Can you really afford your place ?

Appreciate posting this but it always annoys me that articles like fail to clarify whether percentages are pre tax or post tax income. In any case, standard of 6 month without a job has to go up if you make more money.

Also, fails to take into account the burden of maintenance and taxes on the monthly cost of housing - which is becoming a larger and larger burden in many parts of the US. The article is generally useless, because the points they make are either too general or statements of the obvious.

So, in that case, how would you amend #3 (which uses real numbers) to fit NYC's market/lifestyle?

Good point, 300_mercer.

You should have at least ONE YEAR's worth of living expenses in the bank.

TWO YEARS if you make six figures, since higher-end jobs are much harder to replace.

Correct, Lanzz.

The ENTIRE monthly housing nut -- mortgage AND maintenance AND taxes -- should be covered by one week's NET pay, not just the mortgage payment.

So matt, basically you're saying that you should be putting into their checking account (or whatever) 4 times what they're paying for their home? (if the place costs $1000, someone should be making $4000 a month after taxes). Right?

"4. Your credit card balance has remained the same for the past year."

My balance was zero all year long. It has indeed "remained the same", but is a sign of living very well within my means.

Or did these Yahoos think that everyone in the world carries a credit card balance?

"So matt, basically you're saying that you should be putting into their checking account (or whatever) 4 times what they're paying for their home? (if the place costs $1000, someone should be making $4000 a month after taxes). Right?"

Yes. Absolutely.

Wouldn't this vary based on job insecurity/security? Or irrespective of my situation should I put a shiny quarter under my bed for every dollar I make? Matt I assume - based on all your postings - that you lived through the Great Depression, so I do appreciate the counsel.

For manhattan, 25 percent post tax on housing is very conservative. Perhaps upto 35 percent is more normal unless your income is in 7 figures in which case it may be lower than 25 percent. For example, some one making 200k pre tax will have 120k post tax income. He/she will be fine living in a normal 1 bed with 3500 rent. Spend another 3500 per month including vaca student loans etc and save 3k per month. If you have children, you will likely have to move out to burbs where rent plus transportation will be around the same but for a bigger space.

I'm with Matt & 300_mercer on this one. The fraction you save is more important than what you spend on housing -- different people like to spend in different ways. Nevertheless, saving 25% of after-tax income is important if you want to maintain your lifestyle into retirement. By "saving", investments and adding equity into your house count.

Suppose you work for 40 years, income & spending increasing 5% a year. If you save 20% of your income and achieve a 7% after-tax rate of return, the amount remaining annuitizes to the amount you were spending in your last year of work. At a 5% rate of return, you need to save something closer to 30% of your income. Social security buffers things some of course, especially for incomes below $100K.

So no, it doesn't really depend on your job security. If you plan on reducing your spending as you age, it's a different story. But personally, I'd prefer to go out with a higher level of spending. Having it hurt when you piss, having all your friends die, etc. is depressing enough. No sense adding "remember the good life we used to live" to it.

"So matt, basically you're saying that you should be putting into their checking account (or whatever) 4 times what they're paying for their home? (if the place costs $1000, someone should be making $4000 a month after taxes). Right?"

Making $4000 per month *after taxes* is not exactly an easy task. To pull in $4000 after taxes, living in NYC, a single person must earn the non-trivial sum of _$74,040_. (Paycheckcity.com) In a time when PhDs are waiting tables and pouring coffee, how many people can expect to make that much?

Such a person -- who is well into the upper half of earners in Washington Heights, for example -- can only afford, using this system, a mere $1000 per month in mortgage plus maintenance.

Does that even get you a closet these days?

I also think we need to make a sharp distinction between paying rent and paying a mortgage. Paying down a mortgage means coming closer to owning a valuable asset, whereas renting is helping someone else to own or profit off _their_ asset. Owning your home is step one towards a safe retirement, and you should get finished with it as quickly as you can. Renting is another story, but there's nothing bad about stretching your finances to _own_. And evidently a lot of people do just that, given what rents are and what take-home pay is.

Your mortgage payment is more than one week’s salary.
Is this gross or net?
Does this include carrying charges or just mortgage?

TZ, I think the target for the calculation should be mortgage interest on the full value of the home, plus maintenance, but not principal payments.

The reason for "not principal" is because it's an investment that will have returns. The reason to count interest on the full value of the home is because calcs of "fraction to save" often include assumptions of gains on investment. So if you don't consider your "freeloading" off the equity in the home, you are skimming from its investment value w.r.t. retirement.

"Making $4000 per month *after taxes* is not exactly an easy task. To pull in $4000 after taxes, living in NYC, a single person must earn the non-trivial sum of _$74,040_. (Paycheckcity.com) In a time when PhDs are waiting tables and pouring coffee, how many people can expect to make that much?"

Then I guess they'll have to recalibrate their living expectations if they're making less than $75K.

Maybe they need to live with roommates. Or in the Bronx.

At $75K, you can be a little more lax IMO. Social Security (even just the 70% funded portion) will buffer a significant fraction of retirement income.

To NYCMatt and others:
How flexible/stringent is this 1 (spent on housing) to 4 (money in the bank) ratio? Is a more narrow ratio really unsustainable? We are talking about after taxes, so wouldn't someone's lifestyle and general frugalness be taken into account? If someone, say, does not have a lot of personal expenses, could they spend a little more than $1000 per month on their housing if they only make $4000 after taxes from their income? I'm really asking, how flexible is this number?

Keep in mind that NYCMatt's requirements
a) Exclude tipping
b) Reflect bad credit
c) Include a second bedroom for guests who are frequently unemployed
d) Include sufficient financial capacity for multiple union dues for protection
e) Sometimes involve his body clock being messed up by evil employers

only 500 posts in 4 wks?

can't you do better?

I like when columbiacounty defends NYCMatt... tomorrow, Riversider.

5 more.

keep going, liar.

C0lumbiaC0unty, when will they be removing the ankle bracelet so you can come visit us in NYC?

4 more lies.

and you've made it.

4 more lies. not hard for you.

Hey, whatever happened to your late "wife"?

3 more lies.

keep going, liar.

not hard for you.

Did I touch on a sensitive topic?

2 more.

how many lies is that?

yep 500 lies in only 4 wks. that may be a record.

"The fraction you save is more important than what you spend on housing"

Agreed. I save/invest about half my net but, when I had a mortgage, I was paying more than 25 percent because I triple paid my monthly payment so I could pay it off as quickly as possible. Once that was done, housing costs dropped far below 25 percent.

So basically it comes to if you could pay your rent or mortgage with maintenence in 1 week pay , you're in a good place. 2 weeks = start cooking a lil more at home and hit happy hours. 3 weeks pay = be a roomate and start having RAMEN NOODLES OR MICKEYS DEE'S for Dinner. White castle is also a option.

All debt-to-income ratios are calculated using GROSS salary and debt.
The one-week rule (similar to the 40X rule for rentals) is based on GROSS income, not net.

1 week's NET income to figure affordable monthly payment is absolutely absurd.
Take your gross income and divide by 40, that's your max affordable monthly payment.

Example: Income of $100K. Max monthly payment = $100,000/40 = $2,500 per month.
(this includes all debt and maintenance)

1 week's NET income to figure affordable monthly payment is absolutely absurd.

Why ?? Isn't that what you are coming home with after uncle sam screwed you ?

If you're paying 2 weeks or about half your take-home, you're fine from income meeting expenses, but you are not saving.

ms_w71, the 40x rule is the absolute minimum. It is a level that protects the LL over the term of the lease, it is not a sustainable level for your long-term financial health.

Expanding on your example of $100K income. After-tax, your take-home is $5500 or so a month. You want to be put aside about $1200 from your spending, leaving you with $4300. If you put $2500 into rent and spend $1800 elsewhere, you're fine. But if are spending $3000 elsewhere, you have no savings.

People are different, but I imagine that between phone & electric & cable & clothes & vacation & food & eating out & taxis & subway & health & other purchases, the typical $2500 Manhattan studio-dweller would find $1800 tight (but doable w/ effort) as a single. Probably not realistically doable as a couple.

I can't say I know anyone whose income has increased 5% a year. The problem with one-size-fits all financial advice is that it doesn't actually fit anyone. It's not helpful.

Im not sure why people still say gross income because Banks, mortgage brokers, landlords really focus on your NET ! Its like telling a woman I got 12 inches until she unzips YO AZZ

"1 week's NET income to figure affordable monthly payment is absolutely absurd."

Maybe for people who insist on living beyond their means.

By any financial measure, if you need TWO weekly paychecks to just pay for the roof over your head, you are WAY in over your head.

Ionanda, I like your approach of using actual numbers rather than overly general heuristics that may seem reasonable but actually have little or no semblance to reality.

I make "much" more than 100k and have a monthly mortgage coop of ~$1,700. I'm maxing out my 401k, have minor student loan expenses, and paying health insurance for SO and myself (she's in school). I track every dollar that goes out the door, and our monthly variable expenses are a little more than 2.2k (includes a dog and "accrued" expenses like an annual vacation, etc). Were our monthly living expenses any higher we'd either have to reduce 401k contributions or make serious sacrifices in other parts of our life.

I'd encourage anyone attempting to truly understand what they can afford to take the the time to come up with a serious budget that includes irregular expenses (vacation, medical bills) or, even better, actually track you expenses for a few months to get a better idea.

Being here in Manhattan going out to lunch with friends and dinner with the wife I caught myself spending 3k one month. Gotta be careful

>The problem with one-size-fits all financial advice is that it doesn't actually fit anyone. It's not helpful.

Streeteasy heresy. On SE, every decision to buy fits into a spreadsheet that automatically says it is a bad decision vs an ETF.
Every rental is available for cheap just by saying to the landlord "hey buddy, you will go on the shit list", and then you also get universal termination rights.
All buying decisions are solely based on the ability to paint pistachio colors and other silly emotion or perhaps you saw a unicorn.
All new developments are by garbage transfer stations or built on waste dumps.
The Fed is responsible for all problems, and if they aren't responsible then it is the banks.

I am a staunch advocate of "live within your means," but sadly this is not an easy reality for many people. It's nice to sit where you are and boast about your $1,700 co-op mortgage. Maybe you should tell everyone who is in their early 30's, who have busted their asses for a decade to save for a down payment, who's incomes put them into the top 5% nationally, who are finally in a comfortable position to max out their 401k's, but are suddenly faced with a reality of $1 million barrier to entry on a decent 2BR apartment in a decent neighborhood. Oh, and tack on the fact there is no guaranty they can even send their kids to the public schools they are zoned for. Housing costs are absurd today, in a way that today's generation has no choice but to fork up more than 1 weeks' net paycheck to cover living expenses. While many are fortunate, and smart enough to live more frugally and responsibly, it's simply not the same math game that it was before the housing and credit boom of the 2000's. Until this massive deleveraging is actually completed (I don't think it ever will be) and real inflation becomes a factor again, meaning rates will actually rise for the RIGHT reasons, the cost of living equation is so out of whack and the old formula simply isn't fair to apply for everyone.

> Until this massive deleveraging is actually completed (I don't think it ever will be)

I think it will be a long time off.

Oh but the Fed, the massive manipulation, the horror, rates should be higher, if I wasn't wrong about rates then I would be right about real estate prices, oh the Fed horror, FLMAOZ I would be right if I wasn't wrong.

There's no arguing with basic math, but a significant driver of people living outside of their means is unwillingness to accept alternate neighborhoods or living situations. For what it's worth, "....early 30's, who have busted their asses for a decade to save for a down payment, who's incomes put them into the top 5% nationally, who are finally in a comfortable position to max out their 401k's..." is pretty much my situation, minus the $1mm barrier to entry. I know there's a huge bias against Hudson Heights on this board (and don't want to start up the same debate), but the school's are solid (for when the kid thing happens), it's a 20 minute subway ride to mid-town, and there are plenty of restaurants/bars for when we want to stick around the neighborhood. We have dual income friends paying over 4k/month for one of those decent 2 bedrooms you mention, and to them it's worth the trade-off... but it is a choice. Anyway, my point isn't to prop up my neighborhood, just to say that a lot of people could easily find themselves in a lot better place financially if they opted for a slightly longer subway ride.

Of course, it speaks to your point that it still takes a top 5% salary to own a decent place in poorly regarded neighborhood and still be able to save.

I love Guashinton heights aka Hudson heights with all the great food and hot dominicans around.

Bingo, seaver69.

I like living two stops from work and a few blocks to Lincoln Center, but want to pay what I would out in the hour-commute boonies.

I gave up space to live right in midtown. Just 11 blocks away from work. I feel sorry for my sister because sometimes she calls my wife while we are having dinner at a restaurant and she's stuck in traffic driving up to Teaneck from Brooklyn cursing us out. LOL

>> I can't say I know anyone whose income has increased 5% a year. The problem with one-size-fits all financial advice is that it doesn't actually fit anyone. It's not helpful.

You can live your life with the attitude of "every situation is different, so why bother", or you can create some guidelines for your world.

Lot of uncertainty over 40 years, to be sure. In the 5% world I hypotheized, that's saying 2% from inflation and that your income as a 25-yr-old at $50K becomes an inflation-adjusted $160K as your career (and general productivity of the workforce) progresses. If investment gains are 5%, you need to save 30% a year to maintain at-retirement-age spending power.

But say you believe that you have no reason to expect anything beyond inflation in your income. I.e., the $50K you earn as a 25-yr-old remains at $50K inflation-adjusted throughout your entire career. If investment gains are 5% annually, you still need to save 20% a year to maintain at-retirement-age spending power (Social Security aside).

Not a whole lot different, despite a difference of more than 3x in real income growth.

I challenge you to come up with a scenario where saving 0-10% will leave a person w/ retirement income that does not drop. Some people do that and go through life with an attitude of "maybe something good will happen". I've seen some cases of the tail end of that, with my parent's generation. Sometimes, something good did happen and all was fine. But often it didn't, and the results are so pretty.

NYC10007, I punched "10007" into Google to see what neighborhood that is. Top link that came back was to a Forbes page stating it is the 19th most-expensive zip code in 2006 with a population of 5500.

Out of 42,000 zip codes with a population of ~7500 each, it's in the top 0.05% of all zip codes.

I'm not sure why you'd expect a person with an income that is in the top 5% of the population should afford to live there without over-extending themselves.

Speaking of zip codes, I've used this free site for years which shows the exact boundary on every zipcode in the US. Just key it in, press "find zipcode," and you will get a detailed map:

http://maps.huge.info/zip.htm

(Please note I have no connection to the webpage but I find it better than Google.)

>NYC10007, I punched "10007" into Google to see what neighborhood that is. Top link that came back was to a Forbes page stating it is the 19th most-expensive zip code in 2006 with a population of 5500.

It includes City Hall

If you only make $75k, you have no business living in NYC.
Move to Albany or something.

Well, I'm as cheap as they come these days in terms of housing. Our apartment is about 5% of our after-tax income.

dealboy, what if the person bought a $80k townhouse in 1980?

>Well, I'm as cheap as they come these days in terms of housing. Our apartment is about 5% of our after-tax income.

And yet you feel entitled to this undeserved windfall of money that originated from the taxpayers of the State of New York and was intended to provide affordable housing to NYC's working class.

over 50% of my take home pay goes towards owning. But that number drops to 35% when I take into account my tax refund. works for me

But according to Jason, tax refunds are regressive, because the 40-50% of people who don't pay income taxes don't get tax refunds.

different strokes for different folks

Nada,
'NYC10007, I punched "10007" into Google to see what neighborhood that is. Top link that came back was to a Forbes page stating it is the 19th most-expensive zip code in 2006 with a population of 5500.

Out of 42,000 zip codes with a population of ~7500 each, it's in the top 0.05% of all zip codes.

I'm not sure why you'd expect a person with an income that is in the top 5% of the population should afford to live there without over-extending themselves. "

You hit the nail on the head as to why I moved from Tribeca. It's just stupid down there now, and yes, anyone who makes less than $500k has no business expecting to be happy or comfortable in that neighborhood. In reality it's more like $1 million. Sad thing is that applies to many Manhattan neighborhoods today, though it's certainly more concentrated in Tribeca which includes more than just 10007 (which yes, includes city hall...10013 is real Tribeca)

Point is, you're preaching a very good point, but if everyone in New York suddenly decided to follow this little 1/4 of your net monthly rule, you'd lose 3/4 of the population of NYC. It's all a vicious cycle...

>> You can live your life with the attitude of "every situation is different, so why bother", or you can create some guidelines for your world.

Or you can make some useless assumptions that give you the appearance of understanding complex things. Too many people's careers take zig-zags to make a 5% income prediction rational. In my industry, $160k is not even possible - at any stage of the career. How about the many people who get laid off during those "peak" years? Building models on assumptions isn't helpful for understanding people's financial decisions. I'm glad you find it helpful for your personal situation. But your calculations are often mathematically correct without being enlightening.

Why are so many people attacking inoitall recently?

"If you only make $75k, you have no business living in NYC. Move to Albany or something."

If you move, you'll have to work a lot harder to earn the same number if you work outside the city. How many $75k jobs are there in Albany, government patronage sinecures aside?

Matt, let me ask a follow-up question to you. I really hate to pick you apart with the rigidity of your "1/4 of income" rule, but I want to make the point that not all housing expenses are equal.

Your rule of thumb for monthly housing costs, whether mortgage, rent, maintenance, or a combination of the above, for someone earning $60k -- the median in your neck of the woods -- would be just 1/4 of $3334, or $830. That barely pays maintenance in some places.

Let's say that with that salary you have a chance to own your $160k one-bedroom home (in your neighborhood, where such prices still exist, say), and the maintenance is just over $850. Would you propose that someone inheriting such an apartment actually sell it because the maintenance alone breaks their budget? Or that someone with $160k in cash not buy outright because, again, maintenance alone is too high?

In this case, you're paying maintenance on an asset you own, and can presumably dispose of were money to suddenly get a lot tighter.

In contrast, someone paying $750 in rent (with roommates, say) and having zero savings is in full compliance with the "rule".

Yet this rule seems to say that the owner is teetering on the edge of irresponsibility whereas the renter is on the prudent side.

I'd say that in order to correctly gauge expenses, we need to treat expenditures that go towards owning or maintaining a productive asset as been less damaging as expenditures that are non-productive.

As a co-op board member, what would your vote be on accepting the owner in my first scenario (no mortgage, $60k income, $830 maint) and accepting the renter in the second ($60k income, $750 rent)?

Oops, typo: "as been less damaging" should be "as being less damaging".

"Let's say that with that salary you have a chance to own your $160k one-bedroom home (in your neighborhood, where such prices still exist, say), and the maintenance is just over $850. Would you propose that someone inheriting such an apartment actually sell it because the maintenance alone breaks their budget? Or that someone with $160k in cash not buy outright because, again, maintenance alone is too high?"

Yes, that's exactly what I would recommend.

Or rent it out at market rate and lease a place for yourself that you can afford.

***

"I'd say that in order to correctly gauge expenses, we need to treat expenditures that go towards owning or maintaining a productive asset as been less damaging as expenditures that are non-productive."

Agreed.

***

"As a co-op board member, what would your vote be on accepting the owner in my first scenario (no mortgage, $60k income, $830 maint) and accepting the renter in the second ($60k income, $750 rent)?"

Unless the prospective owner could reasonably prove that his income would increase over the years, I'd vote to reject. I'd approve the renter, though.

I just read through this whole thread and all i learned is you people spend too damn much. I'm one of those early 30's, top 5%, blah blah blah, and i generally don't restrict my spending, and yet i rarely spend more than $1,200 a month on non-housing related expenses.

As for the $1M barrier to entry for buying, that doesn't exist either, because even though i'm in brownstone brooklyn, there's still plenty to be had around $500k, particularly if you're willing to go co-op. I guess the other thing i learned from this thread is that kids are a terrible investment/decision, though apparently that's such an obvious statement that no one calls it out directly. Who needs a 2nd bedroom? Not this guy. Kids destroy your social life, your sleep, your health, drain your finances, and if you're lucky you have 50% chance of still being on speaking terms when they finally move out.

"As for the $1M barrier to entry for buying, that doesn't exist either, because even though i'm in brownstone brooklyn, there's still plenty to be had around $500k, particularly if you're willing to go co-op."

Unless you're paying cash (or making a substantial down payment), you cannot afford to buy in the $500K range unless you're making at least $200K.

"i rarely spend more than $1,200 a month on non-housing related expenses."

You must not eat.

Or pay for internet access/cell phone/electricity/cable.

Or buy clothes.

Certainly not ALL of the above together.

all these ratios are great & i agree with most of the guidelines but in reality they won't work for most people.

given that real estate is significantly elevated in price over the multi-decade trends, the average person will find it hard to live within these ranges. of course, on the flip-side of this, given that prices are skewed upwards, this is perhaps the worst time to buy beyond ur means as u r buying an overly inflated asset.

http://www.zillowblog.com/research/2011/08/17/what-goes-up-must-come-down-comparing-price-to-income-ratios-across-markets/

if u take that nyc prices are about 5x income, then u see that if one were to buy today, numbers would look like this (or a multiple factor of this):

$100k income
$500k price

$2.5-3k (mortgage + co-op expenses combined)

net after taxes per month $5k

ie avg right now is 50% of net

oh and this is not prime manhattan only but all nyc. below 96th manhattan & prime brooklyn is prob even at a higher ratio.

I think the title of this thread should really be changed to "can you afford to retire?" That's really the discussion here, not whether you can "afford your place."

mh330, you must have had really loving parents to be so excited about having kids.

As for your $500k BK point...sorry, I'm a snob, as are most manhattanites...isn't that why we live here in the first place? Yes, $1 million barrier to entry is 100% true for snobs like me. If I'm going to work in a job that I really don't love just to make money and be another hamster on the wheel of life, I'm at least going to enjoy spending it on nice things...

As a correction, I looked back at my "top 5% nationally" comment, what I really meant was top 5% in NYC, top 2% nationally...that's where it really starts to sting that you can't afford $h!+ in this city despite making what would be serious money in 99% of the rest of this country...

Looks like NYCMatt has been out-frugaled.

I think some of the angry responses are from people who are clearly not saving in the range of 25 percent of their post tax income. These are the people who need the most advice as I do not think they even understand the concept of salaries going up with inflation. Perhaps some of them work for the govt with nice pensions, in which case they do not need to save as much. Or they have a trust fund.

Silly nada trying to help.

>> I'm glad you find it helpful for your personal situation.

It doesn't make a difference to me personally, I'm just explaining a reality for most people. A pretty wide set of assumptions lead to the same place. You have income that is growing (or not), if you want to retire without loss in spending, you better be saving a certain fraction of your income. If you earn $100K or less, SS provides an appreciable fraction. Ditto for pensions.

Zig-zags in income do not much matter because the your targets adjust accordingly, so long as you want your retirement spending to look overall similar to your earning-years spending. If you want to keep spending at a level commensurate with where your zig-zag took you, you need to save an appreciable fraction of your zig-zag income no matter the zig-zag.

You can write all that down mathematically, or you can apply some common sense.

>> Point is, you're preaching a very good point, but if everyone in New York suddenly decided to follow this little 1/4 of your net monthly rule, you'd lose 3/4 of the population of NYC. It's all a vicious cycle...

Fine point. People often worry about Manhattan becoming a place just for the wealthy. But perhaps there will always be room for both the wealthy AND the financially imprudent.

Not yet having kids, I only spend about $500 per month on non-housing expenses. Apartment paid off; property taxes are low where I live; maintenance is reasonable ($260/mo, ÷2). I work odd hours and pack my own supermarket-bought food. And I ride there by bicycle, so no monthly train pass. My only vice is that I like expensive Belgian beer, which costs nearly $5 a bottle. That aside, as long as you have a partner who doesn't have expensive tastes, it's not hard to keep non-housing expenses low.

This will of course change when we're ready to have a child.

"I think some of the angry responses are from people who are clearly not saving in the range of 25 percent of their post tax income. These are the people who need the most advice as I do not think they even understand the concept of salaries going up with inflation."

I'm one of the dissenting responses (not quite "angry"), and I save well over half of my post-tax income. I also know that the "concept" of salaries rising with inflation is by no means guaranteed. Since the closing of the gold window during the Nixon administration, inflation has more than taken away all the gains in productivity that have led to nominally higher salaries. I wouldn't be surprised in the least if this trend continues for as long as our governments use fiat money. This is why saving, and getting your money into inflation-protected assets like real estate that you own (not rent, and that includes "renting" money from the bank), is so important.

Fine point. People often worry about Manhattan becoming a place just for the wealthy. <<< ANACONDA

If you want to live below 96st, U BETTA make at least 250k if you want to live decent.

NIMBYC is Anaconda some sort of reference to the Chinese New Year?

Could be Greenday : )

One of the variables in how much one needs to save is obviously the level of spending one expects in their retirement. For example, Nada notes above: "If you plan on reducing your spending as you age, it's a different story." Don't most people expect to reduce their spending as they age? I think those who have or plan to have children expect their spending to drop significantly once the kids are out of both the house and through whatever level of education the parents choose to support. Nada's calculations based on desire to maintain consistent level of spending make sense, and it is certainly prudent to be mindful of what one needs to save to achieve that goal, but I am curious as to how many people share that goal? I personally plan on cutting spending in some areas as I age; I also plan on increasing spending in others, but overall, I project my post-retirement spending to be about 80% of current spending (and significantly less than that if I can convince my husband to downsize house - large house is great for living and entertaining large groups now, but maintenance is expensive, and I don't want to be running bed and breakfast in my 60's). Curious if others anticipate spending more between ages 40-60 than they do from ages 60-80 and then even less from 80-100.

agreed with nycnovice. my expenses are up 5x since i was a single guy and the real irony is i spend less on myself than before. so it is due mainly to the need for more space for a family. i don't see why i cannot cut household spending back in half when the kids leave the nest.

in late retirement (70+) the other big variable will be healthcare/medical costs. who knows how that spending will be handled at that point. depending on how much is split between government/private at that point will determine how quickly costs rise at that point.

The unknown variable at any age is healthcare. Surprise, surprise. Day to day expenses as well as housing will be reduced by at least 50%. Even though my children are young, I'm already anticipating the need to downsize/rightsize when the oldest goes off to college in a decade.

"in late retirement (70+) "

Wait, UWS96, 70+ is "late retirement"? Don't you expect to live many years longer than that? (I myself will probably define "early retirement" as 80-90, and "late retirement" as 90-100+. Social Security will not be around by the time I'm in my 70s.)

i'm hoping 35-45 is early retirement :) but on a serious note, i was thinking 55-65 as early retirement. from what i have seen with my parents generation, medical costs don't really change that drastically in this period. it's 70+ and older where the medical costs start to increase exponentially.

yeah sorry i guess i was thinking in the context of the thread, which is child costs. 55 is around the time kids start to leave the nest. so retirement is the wrong word in this context.

"if u take that nyc prices are about 5x income"

A flawed premise from the start.

For upper middle class and lower, you can afford 3x your income -- on the HIGH end. For co-ops it's more like 2.5x.

nymat, why it's lower for coop?

It's lower for co-ops because of their higher monthly maintenance charges.

greensdale, If you only make $75k, you have no business living in NYC,
unless you have paid off your mortgage, and essentially have almost no housing expense.

NYCMatt, is it because coop fee includes re tax?

""if u take that nyc prices are about 5x income"

A flawed premise from the start.

For upper middle class and lower, you can afford 3x your income -- on the HIGH end. For co-ops it's more like 2.5x.""

Actually no, that is fact. The average household price in nyc is 5x income. That is one of the basic ways of knowing it is an overinflated market. there are plenty of indices out there. u can click on the stats from my link from zillow - a real estate site. there are websites that actually break this down for international areas as well. it's amazing how superinflated some areas are.

U r correct, people can only afford 3x or 2.5x their income. Yet many people are living in places that are 10x + their income b/c they brought prior to the bubble. what people can afford and what is actually reality are 2 different things.

Just caught this gem from NYCMatt: "Unless the prospective owner could reasonably prove that his income would increase over the years, I'd vote to reject."

How can anyone prove that their income will increase?
It's well-known that wages are stagnant.
And telling a co-op board "I think I'll get promoted soon" won't suffice.
Please explain what you mean by "reasonably prove the income would increase".

NYCMatt: WHY would vote down someone with 60K income paying all cash and maintenance of $850/month? Does your co-op board use the standard 3:1 or 4:1 ratios? I don't even need to grab my calculator to know that 60K easily clears 4:1 if the only expense is a $850 maintenance payment.

I posted a few months ago about someday buying a $400K one bedroom with say $800/month maintenance up in Hudson Heights where I've been renting for over a year now. I have been saving a ton (rent is less than 1/2 of one paycheck) so hopefully I'll be in the market by the end of the year.

What kind of income will I need for BOARD APPROVAL? I am not going for a 30% savings rate, I just want to own an apartment. It scares me that you say you'd reject someone whose income clearly meets the 4:1 rule, which I've heard is pretty much standard. $400K. 80K down. mortgage of 320K which would be around 1700/month. maintenance of 800/month. Total housing $2,500/month. No other debt. What do you think? Once again I just want board approval. I realize that I won't be saving an ideal % when I first buy a home.