1 Reader Mail: The Rules We Live By | The Billfold

Reader Mail: The Rules We Live By

I found your piece on NYC rents, and the exorbitant amounts we spend on them really interesting. It’s an issue I fret about, too. What’s a good rule of thumb? Should we spend 1/4 of our income? One-third? — David 

When I completed my graduate program five years ago, I had the option of either moving back to California, or staying in New York to find a job and live off some of my savings. I chose the latter, as did two friends from school, and we quickly realized we wouldn’t be able to afford to live in Manhattan, and started scouring Craiglist for a three-bedroom apartment in either Brooklyn or Queens.

A few days into our apartment search, we found a spacious three-bedroom close to the subway in Woodside, Queens that was listed for $2,000 a month. The neighborhood wasn’t very pretty, but the living room was huge, and there was a balcony. One of the bedrooms also seemed impossibly tiny—there was just enough room to fit a full size bed and a dresser, but nothing else.

“Maybe we should keep looking,” one of my roommates said. But then the landlord said he’d lower the rent to $1,900 a month if we agreed to take the apartment that day. The recession had just hit, and everyone was playing Let’s Make a Deal.

“How about $1,800?” we countered, and when we got a nod, my roommates and I looked at one another.

“I’ll take the small room if I get to pay less,” I offered. My roommates agreed, and I paid $550 a month for the two and half years we lived there, which was great, because I was earning $30,000 at the time, and every cent was important to me.

I had student loans to pay. I was sending home money to my parents, who were being crushed by the weight of a falling economy like many other middle class families. My wallet was perpetually empty, but there was nothing to be ashamed about because in the recession, everyone’s wallets were perpetually empty. When I said I couldn’t afford to go out to dinner, or to get a drink after work, there were no arguments, mostly just nods of recognition.

It turned out that my tiny bedroom was exactly what I needed to weather the recession. It also turned out that $550 was all I could really afford if I wanted to make steady payments on my student loans and send home money to my parents. I had my priorities, and I stuck to them. I had made up my own rules about where my money was allowed to go, and those were the rules I lived by. These were the rules that made life possible for me—the rules that carried me across a canyon of economic despair during a time when so many other people were falling in.

The question isn’t how much of your income you should dedicate to rent. The question is really, “What are your priorities?”

This is a roundabout way of saying that I could have simply wrote:

“Dear David — When considering how much you should be spending on rent, a good rule of thumb to follow is to not spend more than one-third of your income on rent. In New York City, most landlords won’t even consider you eligible to rent an apartment unless you earn at least 40 times the monthly rent, or about 30 percent of your pre-tax income. You don’t want to spend more than that on rent, because you’ll also want a chunk of your money to go into savings and retirement, and you’ll probably want to have some spending money for the weekends, too. Hope that helps. Love, Mike.”

I would never write a column like that. I could never write some generic advice to David, hoping that he’s a generic person, living a generic life. We are all very different people (just take a look at me and Logan!).

Yes, there are always rules of thumb to follow, and a quick Google search will lead you to the same advice repeated over and over again in an almost mind-numbing way. But the best rules to live by are the ones you make for yourself to fit your own lifestyle—the ones that will carry you across all the canyons you come across in your life.

My friend Amy, for example, found that after years of living with one psychotic roommate after another, she absolutely needed to get her own apartment. So, after a few years, she decided to make the leap to go roommate-free, even if it meant having to spend a little more than half her income on rent. It was hard at first, but she made her place her own. She adjusted her life so that she wouldn’t have to live with another roommate again. She said goodbye to the days of opening up the freezer, and finding a roommate’s dead pet rat in a Ziploc bag. She used her new space to launch her own business. She spent less money going out, but she thrived on her own. Screw spending no more than 30 percent of her income on rent—she has never been happier in her life.

I have never followed the rules of thumb prescribed by people like Suze Orman, or Dave Ramsey, or even from my very own mother, because none of these people are me, and none of them are living my life. Like Amy, I really value having my own place now, and will say no to all the after work and late night meet-ups at bars if that’s what I need to do to pay my rent and all of my bills.

So, David, the question that I have for you is: Why is the amount of money you spend on rent something you fret about? Is there something else you’d rather have that money go to? If so, those are your priorities, and the rules you live by should be the ones that focus on those things, because those are the things that will ultimately make you happy.


Photo: Flickr/Stu Seeger


24 Comments / Post A Comment

Trilby (#191)

Housing is expensive in NYC so if you want to live here you probably can’t stick to the rule of thumb. Instead, you make trade-offs. I would totally take the smaller BR for less rent, like the author did. When I left my husband a few years ago, taking my teenage son with me, I got us an apt. where mine was a windowless BR that measured less than 7 feet by less than seven feet. It did have a closet and luckily, I like to sleep on a futon couch in couch position. This was so my son, who is claustrophobic could have the big BR. Now I have a nice 2-BR co-op that costs me about a 1/3 of my income but feels cheap to me because I have cut my other expenses to the bone. I ALWAYS bring lunch to work, I rarely eat in expensive restaurants, I NEVER buy drinks at bars (what a huge waste!). I live very modestly and frugally, and I find that the greatest luxury of all is to be able to afford my bills and especially my WONDERFUL apt. that is spacious, well-laid-out, and boasts an enclosed balcony overlooking a dense “forest” that is about 2 blocks wide. Heaven!

Spinach Party (#253)

Auto-Reply to Mike Dang Article: Mike Dang, you are the beeeeeesssstttt!

Although Mike has put it very thoughtfully, I actually disagree. The one-third standard is based on the VERY conservative poverty measures that underlie US government policy. It should be considered much more a hard and fast maximum than a flexible do-as-you-will rule of thumb.

synchronia (#185)

@stuffisthings I’m confused, are you saying people shouldn’t be allowed to spend more than 1/3 of their income on housing? Or that you’d never ever advise it for anyone?

As a graduate student I spent a bit over 50% of my $20k/year income on housing, and was still able to save 10%. It worked for me because renting that apartment helped me live without a car, and I wanted it enough to cut down in other budget categories. Obviously if my income had been 10k the available choices would have been different, but I still would have put my money where it would make me happiest/healthiest.

sony_b (#225)

@synchronia It’s a tough call. I see what stuffisthings is saying, but I think you’re right, some of the tradeoffs are worth fudging the lines a bit. One of the rules my (live-in) boyfriend and I have is that our monthly minimal expenses cannot exceed what we can support on either my salary or on his salary plus my unemployment. I make more than he does, and we’re doing really well right now, but we’re also conscious of the fact that it’s not a question of if one of us will be laid off, it’s when. That keeps our housing expenses at about 15% right now. We specifically choose to live in a less nice (but still totally safe) neighborhood so the Joneses that we’re tempted to keep up with are Honda owners, not BMW owners. We’re in the process of buying our first place together, and we applied that rule to the purchase as well – we’ll trade up in a few years when we have more equity, but keep the payments down below that limit.

Of course our discretionary spending eats up a lot of the other salary (and will really take a bite out of it as we fix up the place we’re buying), but if one of us is laid off we can quit the fancy gym and stuff like that.

When I was younger I definitely paid more than 50% of my income for a studio just so I could live alone. It was worth it after 10 months of living with a (diagnosed) paranoid schizophrenic roommate who “forgot” to take her meds. But even then, I tried to stick to the can-survive-on-unemployment rule. That definitely saved my ass more than once.

synchronia (#185)

@sony_b You make a seriously great point – your budgeting should also depend on how stable your income is. I’ve been really lucky to be in a grad program with pretty consistent funding (and access to loans, although I try to avoid that). Obviously I’ve also had the privilege of knowing I have at least a reasonable chance at increasing my income after graduation.

The keeping up with the Joneses factor is a tough one, too, even when all your friends are students/early-career/underemployed like you. This is why I always love hearing from Mike Dang about how he saves on going out, traveling, etc.! <3

@stuffisthings I’m not trying to say anyone SHOULDN’T spend whatever they need to in order to acquire decent housing. But a person who HAS TO spend more than 1/3 of their income to do so should be regarded a person in serious financial difficulty, not a person who has made some choices out of personal preference. Does that make sense?

(Basically what I’m saying is that your stipend should be seen as too small, rather than you being seen as a person who “decided” to spend half his/her income on rent. Sometimes the warm fuzzy choices rhetoric can obscure serious economic inequities — note that “personal choice” is very much a part of the vocabulary of the political right.)

sony_b (#225)

@stuffisthings This I completely agree with. Personal choice is awesome when you’ve got options. Most people don’t.

MuffyStJohn (#280)

@stuffisthings Thank you for this. The personal choice thing really gets my goat when salaries/stipends/income are not coming close to accommodating the cost of living in a lot of the large, urban areas where people can actually get jobs.

Mike Dang (#2)

@stuffisthings I think we can all agree that being forced to spend more than you want or can afford to simply live somewhere is not a good thing, and if that was what the reader who wrote to me was going through, I would have offered different advice.

My point is that financial advisors would typically tell a person like Amy that she’s spending more than she should on rent, and probably admonish her for it because they love their rules of thumb, but she’s doing exactly what she needs to be doing to make herself happy, while still figuring out a way to be financially stable. I’d hope we could all live our lives in such a way.

Robin (#1,320)

Of course, it varies hugely by region (and cost of living). In Vancouver, which I think is a high-middle city for rent, my limit is 1 week’s gross income (about $865 for me, so I can either afford a crummy 1-bdr or a nice shared 2-bdr). I’ve paid more than that, but it becomes tricky and I become uncomfortable with it…

that said, I agree with Mike. Pay what works well for you and respect your priorities.

I seriously wish that more people would realise ‘Do what’s right for you’ is really the best advice. Always.

Mike Dang! The stuff you write always makes me feel so calm and… I don’t know, ready to sort shit out! It’s great!

Meaux (#943)

@Kate Amann@twitter. He has the same effect on me! He’s an understanding and sympathetic voice of reason. I think that is why he gets so many proposals of marriage.

ThatJenn (#916)

I find more like 1/5 is affordable for me, and that’s why I live in the middle of nowhere (well, kinda – I do live in a real town where I have a real job, so it’s not like I live WAAAY out where my gas costs would eat up my housing savings, but it’s got a very low cost of living, and an accompanying lack of a lot of what I miss about living in a major city).

e (#734)

The 1/3rd rule also varies a lot depending what you get with it. If you live in lovely Southern California, you aren’t going to need much heating oil. If you rent, you don’t need to save money to replace your roof. That sort of thing. I tend to think the 1/3 rule most closely adheres to the way a homeowner in a place with winters that actually freeze should budget.

Mike Dang with another great piece. It’s hard to live by someone else’s rules when everyone’s situation is different. I’ve lived in the same place the past 5yrs and rent has been anywhere from less than 1/5 to over 1/2 of my income (currently at 1/4). I’d rather cut back on expenses to make up the cost, than constantly move anytime my income fluctuated. Besides, those 1/3 rules don’t take into consideration folks like me who don’t own a car and live in a walkable city. What we don’t spend in transportation can be allocated as needed.

I don’t want to get all “who has the worst situation” contest-y here, but I always hear New Yorkers complain about apartment rent and size, and then when I actually hear the size (in this case, able to fit an entire full-sized bed [and dresser!!!]), I’m like, “OH MY GOD YOU HAVE ALL THAT SPACE???” And then I laugh hysterically, and then I start crying.

Tokyoites = masters of tiny spaces

navigateher (#555)

@OneTooManySpoons Yes, this! I’m European and used to very small apartments (also living in a city with very high living costs), although nothing similar to Tokyo. I actually giggled a bit (and then started crying) when I read this: http://thebillfold.com/2012/05/making-small-places-livable/ . The dude who won lives in an apartment over 600 square feet. I know families of three in here that live in that space, and make it work. I also saw an article about small kitchen design ideas in NY (maybe NY Times?), and they were all twice the size of our kitchen (which is considered “airy” and “roomy” here), and people in the comments section were all “omg tiny! how cute! look at that tiny, tiny fridge!!!”. Americans are just used to larger spaces and huge appliances.

MuffyStJohn (#280)

@navigateher Whenever I feel bad about my teeny tiny apartment (under 250 square feet), I tell myself “the Europeans have it worse” and then watch an episode of House Hunters International where couples choose between three variations on a shoebox and I feel a little better.

600 square feet? Not tiny. Actually sort of luxurious.

navigateher (#555)

@MuffyStJohn Also ridiculous? We have one of the lowest population density per square mile scores anywhere yet we live in these ridiculous small boxy apartments. All we have is land. Forests and fields and more forests.

I absolutely hate spending a lot on rent – it’s money I’ll never get back, after all. That said, I’ve lived with too many awful flatmates in too many gross houses. Right now we’re paying a little more to live alone, in a house, with a garage. I suppose if you split it right down the middle, rent is about 20 percent of my income, but in reality we don’t split things 50/50 because I make a decent amount more than the BF.

mishaps (#65)

It’s also good to consider whether or not your rent will go up significantly – I would be more willing to encourage you to go to the edge of what you could afford if you’re in a New Yorker in one of those increasingly-rare rent-stabilized apartments. I had one that in the course of nine (!) years in the apartment went from “market rate” to “OMG so cheap” because the cost only went up by a third while rents around me more than doubled.

(I also have friends who have rented apartments in private homes where they’ve been able to maintain a reasonable rate of increase because it mattered more to the landlord that there was someone living there who they liked and trusted than that they were maximizing their profits, but that’s more subject to change if your landlord loses a job or sells the place.)

allreb (#502)

Lovely advice, Mike Dang (as usual).

When my sister and I were looking for a place about a year ago, we had a lonnnnng talk about what we really wanted. The ultimate answer was location, for which we were willing to pay a few hundred bucks more than our previous rent, for a smaller space. Our 2BR in Morningside Heights comes in just under neighborhood average rent, even with a slight rent increase this year, but it’s less than a block from the train we both need to get to work, it’s only on the third floor (everywhere else we looked that we could afford was a sixth floor walk up), and we like the building and the neighborhood a lot. For us, those things were worth paying more than the minimum (or even average) of what we “should” have been willing to pay.

(My best friend just went through a similar decision to what was described in the article, too, deciding that living alone and the sanity she gets from that was more important than keeping her rent costs at that 30% level. Her life is much better for it.)

cherrispryte (#19)

So over half my income goes to rent, and I’m well aware that’s ridiculous. That said, it’s the most convenient apartment in the entire world, in the middle of a highly bikeable and walkable city, near 2 grocery stores and the metro. I figure (and I learned this the hard way a few years ago) I would wind up spending so much more on cabs and delivery food if I lived pretty much anywhere else. Also, it’s safe as hell, so that’s nice. Yes, I make sacrifices left and right to afford my ridiculous rent, but I’m okay with that.
Well, mostly okay with that.

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