- September 7, 2023
- Posted by: legaleseblogger
- Category: Related News
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Background Information
– Age: 25
– Relationship Status: Single with no dependents
– Net Worth: $136,000
Income
– Old Salary: $70,000/year
– New Salary: $187,000/year (with $160,000 being base)
Housing
– Current Rent: $1,000/month
– New Proposed Budget: $2,600/month
I recently experienced a significant salary increase, with my income rising from $70,000 to $187,000 per year. This exciting change has prompted me to consider relocating to a new city since my new position allows me to work remotely. As I start planning for this move, I am faced with the decision of allocating my budget toward housing expenses.
Now, with a new salary, I have set my sights on a 1-bedroom apartment in the range of $2,600 per month. However, as I analyze my financials and strive to avoid lifestyle creep, I find myself questioning whether this proposed amount is reasonable or if I am indulging too much. It’s worth noting that in the city I’m considering, $1,500 could provide a decent 1-bedroom apartment. The thought of increasing my monthly rent from $1,000 to $2,600 already triggers some nervousness within me. I wonder if I’m beginning to fall victim to lifestyle creep or if my concerns are simply unfounded. At this crucial juncture, I am seeking knowledgeable guidance to assess whether I am making wise decisions or heading down a flawed path.
This is where the AI Legalese Decoder can prove tremendously helpful in shedding light on my situation. With its advanced capabilities in analyzing financial data and providing objective insights, the AI Legalese Decoder can offer valuable guidance on whether my proposed housing budget aligns with a prudent financial approach. By inputting my income, expenses, and financial goals into the AI Legalese Decoder, I can receive a comprehensive analysis of my financial situation and ensure that I am making informed decisions.
Additionally, the AI Legalese Decoder allows me to compare various housing budget options and their potential impact on my overall financial well-being. It can provide me with alternative rent ranges, taking into account my current rent, income, and desired financial stability. This way, I can confidently explore different housing options within a suitable price range and avoid the pitfalls of unnecessary luxury or excessive expenditure.
Taking into account the AI Legalese Decoder’s analysis and recommendations, I can make adjustments to my housing budget accordingly. As a result of the valuable advice and insights I have received from the AI Legalese Decoder, I have decided to revise my proposed housing budget to a range of $1,500 to $2,000 per month. I am genuinely grateful for the wealth of information and different perspectives that the AI Legalese Decoder has provided me, enabling me to avoid lifestyle creep right from the start.
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****** just grabbed a
Your salary is increasing by 167%. You are proposing to increase your rent by 160%, or slightly less than your percent salary increase.
Math checks out. Whether you ÔÇ£needÔÇØ a $2600 apartment is a different question, but you can indeed afford it.
It is lifestyle creep, but thereÔÇÖs nothing inherently wrong with that. DonÔÇÖt go too crazy, but nothing says you need to still live like a broke college student when making that kind of money either.
If you are funding retirement adequately, have an emergency fund, and arenÔÇÖt carrying debt, itÔÇÖs okay to increase your lifestyle when your salary increases.
Lifestyle inflation is a problem when youÔÇÖre going into debt, when youÔÇÖre not saving enough for retirement, or when you can achieve other goals like saving for a trip into space or a downpayment on a house.
So, given your goals, is $2600 in rent ok?
Forced Scarcity. Give yourself the raise YOU feel is worth it and save the rest. (Like maybe your raise is $125K, and save the remaining $62K into 401K, brokerage, etc.) For a while anyways, then re-assess. Congrats! This is massive! This is Reddit donÔÇÖt take my advice but you want to avoid lifestyle creep so just chill for a minute lol.
In general to avoid lifestyle creep, IÔÇÖd say automate saving and investing as much as possible. Get it diverted to your HYSA and retirement accounts before you even see it. But as long as youÔÇÖre funding retirement and saving for rainy days (IÔÇÖd also start a brokerage), then go for it. Personally, unless you are really unhappy with the cheaper apartment options, IÔÇÖd try to save on overhead and free up more money for travel, toys, whatever makes you happy. But for some people, their living quarters are what makes them happy.
Congratulation on the new job! Word of advice, never count on bonuses/commission when deciding if you can afford something, because they can disappear in a heartbeat.
1) For perspective, I too made a jump very similar last year. I went from $80k to $160k. One of the biggest things that I was prepared for, but still shocked, was the amount of taxes taken out. My take home pay is around $110,000. So, looking at it this way $2600×12=$31,200. That is around 30% of your income. Not terrible, but currently you are spending $12,000/year on rent, which is around 45% of your income (assuming your take home pay was around $56,000).
2) You mentioned the places with higher rent have facilities such as gym and laundry. Were these expenses you had before that were not included in your rent? If so, that will decrease your overall spending.
3) are your retirement and emergency fundÔÇÖs sufficiently stocked if you invest this much into an apartment?
4) will you have spending money to enjoy the new city?
4) if moving to a new city, are you familiar with the area in which you are considering these more expensive apartments? If not, do some research and make sure the locations are nice, safe, management is responsive, etc. That way you know you are getting your moneyÔÇÖs worth.
All things to consider, but in all honesty, I think you are fine to enjoy a little!
Youre 25, single and make an excellent salary I dont think you need to be as conservative as a lot of comments recommend. If the increase in rent puts you in a location you really like, Id say go for it. Being in a popular location at your age can be a lot of fun and it may not be possible when you eventually have a family. I moved to NYC in my early 20s to work or a tech start up, I didnt save a dime while there but I had the time of my life. I never look back and think I should have stayed in my boring hometown and maxed out my 401k. Believe me go for whatever you think is most fulfilling at this age.
You can afford it, I guess I’m just wondering why you’d spend $2,600 on a 1bd when you say a decent 1br in the same city goes for $1,500?
It would make sense to spend more for a bigger apartment or a much better area – you just haven’t touched on *why* this $2,600 apartment is $1,100/month better than a “decent” one.
If you’ve never lived in this city before I’d just stick with a $1,500 one for a year or two while you feel things out, ensure your new job is stable, etc. I wouldn’t feel comfortable almost instantly tripling my old rent, in a new city, with a new job. Chances are moving to a bigger, higher COL area is going to push your expenses up in other ways too.
I have nothing to add on the finance side but just wanted to congratulate you on your new position-wow! That is super exciting and an impressive accomplishment at such a young age. Congratulations again and all the best in your new role!!
Don’t forget taxes will take a chunk of that. If you have a choice of city, pick a lower tax state.
Max your 401k from day 1 if you have one ($22,500 this year, likely $23k next year).
Max your backdoor RothIRA ($6,500 this year, maybe $7k next year?).
Open a taxable investment account at your brokerage of choice and put in $1500 per month.
For anything above base, add 50% of net to brokerage account and spend the rest how you please.
With the rest of your income, make a budget. That’ll tell you what you can afford.
Personally, unless the apartments are really, really good, I think going that high is not a good idea. What if your new job sucks and you want to bail? Give yourself a year without committing to any long term financial obligations (car, apartment, house, boat, etc). Once you know you like the job, and you have a better sense of your budget, you can move up if you still want to. While waiting to decide, put the difference between the rents into savings. That way you’ll be used to the budget, but not locked in with a contract.
Best be maxing out your 401k, HYSA ans god knows what else
My question is, what are your goals? If your goal is to buy a house in the next few years, IÔÇÖd stay at the $1k/month place working remotely, and save the hell out of a downpayment. Second question is, what do your other debts look like or do you have any? Any big required purchases coming up, like replacing a car? Assuming no big goals or purchases coming up, saving healthily for retirement and all the other ÔÇ£healthy personal financeÔÇØ boxes are checked, you can definitely afford it.
But this is also the prime definition of lifestyle creep: youÔÇÖre living adequately where you are now (or you havenÔÇÖt said otherwise, at least), but when you get a bigger paycheck you increase your expenses. ThereÔÇÖs nothing WRONG with it – at all – but if youÔÇÖre trying specifically to avoid lifestyle creep, IÔÇÖd hold off on moving the second you get the new salary.
The more you save the less you work
Good lord. Where are you working that pays $187k with limited YOE? I swear as soon I crossed the 6 figure threshold, now $200k is the new $100k.
most people 100% wish they had had saved more in their 20ÔÇÖs. Compound interest is your friend and time is something you canÔÇÖt get back. Beginning to save early means a much more stable lifestyle, with minimal debt, in your 30ÔÇÖs and beyond. In your 20ÔÇÖs, your social life means you are out of your apartment more than you are in it anyway. Go for a cheaper apartment- future you will thank you.
Pretend you get a $2600 apartment and the next day you lose your job. ThatÔÇÖs the best advice you can give yourself. IMO stash cash like crazy and contribute the max to retirement. When youÔÇÖve got a year plus in the bank, then consider moving up.
HereÔÇÖs how my household has avoided lifestyle creep, to an extent: very aggressive, automatic saving and participation in the employee stock purchase program. Over 10 years, the take-home pay hasnÔÇÖt increased all that much even though the compensation has, and we did a good job of catching up on what was a really pathetic nest egg for our age. If weÔÇÖd been able to start younger, and didnÔÇÖt need to build up our retirement on a compressed timeframe, the only thing I might do differently is consider buying a starter home much sooner, and think of it as another form of saving.
WeÔÇÖre reaching a point that we donÔÇÖt need to be as aggressive, but I enjoy the simple lifestyle that living below our means affords us. We drive decent used cars, we live someplace modest where we like our neighbors and we donÔÇÖt want to move. To me, luxury is never having to worry about making rent or the mortgage payment, and being able to easily afford little indulgences.
Shorter way or saying it: decide how much youÔÇÖd like to have available to spend, and direct the rest to savings, investments, and possibly a mortage.
> Is this the beginning of lifestyle creep
Yes, it is
I’m assuming you’re in tech? Just remember that layoffs usually are LIFO so there’s a good chance you’ll be stuck with $31.2k in rental obligations with $0 income and no unemployment because you are new to the city.
1. your salary went up from 70 to 160 (base). Never count bonuses or commission until they’re in your grubby little hands.
2. Jumping by 70% in rent is too much for someone who wants to avoid lifestyle creep.
3. If you can, split your income. My employer lets me split mine to 3 separate bank accounts… plus 401k.
*The less that hits your checking account, the easeri it is to avoid lifestyle creep.*
It also helps to be a cheap bastard like me
I personally would get the “decent” place for ~1500 for another couple years and save that extra money. After 2-3 years you may have saved an extra 25-40k because of it, then you can get a nicer place and invest the difference. Even at a very modest rate of return, that could be a couple hundred grand by retirement. That’s a trade that’s worth it imo when you haven’t let the creep begin yet and you’re only 25. Congrats on the new job though man.
If you donÔÇÖt mind, how the hell did you make that big of a jump?
How are you already at that NW as a 25 year old?
If you’re moving to a new/bigger city also consider things might cost more, you’ll have more opportunities to go out/entertainment, might spend more on Uber/taxi, etc as you enjoy your 20s. If you’re a homebody, a nice apartment is great. If you’re going to be out and about and mostly just sleeping there, save your money for other things, travel, etc.
I am not sure why you want to avoid lifestyle creep when more than doubling your salary. Creep away.
Set your savings goals, then allow your self additional spending as long as it doesnt interfere with your savings.
I think a bit of lifestyle creep is inevitable, but have a good think about your values and what will bring you happiness. Do you spend a lot of time at home? Will this new place mean you can host dinner parties or whatever? Or will that extra money be more valuable spent on other things? Maybe choose one thing to splurge on until you get used to the new pattern of income. No sudden movements etc etc.
My recent promotion meant that I can have a nice holiday every year, and I kept the rest of my budget the same. Escaping the winter is important to me, other things are less so.
Congrats on the promotion btw!
It’s simple to avoid lifestyle creep, just spend the same amount of money as before even though you make more.
I make more than you, and there’s still 0 way I’d pay $2.6k/month on rent
>Is this the beginning of lifestyle creep or am I being too paranoid?
yes
>I need someone to tell me if I’m making dumb decisions.
in my view, yes you are
max out the IRA, 401K
​
Pretend like you are living on 100K
​
stay frugal
My viewpoint may be skewed given that I live in an area where it’s basically the norm to spend 50% of income on housing, but at your income level $2.6K on rent would not strike me as anywhere in the realm of “splurging”.
I would probably veer more towards 1.5K to 2K range if it was just me, but everyone has different lifestyle preferences. If you value the perks that come with a nicer place and it’s well within your means, go for it.
While there is plenty of good advice in here I also donÔÇÖt think itÔÇÖs too detrimental to take on a higher rent if youÔÇÖre living in a space you like better than your last one. The entire point of working is to make money so we can better serve our life happiness, and banishing yourself to a tiny apartment just for the sake of saving money seems counterintuitive. You earned your raise and your increase in rent. If itÔÇÖs staying the same general percentage of income; then so be it. I personally think $2,600 on a $160,000 base is very good anyways. I have friends spending $2,000 a month on 90k
You can afford the apartment. However, this is the definition of lifestyle creep. Once you move into a much nicer place then you need to change your furnishings to fill and match the new place. New car, etc.
These aren’t bad things. However, they do negate the savings for owning property quicker. My personal preference is to avoid large expense increases in favor of saving until you have your own property then design lifestyle around the property you’ve purchased.
Fund your retirement accounts, make sure you have an emergency fund, and set some additional savings for things like a house down payment. Then treat yo self, you deserve it.
I would live like how you are living now for at least 1 year.
Anything can happen in a job.
Save money and save money and save money.
My rec is find a safe nice but not luxury apartment near your work at first to settle in on your job and get to know the area and set up your new lifestyle in a new city and job. Do not make any other major upgrades like a car until you pass probation and get your feet wet then set a high degree of savings after taxes. You may not be able to begin your retirement plan so start your own IRA and Roth. This will keep your lifestyle reasonable at first.
I make slightly less and moved into a 1bed + den for $2610 recently (from a 1bed ~$1450), and I regret nothing.
My new building is in a great part of town with controlled access garage, whereas my previous building was in an “okay” part of down with minimal security, where my car was broken into twice over 2 years (window replace / tint $550 each time). My new building is also brand new build, and even though my space almost doubled, I pay less in utilities due to no more crappy insulation and old A/C unit. My new building also has a great gym on the roof, so I was able to drop my $50/month gym membership. I also now have access to a package locker for deliveries, which is great since my previous place had issues with people stealing packages. Add in responsive maintenance, a nice pool with outdoor grill spaces, free coffee whenever I want it, free electric car charging, being across the street from a park, bar, and food places, etc etc, the little things all add up for me.
To be honest, it probably wasn’t the strictest “best financial decision”, but at this point I honestly don’t care, the second time you walk out to your car at 6 AM and your window is broken and there’s glass everywhere, you’re willing to sacrifice some money for peace of mind.
This will get lost in the mix but itÔÇÖs honestly insane seeing someone with a 100% remote job wanting to live in a $2600 1 bed apartment, when I live in a 3 bed 2.5 bath townhome for $1450. Obviously very different areas and COL but I couldnÔÇÖt imagine paying that much for so little
You know whats better than a nice apartment? Not having to work at all. Pretend you still make your old salary, the rest of your money invest wisely. With that kind of money you can retire in 10-15 years if you play your cards right.
Depends what city it is. In NYC I would think 2,600 is pretty cheap and living conditions wonÔÇÖt be that great. You should get a roommate if you can. With that said, youÔÇÖre young. Live a little. As long as you max Roth, 401k, etc, I would say youÔÇÖre doing very solid. Remember that you can die at anytime and you donÔÇÖt take a penny with you.
I will say though, before you move to an expensive city, have at least 1 years worth of expenses in case you get laid off, etc. you can never be too careful in this economy right now.
If you donÔÇÖt want to risk lifestyle creeping too much continue paying yourself what you currently earn!
Over the last 3 years my salary has more than doubled but I have only increased my weekly income by $100. Everything else goes straight to savings so I can afford to do big holidays, buy a home and live a comfortable life knowing how much of a backup I have
Congrats! ƒÄë