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Ask Savvy: Leaving the Nest Budget

Dear Savvy,

I moved back in with my parents about a year and a half ago to get my finances under control. I want to move out in the next few months but don't have a clue what my budget should look like. I want to live on my own (or with roommates) and be financially solvent — unlike the last time I was on my own. My current "living with the parents in the suburbs budget" is working great but I don't know how to translate it into a "living on my own in NYC" budget.

Because I have been home I haven't had to pay for groceries, trips to the laundromat, and utilities. I am lost in terms of how much to budget for each of those categories and I don't even know what is the maximum amount of rent I can afford. My current monthly income is about $2,000 a month. I want to be able to save money, continue to pay off my debt but not feel like I'm depriving myself. I also want to figure out if it would be worthwhile to continue living with my parents until I get a raise.

To see my answer,

.

Savvy says: Since you're unsure of your future expenses, you need to build a spending plan that includes all of your foreseeable costs — the total will let you know whether or not you can afford to move. I'm not sure how much debt you're carrying, but if you have a fair amount of high interest credit card debt or personal loans, you might want to consider paying more of your debt before taking on more expenses. That being said, if you're on track to be debt-free before you leave the nest or will be finished with it soon, here's what I would do.

First thing's first, do some research. Find out what rent will cost in the neighborhoods where you'd want to live by looking online, making calls, and talking to friends. Rent will take up the largest percentage of your income, but you shouldn't spend more than about 30 percent of your income on housing costs. Assuming your $2,000 is after tax income that means you can afford to pay about $600 in rent.

You need to include debt repayment in your future costs, and I would allocate no less than three times the minimum payment. If you're only paying the minimum, you're not really making a dent in your debt. Make a spreadsheet that includes rent, debt repayment, utilities, cell phone bill, groceries, transportation, any personal costs like prescription meds, health insurance, car insurance, car payment, Internet service, cable bill, and savings.

I can't tell you what to enter for each expense, and its likely that not all of them apply, but you can roughly estimate (ask around to friends and family) for each to get an idea of whether or not you'll end up in the black or red each month after covering your basic costs. If the answer isn't the one that you want, I'd continue living at home for a while and possibly consider picking up a job on the side to increase your income.

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Onyx_Martinez Onyx_Martinez 7 years
I'm in a similar situation to the advice-seeker. My mom is trying to get me to save up and buy myself some real estate. I've got a co-op in Queens in mind, and I'm trying to put money away to get in on that.
absolutromantic absolutromantic 7 years
Just wanted to add my assenting opinion: for $600/month, I highly, highly doubt you'll be able to find a livable place in Manhattan. Even if you have roommates, that's ridiculously cheap. You need to be prepared to spend a lot more on rent, especially since you're making such a low income. I don't know anyone who spends less than $850/month on rent - and the only ones who spend less than $1000 are those either sharing a bedroom (not an apartment - a bedroom) or living in dangerous parts of Harlem that even they admit they wouldn't walk to from the subway at night. Finally, please forgive me if this is insensitive, but at $24k/year, isn't that poverty level? (According to a quick Google, $26k/year is considered poverty level in NYC). I think you'd be better off staying with your parents and trying to become more financially independent rather than totally financially independent. Once you get a job with higher pay, you can move out and try living on your own.
bengalspice bengalspice 7 years
I agree with my fellow NYers, you will need some serious luck and help if you're going to look for a place in NYC with $2000 per month income. I second rc ... expect to spend 40% to 50% of your income on rent. AVOID BROKERS. And try looking at places like Brooklyn, Bronx, and Queens if you really want to stay in the city. Otherwise I highly recommend NJ if NYC nightlife is not essential to your everyday living. As for budgeting, I would take a close look at the expenses your parents are accruing on your behalf. How much more have they been spending on electricity once you moved back? How much more are they spending on food? What foods are specific items that only you eat? Tally everything up for a month, and you'll have a ballpark number. I also know that Google Docs as some helpful spreadsheets.
supercoolnat supercoolnat 7 years
Another thing to consider is to continue living at home, but being more financially independent. Work with your parents to figure out an appropriate "rent", as well as your portion of utilities, groceries, etc. This can help you learn how to maintain a budget, pay some "real" living expenses, and maybe even gain a more independent lifestyle while living at home. And it will still be more affordable than going out totally on your own while you're still only bringing home $2K/month, so you'll be able to keep saving and paying down debt.
ilanac13 ilanac13 7 years
also being a new yorker - i had to make the concession to live north and VERY east - so i'm on York Ave - and it's a longer walk to the subway, but i have more space for the size. also, you could luck out in finding a rent stabilized building. mine was and that's why my place is cheaper, but if you're only making $2000 a month, you're really going to have to consider living with a few people in a small place . it's not going to be very comfortable.
TidalWave TidalWave 7 years
I live in NJ (which has it's own ridiculous living costs) and have 2 other roomates in a townhouse. Here's my budget: http://teamsugar.com/user/TidalWave/blog/1653564 You can see in the spreadsheet what I have alloted for which categories. If you plan to live in NYC, you can move your transportation expenses into rent. I definitely definitely recommend living with roomates. Mainly for financial reasons, but also it really is nice having immediate friends when moving to a new area, especially living on your own. Just having someone to go out with or eat dinner with is really comforting sometimes. The fact they help with the bills too, is helpful :) Figure out your bare minimum for utilities and keep up to date with frugal blogs as to how to reduce your heat bill, cable bill, etc. I also agree with CraigsList. I have found so many different things via the site (this apartment, my roomates, a microwave, my running buddy). Be careful but just use your senses. Oh and at $2k a month I wish you some SERIOUS good luck on affording your own place. At $3k/month it was difficult enough for me to find a place here in Jersey even with roomates! Anything less than $600 here is disgusting or very far away from work, I couldn't even imagine what it would be in the city! You will have to forget about entertainment for a few months since you have those initial move-in expenses like security deposit and first month rent. Then there is the actual expense of moving and buying things (def. use craigs list for that). Good luck!
mlen mlen 7 years
you might also want to consider living outside the city. i know people like to joke about the bridge and tunnel crowd, but in reality, there are some good areas to live outside the city that are just a subway or path ride away. hoboken is a lot of fun, with a ton of restaurants and bars by itself, with a younger (35 and under) crowd. rent is expensive, but still a bit cheaper than nyc. same goes for brooklyn. and jersey city is also up and coming, you have to be a bit more careful about what area you are in there but the parts that have been built up are quite nice. i do agree eith rc- you are looking at atleast 50% of your paycheck for rent. even in hoboken or brooklyn probably. and a roommate is almost always a must. but it does have the benefits rc listed such as splitting cable and utilities. also, make sure you have a safety net of cash to fall back on in case there is a month when you are having trouble meeting expenses, or in case of emergency. you don't want to have to choose between paying rent and eating. i currently pay for a car still because i don't work in the city. but my roommate does so all she has to buy is a metrocard each month. no car payments, no car insurance. a good way to save some money there! i just did this move recently so its a bit rough at first but it gets better once you get on a budget. good luck!
bellaressa bellaressa 7 years
ohh wow, great advice rc4480!
rc4480 rc4480 7 years
As a resident of NYC that did the move from "living with parents in suburbs" to "living in NYC," here are a few tips. a) unless you're willing to live in a less-than-ideal location (in terms of safety or distance), you will have to have roommates. NYC is different from other cities, it really is almost unaffordable to live by yourself on your current budget. b) another reason why roommates are better is that you cut your bills in 1/2, 1/3, whatever. It's not like 2 people use 2x the electricity of one person, plus, cable is SO much cheaper, you can share groceries, split the cost of cleaning supplies, etc. c) NYC is a tightly packed city, so think creatively. For example, the border between soho and chinatown is pretty blurred, and for a few blocks, you might get cheaper rent but still live near cool bars and awesome shopping. d) consider the type of building you want to live in, and be realistic about your tradeoffs. you're not going to live in midtown east in a high rise luxury doorman building by yourself on your budget. so what's more important to you? a nicer building? having your own place? being closer to the subway? being closer to your friends/favorite restaurants/shopping/ nightlife? Living in NYC in general is about tradeoffs. I first moved here on basically the budget you're talking about, and decided I wanted to live near great shopping and nightlife...so I had a tiny, hole-in-the-wall, 5th floor walkup apartment in the village that I SHARED - tight squeeze to say the least. But i loved it there, because it was what I wanted. Now i've traded off for a nice luxury doorman building, but i'm on the Upper East Side, which is nice, I traded off in location for a nicer place, and at this stage in my life, i'm happier here. Once you've figured all this out, go on craigslist. I've found each of my apartments and all of my roommates on craigslist. If you're sensible, you won't be ripped off. It's really the best resource for an NYC apartment hunter. Oh, and sorry savvy...but the 30% rule doesn't apply in nyc...trust me, you don't want to step foot in the apartments that you'd pay $600 in rent for. Most people I know pay nearly 50% and have very little savings. Good Luck!
Beauty Beauty 7 years
I would add: Don't forget to factor in NYC income tax, which takes another 5% or so from your paycheck.
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