $5k in an ING account, and an additional 1k in a savings account so it’s liquid.
4. Restart investing for retirement, only to your company’s match, and don’t worry about a Roth yet.
5. Pay double on your student loans, pay triple on them, whatever you can. You should be able to pay them off in about three years at that rate.
At most you will stop investing for retirement for about one year (it took me less than six months, though when I planned it, it looked like it would take a year). Setting up that emergency fund will prevent you from going back to the credit cards if something pops up (a true emergency, like getting hit by a messenger bike, not a dress on sale at Loehmanns). You are young enough and determined enough that in the long run, you will appreciate more having financial security between you and being homeless than a few hundred dollars (even with interest).
If my advice sounds like Dave Ramsey, it is similar. I very much recommend him, although obviously his goal of living expenses being 25% of your income is not possible in this city (at an entry level salary anyway). You’re actually doing really good, but I would try to rein it in, get focused, and knock out only one goal at a time. If nothing else, having a goal to get to AFTER you reach the current one helps keep you motivated.
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heh. first thing I thought about was move too. but seeing as how that’s not an option…
how ’bout a slight compromise of moving out of NYC into a surrounding city that may be cheaper? that’s if the commute is acceptable to you, and the change of lifestyle etc.
but the simplest and probably most effective solution to combat high cost of living is to move out of the high cost area.
anyhow, hopefully someone will come up w/ some better suggestion.. but take this story to mind:
there was a thread on fatwallet forum. a guy was asking for help with his debt. one of the biggest hit to his income is the monthly payment for his overpriced car loan.
almost everyone suggested to him to dump the car and buy a beater for the time being — even though the poster stated specifically that getting rid of the car is not an option.
it’s a lot like your scenario. his car was his money pit, while your rent is yours. if you were in debt, I would highly suggest moving. but since you’re not.. and you’re merely breaking even, it’s up to you to find that balance and examine what steps you want to take, so you can get to where you want financially.
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Here are a couple of suggestions that would be *temporary*. If I were you, I’d sacrifice for one year and knock out that student loan once and for all.
Would it be possible to have a roommate move in for a year? You might be able to find somebody in the same situation that would “rough it” with you for a year? That would save you $6,000 right there. I imagine your place is small, so you might have to get creative when it comes to dividing up the space. If you’ve ever lived in a dorm room with a roommate, you know it can be done.
As for the income side of the equation – have you though of taking a temporary part time second job? You could make $1,000 per month cleaning apartments.
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This blog is title Get Rich Slowly. I think she is doing everything right except understanding the Slowly part.
I also agree with Scarfish, you are trying to do too much at once. Set specific financial goals, then when you accomplish them you won’t feel as if all your hard work and planning is moot.
I also live in NYC.
Biggest Expense is housing.
Second biggest is food.
The rest is chump change.
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Hm. Where in NYC are you living? You don’t have to move out of the NYC area, but if you are doing it up roomate style your rent should be considerably lower than 1000/mo unless you are living in a posh neighborhood (ahem, most of Manhattan is ridiculously overpriced!). Time to get out!
Depending where you work, check out the following areas. If you work on the West side from Midtown down to Battery Park, check out Jersey City or Weehawken. It’s really a 10 minute ride into New York on the mini buses that go through the Lincoln Tunnel or PATH trains from JC. If you work on the East side north of 14th Street I’d be seriously looking in Astoria or LIC (LIC will be the new hot spot in 5 years) Make friends with the yellow line subway trains to the 4/5@59th st in Manhattan to get to easterly locations. If you work south of 14th street, there are a bunch of safe, nice, cheap neighborhoods in Brooklyn that very easily accessible via subway.
If none of these options sound good to you, maybe you could provide some reasoning? You may also already live in an outer borough but that wasn’t very clear from the above posting. If not, just remember that NYC isn’t only Manhattan.
You should immediately get rid of as many unnecessary utilities and services as possible. Cable? Get rid of it. Internet? Cancel it and get some sort of wifi card for your laptop or computer. Heating bills too much? Turn down the heat a few notches and put on a sweater. Insulate your windows.
If your roommates have a difference of opinion on some of these matters it might be time to find some new roommates. Seriously, they might be your friends, but if you are all in different financial situations and someone isn’t willing to take a bigger hit to accommodate someone else being able to live with them (which is unfair to ask of a friend anyway IMHO), it’s time to go.
Sorry if I sound like an ass about some of these things, but these are all issues and concerns I’ve had to deal with at some point.
Good luck!
http://newyork.craigslist.org/brk/roo/
http://newyork.craigslist.org/search/roo/que?query=astoria
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Yeah– I don’t really see where the problem is. She sounds like she has an ideal situation. She’s building savings, she’s building retirement, she has almost zero credit card debt, she’s only 23… sounds to me like an enviable situation!
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As another person in her mid-20s living in a ridiculously overpriced city a bit south of you, I’d really encourage you to keep the long-term (well, next five years, anyway!) view in mind when you’re making these decisions. The paramount question for me would be, what industry do you work in, and what sort of advancement prospects do you realistically have (with your current degree)? Just breaking even isn’t a terrible thing–given that the timeframe is limited, and it’s in service of a well-defined financial goal. I mean, heck, people voluntary go into debt for mortgages or their education all the time. Your early 20s is another time that it may make sense to “invest” in yourself and your career.
A few years ago, I lived on credit cards, racking up about $1,000 worth of debt, in order to live in this city over the summer and intern for peanuts during undergrad. That landed me the current job when I graduated. I chose to live in the city, close to public transportation, in an apartment that cost about half of my take-home pay. Some might have seen that as a mistake, but living in a not-scary neighborhood close to the metro meant that I could pull late nights as needed. After 2 years at my job, and two big promotions, my salary has increased by 35%. (And it was a decently-paying job to begin with.) No way that I would have snagged those promotions without working until 8:00pm during busy times to be the person who got the job done–well past the time that the last buses run in the neighborhoods out at the end of the metro lines.
Of course, if you’re in an industry where a masters degree or MBA is going to be required to really get anywhere, then there’s not much of a point in wasting a few years living hand-to-mouth at this point. (Go back to school now!) Same deal if you’re working for a nonprofit NGO where your salary is probably not going to go up much, regardless of how far you are promoted.
I’m nth-ing the suggestion to scale back on student loan repayments and retirement savings until you have a decent cushion in an emergency fund. (I’d define that as at least 3-4 months rent plus food, which sounds like about $5,000 for you.) There’s no describing how much anxiety it lifts to have a cushion like that. Even if you’re still barely making ends meet every month, it will feel different.
Good luck!
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Uff. That long comment above can actually be distilled down to one piece of advice: please don’t be penny-wise but pound-foolish when trying to cut costs. If living in a “cheaper” place further out means that you have to leave work every day by 5:30 to catch the last train, you might end up worse off financially down the road.
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Whoo, can I relate. I’m 23. I live in New York and take home about $23,000 after taxes (that’s BEFORE 401k). A few things:
1. Seriously, Amanda can be paying less for rent. I pay $600/month for a big bedroom (which I share with my boyfriend) in a recently-renovated Manhattan two-bedroom. Not that $1000/month is an uncommon price in New York, but that doesn’t mean you can’t find cheaper, especially if you’re willing to live with several people. In my social circle, only people who live alone pay that much in rent. Depending on convenience to her job, she should check out Greenpoint, Sunnyside, and Flushing. This is the big one—any price drop she could find in her rent is money she could be putting right into savings.
2. She should make sure she’s getting the best deal with her Metrocard. It’s surprising how many people don’t take advantage of the monthly deal and run it through an FSA at work.
3. She should make sure she’s not paying for extraneous features on her phone. Most common money drain in my social circle.
Other than that, really, her frustrations are the frustrations of a mini-generation of young New Yorkers who are waiting for their salaries to hit a level that allows them to have brunch with friends without budgeting for it for two weeks. My hunch is that we just have to make smart choices with the little bits of money we have and wait.
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There is really nowhere else in the whole US with your industry?? Other than moving, the only thing I can think of is to get a better paying job. Do all you can to get a promotion. You are doing everything else right, so cutting costs isn’t going to help you nearly as much as increasing your income.
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Me again,
I definitely agree about English Major’s metrocard comment. A 30-day unlimited metrocard taken out pre-tax is by far one of the best deals I’ve ever encountered. Especially for a subway system that runs 24/7.
I also wanted to say that while you are busy cutting out utilities and getting rid of cable, you should head on over to the NYPL (nypl.org) and get your library card on. Find the branch closest to you and you can search for books/dvds/vhs etc online and have them delivered, (free of charge!) to a branch of your choosing. Booya. Free entertainment. Don’t forget to return items on time though!
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First, I agree with the general consensus – it sounds like you’re doing well!
I would actually argue for doing the opposite of what most people are saying with regards to retirement vs the student loan. You mentioned that your student loan is a “ridiculously low rate”. If it’s locked at a low rate, honestly, I’d pay the minimum on it until your emergency fund is set up and your roth IRA is maxed out.
I am in a vaguely similar situation in that as a graduate student for years on end (I’m in a very long program!) I have a fairly limited income relative to expenses for an unusually long time. In my case, I was deciding between paying off my mortgage at anything above the minimum rate vs maxing out my roth IRA contributions. For the first couple of years, I figured guaranteed returns were better than not guaranteed ones, and skipped the IRA to pay the mortgage. Once I had a 10 year history of following what I did have in my IRA, however, I sat down one day and calculated my averaged yearly percentage returns on my IRA money – and it was well more than twice (!!) my interest rate on my mortgage. So, given that a roth IRA is a great deal where if you skip your $4k contribution now you’re never going to get the chance to make it up, and that even ignoring the tax advantage on average your returns are so much better than your interest rate on your student loans (which in turn actually have a tax advantage of their own – you’re deducting the interest on them from your taxes, right?) I would say it’s clearly worth it to max out all other forms of savings before paying more than the minimum there.
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You’re doing everything right and you’re having the experience that we all had when we came to the city. A few things that help:
1) Stick with your friends who can have a good time without having to break the bank. If you have good friends who can really have fun with a cheap bottle of wine and home-cooked dinner or are content to go to bars with cheap beer, you won’t hit your 30s regretting having missed out on having fun while you were younger. Share this time with others.
2) Ignore the NYC PR machine’s hype about what fun high society is having at Place XYZ. You’ll go someday if you want to.
3)Focus on building your career and professional life. You hopefully picked an industry where people eventually make more. Work on building the skills and contacts that will get you from where you are now to where you want to be. Have a plan.
4) Build that emergency fund. Nothing will put you in a tailspin like a temporary setback of some kind.
5) If you’re really only paying $1000 a month in rent right now, you’re not going to find much that’s cheaper. Don’t move to a suburb for $800 a month in rent and then add on MetroNorth Fare fare, larger utilities, etc. If you do find something cheaper, stick with something on the Subway or PATH.
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Like several people said, I think you are making great strides given your age and your situation.
My top 3 suggestions for those in just starting off (usually in their 20s) are
1) Keep your credit cards at $0 (pay them off each month)
2) Fund your 401k up to the match (at least)
3) Get started on an emergency fund
It sounds like you’ve got all three under way.
But if your student loan interest is less than 5.5% I’d stop prepaying that and focus more on your emergency fund.
Next I’d suggest the following
1) Focus on increasing your salary – ask yourself how can you get a raise / promoted
2) When you hit 3 months of an emergency fund – switch the focus more to a Roth IRA – you’re guaranteed to need to retire but there’s no guarantee you’ll ever need an emergency fund (you can always raid your Roth if things get really bad)
3) Start saving for an apartment/condo/house
4) Try to hold off on buying a car as long as possible – between $$$ to purchase them, taxes, gas, insurance and depreciation they will suck you dry.
There’s not much more beyond that at this stage.
Best,
-Frank
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You’re doing great. Hang in there until you get a couple raises at work, don’t upgrade your lifestyle so that it eats up all the extra cash, and you will be right where you want to be in a few years.
At your age you are doing 100% better than virtually all of your compatriots just by not digging yourself into a deep hole of consumer debt!
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It kind of sounds like there’s a contradiction at the root of the problem: her industry is only in New York, but her take-home pay is only $28,000. That doesn’t sound like an industry worth sticking around in, to me. If there’s no chance of greatly increased pay in the next couple of years, I’d change industries, move, or try to get whatever qualifications are needed to move up within the field. If this means abandoning retirement savings for now in order to pay off the loans and get another degree or whatever, I think that would be OK longterm. (I have no qualifications to give financial advice, though.)
I’d also check on whether the conventional wisdom that NYC is the only location for your industry is true. If it’s publishing, for example, there ARE book publishers outside of NYC. Sure, they’re not Penguin or whatever, but do they have to be? Questioning some of the “everybody knows” statements like that might be worth doing.
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(I meant I think abandoning retirement savings *temporarily* would be OK long term, since she can return to that shortly when she’s more comfortable.)
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stop paying off the student loan!
I know that sounds ridiculous, but I’m betting your interest rate on that is ridiculously cheap (is it lower or higher than what you get from ING?)
Stop paying that off, and instead start putting that money in a Roth. You didn’t say what you work on, but I’m betting that you expect to be earning more money in coming years — if so, investing that money now is your best bet.
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I know telling her to move doesn’t sound like a nice or practical choice, but seriously…
I live in the midwest and here you can get a 1300 sq. ft. home built in 2006, two car garage, fireplace, central air, three bedroom, two bath on a 30 year fixed for the same monthly payment (maybe a little cheaper).
I don’t think being a city dweller is a bad thing, but you need a good enough job to make up for it.
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Hi Amanda,
Like some people said, you can increase your income or decrease your expenses.
As for your income, what is the pay range for the next position for you? Is that something to which you can look forward or would that leave you in much of the same position? How many years do you have to put in before you get a salary that would make you live less paycheck to paycheck? I am in a NYC-focused industry that pays very little and am considering a career change/re-orientation.
As for expenses, your rent is the black hole. As others said, would moving make a significant change in your lifestyle? PS: I live in Ditmas in Brooklyn for $550 with 3 roommates.
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I’d recommend doing the opposite of what Scarfish says.
It doesn’t seem you carry any credit card debt, so that’s not a problem. Perhaps use credit cards to your advantage and get one that saves 5% off groceries. As long as you continue to pay it off, things are better there.
Pay the minimum on the student loan. If it’s a ridiculously low percentage you may be better off putting in ING as Neha says. At the very least that’s $50 that you can put towards your emergency fund. If there’s an emergency ask yourself if you can “re-borrow” the money at the same rate as your student loan. I’m guessing the answer is no.
As far as moving goes, I can’t think of industry that only exists in NY City. I’m thinking you must be advertising agency, but they are everywhere. Since you don’t give us your occupation, we can’t really go any further with moving. I’d look into seeing if you can somehow pay less than $1,000 a month for rent. I’m guessing not since you’re already sharing a place, but it doesn’t hurt to look.
That leaves trying to increase your income. Unfortunately there’s not really a quick fix to this one. It could mean looking for a new job. It could mean putting more effort into freelancing. It could mean leaving your industry all together (which is something I would consider if that’s the best pay they can give you). It could mean starting a blog – it’s not for everyone and it’s not always a profitable thing (especially if you are me), but if you are good there’s money to be made. Perhaps you could take bartending class and learn to bartend at night or on the weekends.
In the end, I think you realize that there are really only two things that are a problem. 1) Your take home pay is too low and 2) The place your living costs too much. You aren’t doing bad as long as you are in a growth industry and can expect 15-25% raises yearly (preferably starting with the 25%). If you can expect cost of living increases, then you’ve got to get out. It’s probably worth having this discussion with your boss sooner rather than later. I’m sure she/he understands that cost of living situation and that your salary is far below the average for the City.
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I agree with Lazy Man and Money and a couple of others. Stop paying the extra on your student loans, and put that extra $50/month into the ING account (assuming that the student loan APR is lower than the ING). Paying off low-interest debt when you have no emergency fund is short-sighted. When you lose your job or have unexpected expenses, how are you going to live? Could you re-borrow that money back from your student loan? No, of course not. Once it’s paid, there’s no getting it back.
Also, not paying off your student loan early will also be good for your long-term credit. Making many years’ worth of payments on-time looks very good on your credit report.
Also, see if you can find a part-time job waitressing at a place where one of the perks is free food. That would be both a supplement to your income and a reduction in expenses.
Lastly, ask for a raise. If you’re not clear on the policy at your company, ask. Insistently. If you’re past due for an annual/quarterly review, insist on having one ASAP. Shop around to other companies in the same industry. Even apply and go to some interviews. Don’t be scared about letting your boss know about it — if they value you as an employee and know that you’re thinking about ditching, you might be surprised what kind of raises they can come up with. Job loyalty (both employee and employer) is long dead — don’t feel guilty about it. Just do it. Don’t let yourself get trod upon.
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If you feel that you can’t save anymore, then there’s only one other option, make more money. Perhaps you can obtain a decent second job? Perhaps start a side business? Sell stuff on eBay? There are lots of options.
FT
http://www.MillionDollarJourney.com
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Amanda, put off paying more than the min on the loan until you get all emergency buffers built up.
If the loan’s rate is less than what you get with FDIC insured CDs, once you get the buffer, keep paying the minimum and buy CDs instead. When CD’s won’t pay what the interest rate on the loan is, start paying off the loan as the CD’s term expires. There is no risk here, and you’ll pay it off faster this way.
Stave off using the credit card except when purchasing things you need the protection from, and then only when you can pay it off that month. Pay it off that month.
You sound like you have an entry level position. You’re not supposed to be “living” when you have a job like that, you’re supposed to be working like a dog so you can get a decent salary. Work like crazy, take extra responsibility, and get an apartment which is cheaper (takes some looking, but there are plenty in NYC if you persist).
Entry level salaries have an expectation that quality personnel will get 10-20% raises over the next few years if they’re worth it. You just have to work like crazy and avoid financial ruin erstwhile.
If they don’t have more use for you at work then you can currently do, get a secondary job a couple nights a week that doesn’t go too late.
Oh yeah. Fellas are useful for free good times as well. Although from what I’ve heard of the dating scene in NYC, that can be hairy.
–Michael
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Wow! Thanks everyone. (This is Amanda) I’ve been traveling for the holidays so I just now got a chance to check this. Lots of encouraging and helpful replies… Thanks!
As for some of those questions.. yep, I already have 2 roommates (in a 2-bedroom apartment.) I’m moving in April (lease is up) hopefully to a cheaper place. But for my first 2 years in the city, it was worth it to me to be in a convenient location (really close to work–I can walk!) and it’s safe. Having almost 2 years under my belt, I think I can venture out now!
So I’m working on moving.
I actually just got a very unexpected small windfall for Christmas which makes me much, much more comfortable about my emergency fund. That was incredible luck and going straight to the ING account to start earning interest.
As for getting a raise… I am fairly entry level, but the *really* sad thing is, I already got a promotion and a fairly big raise! My salary before that was even worse! That was almost a year ago now, so I’m starting to look for another job if I don’t get another raise soon. It wouldn’t be huge, but my industry is such that these few years of drudgery are sort of required. Sigh. I’m getting promoted fairly fast so far (My first one was after 6 months) so I’m going to stick with this field for awhile. The good news (well, not really because I’d love to go back to school..I love being in school) is that a master’s degree is probably a detriment to my career. That sounds kind of sad, but in reality, practical experience is much, much more highly valued. So at least I’m on the right track there (with no more expensive school).
I’m going to look into lowering my student loan payment again. I’d have to double-check the interest, but it’s definitely less that the 4.5% that ING pays.
Anyhow, thank you all so much for your help. I think what was most helpful was the reminder that this is a slow process. Gotta remember that I’m 23 and it’s ok to be broke for a few years while you’re young as long as you’re saving wisely. Thanks again!
Amanda
PS: I’m 100% debt-free as of a few weeks ago. Hurrah! (And with that totally unexpected emergency fund boost, I’m feeling much more secure.
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If it’s at all possible, move to Philadelphia. Housing and rent prices are so low relative to NYC that some are living here and in the New Hope, Pa. area and commuting to NYC. (Revoltingly, a NY article about it semi-seriously referred to Philly as the sixth borough of NYC.) Even with the rise in house prices, there are many areas of Philly– some actually safe– where you can buy your own small house for your annual salary. This listing, for example.
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I wouldn’t recommend moving to Philadelphia or New Hope without a lot of thought – the commute is very long. And as someone who has lived in Philadelphia and it’s suburbs my entire life, I can tell you that there is no place a single female wants to live that costs $25000. Minimum $100,000 for someplace you will feel safe. Kensington is known to be a bad area (though it is one of the many places that people are buying into and hoping it will improve – safety first!). On the other hand, a friend has an adorable one bedroom apartment, Upper East side, for $800 a month – keep looking, you can find better options than you have now, in the city.
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I paid extra to live close to my job. It’s well worth the money in time, frustration and commuting costs. Living in NY – near work – stay there – especially if you have (and like your) roommates. Think “peace of mind.”
I also freecycle (http://freecycle.org/display.php?region=US%20Northeast#New%20York). I give away things that I don’t need and get things that I do need – all free. That will save you a few dollars.
Live frugally – best advice you can get…
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I know this is late but…
As a 23 year old with $13,000 in credit card debt… I recommend that you put off saving $150/mo for two months and GET RID of your credit card debt.
I’ve had credit cards since I was 18 and I was always very careful with them. Then I made the mistake of listening to my dad when he said “oh, just put it on the card, I’ll pay for it.” It’s a nice gesture and all, but now that my dad CAN’T pay for it anymore (complicated story), I’m stuck with $13,000 of credit card debt… half of which is college tuition that fin. aid didn’t cover.
At the very least think of it this way, if you can get rid of all of your credit card debt in just two months and hide the card(s) so you don’t rack up anymore debt, that’s one (or more) less bill you’ll have to worry about each month.
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I lived in NYC for 15 years after my college graduation. I hear you on the low salary–my industry is like that for the first few years too. Sounds like you’re doing better than average. That said, here’s how I survived:
1) UTILITY BILLS. Get these down to the minimum. Compact fluorescent bulbs. Sign up for an alternate energy provider. Put your “vampire” appliances on power strips. If you’re not using the appliance, turn it off.
2) THRIFT/STREET FIND At one point I was so broke that my hang-out clothes came out of trash on the street and my work clothes came from thrifting. Hint: church rummage sales are way cheaper than thrift stores. Call the religious institutions in your area and find out when their sales are. If you have style you can really rock this. The same goes for furniture. I bought very few items of furniture for my apt.
3)CHEAP APARTMENT. NYC apartments quality is on a sliding scale going from large apt/scummy neighborhood to small apt/nice neighborhood for the same amt of money. Get your rent down to as low as you can for an apartment/area you’re comfortable with. Don’t pay a broker–go door to door and ask the apartment supers.
4)TRACK YOUR SPENDING. You’ll find some surprising money drains.
5) EDUCATE YOURSELF. Read all the personal finance stuff you can. Talk to people–every New Yorker has personal saving tips.
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Dear Amanda, You’ve gotten loads of good ideas on how to cut your outgo (demand side economics). Now get a part time job (suply side economics) and become more financially comfortable. One good thing aboug a part time job is the extra income, ANOTHER IS YOU’RE TOO BUSY TO SHOP AND SPEND. This difficult time will pass, you’re doing great kid!
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Congratulations, Amanda, for your good choices. You are smart for starting at a young age to save.
That being said, the best advice I can give you is to relax and don’t save quite so much so fast. Your first priority should be to pay down your student loans. Do that by all means.
Next, do pay off the credit card. Hold on to it, though, if you think you won’t charge. You do need a credit card to hold a hotel room or rent a car. It’s hard to do that without one.
Then,think about moving. I’d relax and take my time, though.
Of course, save. You’re young and will not be sorry if you do. Just don’t go off the deep end. You will become upset and frustrated and fed up if you don’t take it easy.
All this stuff I have learned the hard way. I am now 65 and have just retired. I started saving at a later date and had to pinch pennies and go through all sorts of frustrating stuff in order to do it. So, take a page from my book. By starting to save now, you will not have to go through what I did to make up for my bad choices.
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Move to Kansas City.
I have friends who have bought inner-city houses for $1400 and $2000 cash, fixed ‘em up and rented them out. Seriously.
In 2000, I myself purchased a foreclosure in the suburbs of an inner-city area and rehabbed the house out of my pocket, paycheck to paycheck.
It was a 3-bdrm, full basement home for $22,800 cash, which sat on 3/4 acre. I then went to the Land Bank (city hall, downtown) and purchased the wooded lot next door that had a water ditch on it in the woods for $150 cash. Why? This is where the deer go to get water. The lot on the other side of me was also vacant, so it was like living in the country, but right in the city, and right down the street from a major highway.
In 2004, I refinanced it for $78k and took $48k cash off of it.
IMPORTANT: But I didn’t rehab it with this cash. NEVER DO THAT. I took that $48k and went down to Florida, just north of Clearwater Beach, and purchased 10 tax liens (paid delinquent homeowners’ back taxes).
After a year, when the FL homeowners did not pay their back taxes, along with the 14-26% interest in a lump sum to the delinquent tax dept, all 9 houses became mine, mortgage-free, each worth $150k.
As the houses became put in my name, I immediately slapped insurance on them.
Two weeks after I received the first house, a hurricane came through and smashed it flat. The insurance company had to give me a check for $150,000.
I had an investor approach me. He said, “If I bought all 9 homes in a package deal, would you sell them to me for $125k each?” I said, “DONE DEAL. Let’s do a contract.” It was a win-win — He saved $225,000, and I received $1,125,000.
He wanted to rehab them and rent them out. I myself do not like to rent houses out — I don’t want to chase my money to the crack house or deal with renters. You can rehab a house and rent it for 5 years — then they move out, and you have to do it ALL OVER AGAIN. No, this is NOT me! I am what you would call a flipper. Get in, get ‘er done, and get out.
That’s all I know. — Smiles, Annie in KC
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P.S. About IRA’s.
My hairdresser put $2000 in an IRA for 28 years ($50,000). The last 2 years, just before retirement, they allowed her to put in $4000 yr for the last 3 years ($another $12,000). This totaled to $62,000 of her own cash.
At the highest point, the IRA was up to $81,000.
Last year, she retired and went to get her money. They said there is only $24,000 in it now, because it was invested in the stock market, and the stock market went down. So basically, the IRA lost $38,000 of her own money, along with the $19,000 interest.
So she lost $57,000 in the IRA, and now only has $24,000 for retirement. Not even a year’s pay. Cat food is on Aisle 4.
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1-Get a second job.
2-Save $150 and buy a shotgun.
3-Save $200 and buy a good used revolver.(.38 snubnose is fine-remember Bernard Goetz).
4-Save $50-$100 and buy plenty of
ammo.Have your roommates do the same. (Especially if they are white since they will be targeted and less likely to blend in).
4- Move to Bedford Styvesant, Newark NJ, Bronx, Flatbush Brooklyn etc. or any other ghetto and save on rent. You can find a shithole for less than $1000 per month.
5- Buy body armor with the money you save on rent.
6-Get an immmigrant pregnant and have as many babies as you can. Get welfare, food stamps, public housing etc.(You have to find an immigrant since most white women will not do this for a white man.)
Kick back and live the high life! That is the best of living in NYC unless you are rich! Lots of luck!
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