Thursday, December 4, 2014

Living on less vs. living well

As you may have noticed, my regular monthly expenses since I moved have dropped dramatically. (And a good thing too, since so did my income; between the lower salary, and aggressively contributing 25% of gross to my 403(b), my take-home pay is only about 55% of what it was. On the other hand, I don't have to pay off student loans with it -- I'm not really living on all that much less than I was before.)

Some of this was really intentional: I gave myself a food budget and have been mostly sticking to it, resisting temptation to buy vast quantities of cheese and take myself out for Vietnamese food when I'm too tired to cook.

Some of it, though, was partly just luck. It's cheaper to register, insure, and maintain my car here. And housing is really inexpensive. I made one big decision, though, that's helped keep it super low: I decided to live with a roommate. I've been paying $300 in rent plus half the electric bill, which has meant that in some months my housing expenses were only in the $325 range. With winter coming on, my December rent/utilities will be up to $350 (gasp!)

However, I needed to find a new roommate for the spring semester -- it's a long story, mostly not bad, just kind of a pain. I went and saw five places, after writing emails to about a dozen people. The first three were totally unworkable, for different reasons, but one of them was tempting, because it would have been very cheap -- just $275 a month including everything, with no electric bill. (The dealbreaker problem there was no real kitchen -- they have a toaster oven, microwave, and mini-fridge, but since a lot of my budget-balancing involves heavy cooking, I didn't think I could handle it. There were other problems in that situation too, though.)

I ended up going with a room that's $400, all-inclusive. So in the winter, it won't be much more than I would have paid here, although an extra $50 a month does add up...still, it feels like quibbling when I compare it to anything I ever paid in New York. My lowest rent there (to share a room) was $600, and that was nearly fifteen years ago, and in a neighborhood a long commute from my job. My highest rent was -- holy Jesus -- $1900, though that was when I was paying the whole rent on a 2-bedroom by myself for a few months when I didn't have a roommate. (This is why I had student loans, folks: I should never have taken that particular apartment. Moment of panic. I should talk about why I did it sometime.)

OK, but this is all a really long way of talking my way around to commenting on the posts about living on 50% of your income (or less) that J. Money and Cait have recently made. In particular, Cait does a thought experiment: What if we'd been told, all our lives, that what we should do was to live on as little as possible and save the rest?

For me, the answer is: I'd have a lot more money. I wasn't encouraged to be a spendthrift or anything, but nobody ever really talked to me about saving in a more than theoretical way. My parents have done pretty well, largely because their salaries got very respectable as they got older and, as many have noted, the period during which they've invested in their retirement accounts has been a very good one for the markets by historical standards. But they've never had a budget and I'm pretty sure have never said things like "I'm going to save 10% of my income" (or 20% or whatever.) They just have income, spend, and save what they don't use.

I always knew saving was something I needed to do at some point, after student loans and grad school, or for certain goals (like when I wanted to quit my first job out of college, I saved like mad for six months so I had enough to live on while I interned.) But the idea that you should save a percentage of whatever came in, even if your overall income was low, was totally new to me, aged 35, when I first started to look into money management earlier this year. Let alone the idea that you should live on as little as possible and bank the rest! In this case, right now, that would have meant I should've taken the $275 option, not the $400 one.

$400 is still a great rent/utilities cost, by American standards, and the room and house are much nicer than the two cheaper options I saw (and also nicer than the two more expensive options I saw!) But part of me is probably going to continue to have a nagging feeling that I should have tried to save the $125/month and live in the $275 place.... Honestly, I'd probably just have ended up spending the savings on getting takeout though. Or at least a big chunk of them. "No real kitchen" is my dealbreaker, it seems.

13 comments:

  1. You would def. spend 50-75$ more on eating out without a proper kitchen! Now that you've paid off your CC debt next month, you can afford the increase as well and still meet your savings goals. You'll have interest working for you rather than against you.

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    1. Yeah, all that interest racking up at .75% :-) I'm like the only person in America that wishes interest rates would go up -- I don't need a mortgage or a car loan anytime soon, so I'm dying for the prime rate to rise so savings accounts will have to start competing again. It wasn't so long ago I had a 3-year CD at 5%!

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  2. I agree having no real kitchen would inflate "eating out" cost over the long run and general not good for your health.

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    1. Yeah, I was going to be able to borrow someone's kitchen on the weekend to make a big pot of soup or something but over the long run that wasn't really going to work well.

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  3. If it bugs you, try to not use your kitchen for a week. You'll probably stop worrying after!

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  4. Given the options, it sounds like you did make the best choice. Living without a kitchen would be tough, and expensive!

    In my early 20's, I opened an account at Edward Jones. My Planner was pushing the whole "live on nothing, save the rest!" But he made it sound terrible. He actually said the words "live in a cardboard box, if you have to!" I immediately turned up my nose and blew off his advice. Sigh! It's funny, there isn't much difference between what I make now and what I made then, and my expenses are higher, and yet I'm managing to save more, pay off more debt, and living pretty well. Think of all the money I could have now!

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    1. I know, I guess most of us are just dumb in our early 20s -- the future seems like such a long way off, and saving seems like something we should do, you know, sometime.

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  5. A kitchen is required. I've lived in dorms where we didn't have full kitchens (the new ones did, but I was in the old building) and we had our sinks/fridges in our rooms and then a microwave and hotplate in the common area. I ate like crap. Well, when I cooked I did. I was in Montreal with loads of cheap, delicious food options.

    I think you've definitely made the right choice. $400 is still killer. We pay $900 all in for a 2 bedroom, but it wouldn't be workable for a non-couple, unless you were really friendly, since the bathroom is off one of the bedrooms. Fine for us, but two separate, strangers - not so much!

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    1. Yeah, it was probably the right call -- I didn't go into all the pros and cons of the various situations I looked at, besides straight-up rent, and I think this hit the balance of cost and nice-ness the best, considering all the various options.

      And yes, it would be tough to have a renter if that person needed to go through your bedroom to get to the bathroom! What an odd setup -- I'd assumed your house was newer, since you say "townhouse," but to me that sounds like the kind of thing you get in really old houses. The house I grew up in had a bathroom that was only accesible through either my bedroom or my parents' (it had two doors) but it was 100 years old AND I don't really think my bedroom was meant as a bedroom; more of a sitting room/office kind of thing.

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    2. Ah, no. I haven't been clear. :) We moved and rent an apartment in new city. That's the one with the funky layout issue, which is understandable because it's an old home that has been converted into three apartments.

      The "townhouse" is residual of that fast move. We had to move quickly, but we couldn't see, and so we rent that place out. And so we are landlords, but we also rent an apartment. Ideal? nope, but it is what it is.

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  6. Sounds like you made the right call. We have to remind ourselves that sometimes you spend money to save money. Like when you put $500 of maintenance every month into a junker car - maybe it's time to plunk down $2,000 for a "new" used car that runs better, ya know?

    And now I think I need to start with my kids, young, telling them to save, save, save...

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    1. Yeah, you're right :) And with your kids -- I don't think you need to be obsessive about it, but definitely some financial education is in order, showing them what they'll need to pay every month if they take X loans out, vs what they might make in interest if they put even small amounts of money away young.....

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