Ppl in high cost states - How do you save money?

[z1ggy]

Moved from CT to NJ this year, and got just a minor bump in pay, barely enough to cover the higher cost of living. I got bored at work yesterday and was looking around at slightly larger condo's in the area to see what rent was like once I need to upgrade size.

It seems like going from 2 beds --->3 beds makes the price jump a huge amount if you aren't willing to live in a dump in my area. I pay $1850 right now for a 2bed 2bath that's about 800sqft. To add just an extra bedroom, makes prices go over $2400 on average. Long story short... assuming I only get raises barely above inflation for the foreseeable future, even with no car payment or student loans, how the heck do middle class people afford a family? My g/f and I make quite above the median income level, yet with her student debt, my student debt, car loans, etc.. I'm really not sure how we will be able to live in a bigger place, let alone afford the kids to fill said space. No clue how we'd even begin to save up for a house.

Are we now in a generation of life long renters who can't get ahead until their mid 40s?

 

[pauldun170]

How old are you?

 

[z1ggy]

28

 

[Chapbass]

I'm not from teh area so I don't know, but here in Chicago the answer is either live very expensively, or commute from the burbs, or live in a rough area.

 

[repoman0]

I think you just wait longer to have a family. You and I are in similar situations ... 27, $1700/month for a one bed here. I still manage to put away 1.5-2k cash per month, after maxing out retirement and HSA. How much are your student and car loans that they are significantly impacting your finances?

 

[purbeast0]

While doing my 401k/roth IRA savings I ended up saving around $21k to put down on a house. That was the most we had saved and basically had no savings after we put it down on our house. I did have some income coming in on the side from mobile apps I made which went straight to savings so that helped a lot. Now keep in mind $21k was only 5% down on the house we purchased.

Since then (4 years ago) my salary has gone up even more so I am also saving more. I have a decent nestegg once again but also contribute to 401k and Roth IRA. The way we do it is just by making pretty good money. We do spend a lot and go on nice vacations too, and we now have a kid who is 20 months old so expenses have gone up so the money we save isn't quite as high as it was before. But we don't save for the sake of saving - we also live in the now and enjoy our lives. I do know a lot of people who are friends who are basically living paycheck to paycheck with not much savings. It's just tough when living in a high COL area.

 

[zinfamous]

why do you have car loans?

get rid of that crap, first.

 

[z1ggy]

I think you just wait longer to have a family. You and I are in similar situations ... 27, $1700/month for a one bed here. I still manage to put away 1.5-2k cash per month, after maxing out retirement and HSA. How much are your student and car loans that they are significantly impacting your finances?

student loan ~$420 per month
Car loan + insurance ~$415 a month

I still have a positive cash flow. If I don't have any unexpected expenses in a given month like say... buying new tires like I do this week, I can save $900. That's all well and dandy, but that almost never happens. Even if I can save $5-7k per year, and my g/f can save that much, it still will take us like 8 years to put a down payment on a house, unless we are willing to not put down 20%.

 

[K1052]

I'm not from teh area so I don't know, but here in Chicago the answer is either live very expensively, or commute from the burbs, or live in a rough area.

Relative to the coasts Chicago is quite a bargain. For the money he's paying in rent you could own a large condo in any number of decent, yet not hot, neighborhoods here.

 

[z1ggy]

While doing my 401k/roth IRA savings I ended up saving around $21k to put down on a house. That was the most we had saved and basically had no savings after we put it down on our house. I did have some income coming in on the side from mobile apps I made which went straight to savings so that helped a lot. Now keep in mind $21k was only 5% down on the house we purchased.

Since then (4 years ago) my salary has gone up even more so I am also saving more. I have a decent nestegg once again but also contribute to 401k and Roth IRA. The way we do it is just by making pretty good money. We do spend a lot and go on nice vacations too, and we now have a kid who is 20 months old so expenses have gone up so the money we save isn't quite as high as it was before. But we don't save for the sake of saving - we also live in the now and enjoy our lives. I do know a lot of people who are friends who are basically living paycheck to paycheck with not much savings. It's just tough when living in a high COL area.

This is the first year at my company and I honestly have no clue how well they will treat me as far as raises go. I'm in the "inside" because I work in sales, so I know our costs (roughly) and yearly revenue. I'd be kind of pissed to only get a 2.5% raise, but I'm going conservative here. I get a bonus each year, but it's not really much to write home about. This year it's $3,600.

I honestly just feel like most people who are around my age and make around my family's money and buy near me, just... straight up don't have savings.

 

[z1ggy]

why do you have car loans?

get rid of that crap, first.

uhhhh because I'm 28? and I bought the car 2 years ago? And I didn't have $17k to pay my car in cash? lol the heck do you expect. I can't just magically pull money from the air to pay it down right now, hence the whole point of this thread.

How can people get so ahead in these types of high cost states that they can actually afford to pay a car in cash, or afford the 2 year low interest car loans?

 

[Viper GTS]

Make more money really. The greater NYC area is absurdly opportunity dense (really the only reason I'm here), take advantage of that. Change fields if necessary.

Viper GTS

 

[z1ggy]

Make more money really. The greater NYC area is absurdly opportunity dense (really the only reason I'm here), take advantage of that. Change fields if necessary.

Viper GTS

Yes, well that's the easy answer as always.

Job = sales engineer. Not exactly a money pit. I don't have any other real skills where I could suddenly change careers to something more lucrative. This is a super small company so there's also no real way to move up. My direct boss is the president of the company.

 

[Viper GTS]

I'm not saying it's easy, just that that's the answer. I had the luxury of moving here for a good job and was then followed by my now wife when she got a good job offer. I've never had to live here with low income, and I wouldn't want to - If my household income dropped dramatically I would leave.

Viper GTS

 

[zinfamous]

uhhhh because I'm 28? and I bought the car 2 years ago? And I didn't have $17k to pay my car in cash? lol the heck do you expect. I can't just magically pull money from the air to pay it down right now, hence the whole point of this thread.

How can people get so ahead in these types of high cost states that they can actually afford to pay a car in cash, or afford the 2 year low interest car loans?

lol. you spent $17k on a car for no reason. What I expected, I guess, was something more reasonable (not that I'm the most reasonable person compared to "the norm")

Granted, I tend to live where I don't need to depend on my car on a daily basis...but I'm also not going to be spending more than $5k on a mobile prison that's only function is to transport me from place A to place B. Just saying. But it sounds like you are saving a decent enough/month despite those unnecessary expenses. My primary suggestion would be to transfer those monthly savings into paying off those loans ASAP, because they are destroying your money and your soul.

 

[cbrunny]

1. Learn to cook on the cheap. Don't eat out.
2. Get rid of debt.
3. Define "ahead" for yourself, not relative to others. In Ontario, the average adult has ~$21K in debt excluding mortgages. Think about what that means for lifestyles.

 

[repoman0]

student loan ~$420 per month
Car loan + insurance ~$415 a month

I still have a positive cash flow. If I don't have any unexpected expenses in a given month like say... buying new tires like I do this week, I can save $900. That's all well and dandy, but that almost never happens. Even if I can save $5-7k per year, and my g/f can save that much, it still will take us like 8 years to put a down payment on a house, unless we are willing to not put down 20%.

Car loan and insurance is somewhat unavoidable and $17k is a pretty reasonable price range for reliable transportation (a bit high), so nothing to do there, and they're usually only around 2% so who cares. Maybe look at other insurance providers ... I use geico and only pay like $750 a year. Have you looked into refinancing your student loans? That's a pretty big payment. Mine is only $65, then again I reduced the balance by around $30k by paying aggressively over my first few years of employment so now it's a 4-digit balance.

Putting down 20% is ideal, but not always practical ... many people I know (almost every younger person I know who has a house in this area) put down less than that and they do perfectly fine. If you plan on staying in the area, it's something to consider. I would have no problem doing it considering how much I expect housing prices to increase in my area but I am not sure I want to stay here for more than a few more years ... so I'm renting while saving up for buying elsewhere. Look at mortgage calculators and play with it for various down payments. You can find some good ones that include PMI and property taxes ... you might be surprised that even with a small down payment, PMI, taxes, etc. your payment will not be much more than your current rent. At least that's the case here.

The other thing is to just make more money, as others have said. Move around to a different company if necessary, advocate for yourself for good raises, work to get promoted.

 

[z1ggy]

You're very lucky. My g/f is locked into her job for another year, and furthermore needs a license to practice in every state she would go in. Plus, she's super attached to her family, they'd lose it if she moved any further away than the Tri state area.

It's just hard for me to see how we'd be able to afford to live around here under "worst case" scenario which is we both have car payments (even if cheap, like $200 a month) a 3+ bed apartment, plus kids. It may require moving much further away from my job if I were to stay here.

 

[steppinthrax]

I live in one of the highest income states in the nation (Maryland). I work in the DC area. The cost of living in MD can be quite high. The county I live in is in the top 24 in terms of income. When I started making 6-figures (4-5 years ago) I remember thinking I was big shit and my money problems are gone. Later I remember people reminding me that 100K is nothing in DC and that 300K is the new 100K in DC. I make in excess of 100K now, but I can't live lavishly, I just can live comfortably. I'm trying to make even more money. My life goal is around 400 - 600K a year. I also want to own more than 2 homes (have 2 right now). I paid my student loan off years ago, I cut them a 14K check and never heard from them again.

Point is you need to find ways to make more money.

 

[zinfamous]

You're very lucky. My g/f is locked into her job for another year, and furthermore needs a license to practice in every state she would go in. Plus, she's super attached to her family, they'd lose it if she moved any further away than the Tri state area.

It's just hard for me to see how we'd be able to afford to live around here under "worst case" scenario which is we both have car payments (even if cheap, like $200 a month) a 3+ bed apartment, plus kids. It may require moving much further away from my job if I were to stay here.

If you keep a pretty detailed monthly budget of where your money is going, that would be the first place to look at what expenses need to be addressed. I seem to recall you doing this in earlier threads? Usually, the biggest holes in monthly spending would be way too much on eating out and debt that you should simply pay off faster. Refinance the student loans if possible, but by all means--turn that 5 year auto-loan into a 3 or even 2 year loan if you can afford to.

I mean, don't impoverish yourself, but bits of cash here and there saved from daily lunches or not going to a movie that you will probably hate anyway, and converted to paying off debts and being more efficient with lifestyle go a long way to generating more hidden income that you never were using before.

 

[Viper GTS]

Part of the issue here is your age/career level. Your income will go up if you're good at what you do and are willing to move around. I didn't start making good money until I was about your age and didn't move here until I was 30.

You're projecting your finances like your income is going to remain the same, if that's the case you are doing something wrong.

Viper GTS

 

[monkeydelmagico]

if you aren't willing to live in a dump in my area.

I live in jersey as well. The rent is too damn high. So I rented "a dump" long enough to raise a down payment. Bought a dump. Started a family. Fixed it up. Paid off the mortgage. Sold for profit. Changed jobs. Got raises. Bought a bigger dump cash. Fixing that up. Sending kid to college now. 25 years goes by in a flash.

Welcome to the wheel fellow gerbil. Enjoy the ride.

 

[z1ggy]

Part of the issue here is your age/career level. Your income will go up if you're good at what you do and are willing to move around. I didn't start making good money until I was about your age and didn't move here until I was 30.

You're projecting your finances like your income is going to remain the same, if that's the case you are doing something wrong.

Viper GTS

It's a conservative estimate because I don't have enough historical data to support anything more than a guess, which is 2.5% for me right now. At my last job, I averaged about a 5% pay increase per year. However, I had a much higher cash flow because I had a roommate and split basically all my costs 50/50. I also didn't have a car payment for about a year, which helped, too.

I'm going to ask one of my close coworkers what the typical raise is like around here, same with bonus. It must be half way decent, everybody here is a lifer.

 

[repoman0]

Plus, she's super attached to her family, they'd lose it if she moved any further away than the Tri state area.

Same with my GF. Luckily they are nearing retirement and plan on moving away anyway I do love it here and would find leaving it behind pretty difficult, so I'm still on the fence about buying a place to live in for a while, rent out for a while, and come back to later.

One other thing -- can you guys just live in a one bed apartment for a while? How much would that reduce your rent?

 

[z1ggy]

I live in jersey as well. The rent is too damn high. So I rented "a dump" long enough to raise a down payment. Bought a dump. Started a family. Fixed it up. Paid off the mortgage. Sold for profit. Changed jobs. Got raises. Bought a bigger dump cash. Fixing that up. Sending kid to college now. 25 years goes by in a flash.

Welcome to the wheel fellow gerbil. Enjoy the ride.

The g/f and I are actually considering building a home out of (lightly used?) storage containers. I know it might end up a zoning nightmare, but homes around here are truly some of the most expensive I've ever seen, save for on the coastline.

FWIW I live in Basking ridge/Bedminster. Ritzy as all hell for being inland.