Wednesday, June 17, 2009

How To Live Cheaply In An Expensive City - Part 1

Tip #155 - How To Live Cheaply In An Expensive City – Part 1. It is easier to live cheaply in a place like Wichita, Kansas than it is in New York City. Even though wages are higher in a place like New York City, it usually does not make up for the cost of housing, which is generally the largest chunk of anyone’s budget, as well as many other expenses that are higher in the big city. By looking at a cost of living calculator, a home in Wichita, Kansas that costs about $250,000 would cost $1.1 million in New York City. Going by that alone, one would need to make more than 4 times the salary in New York City than in Wichita. So how does one make it in a large expensive city like New York without going into debt? Like everyone else – by saving money on expenses. It just may be a bit harder to do in the big city than in other places.

Since housing is the largest chunk of most people’s budgets, when living in the city you need to find a way to keep your housing costs low. There are several ways to keep your housing costs down.

--One popular way – especially if you are young – is to find a roommate to split housing costs. A two-bedroom apartment is less than twice the price of a one-bedroom place. You also don’t use twice as much utilities, saving you money there as well.

--Find a place near public transportation, if you are working in the city. Prices of homes near subway and bus lines are usually more expensive than those that are not. However, if you factor in the cost to park at a bus stop or the cost of the extra transportation to get to the subway, then it may be more economical to live within walking distance.

--Find an older home. Older apartment buildings and older houses generally cost less than a new home. You might have to give up on some amenities, but be honest with yourself whether you would really use the exercise room in the swank new condo or if you need granite countertops in the new home. By forgoing some of these extras, you can save a bundle.

--Look for a private rental. Apartment buildings may not be flexible with their prices if they are in demand. But individual owners may be willing to rent their basement apartment or whole house for less than corporate buildings. Presenting a clean rental history with solid references and a professional appearance will go a long way with potential landlords. Landlords are often willing to sacrifice a bit of rental income to get a good tenant.

--If you are new to the city, wait to purchase a home. In large metropolitan areas, there are usually dozens, if not hundreds, of neighborhoods and towns to choose from to live in. Get to know the city before you commit yourself to buying in an area you may not like when you get to know the city better. Realtor fees and moving fees will drive up your expenses quickly if you want to move to a section of the city that you like more.

--Try to stay in your apartment as long as possible. Moving around often costs a lot of money. In addition to the cost of movers, there are start-up costs for turning on your utilities each time you move – this may include separate fees for water, gas, electricity, cable, and telephone. There also may be move-in/move-out fees associated with your apartment. And you may have to pay for temporary quarters as well as storage if your move in and move out dates don’t line up.

While housing is the largest expense in most people’s budget, especially for those who live in big, expensive cities, in the next part of this series, we will discuss ways to cut down on other living expenses while living in a large city.

In Real Life (IRL) – While I have never lived in New York City, my family hails from there, so growing up we visited my grandmother and other relatives quite often, and I got a first-hand taste of the high costs of apartment living in New York. I grew up in the Philadelphia area, but lived in the surrounding suburbs, rather than the big city so have no real world experience of living in that city. After college, I moved to the Washington, DC area where I got a pretty good taste of the expenses of big city living. While I didn’t live directly in the District of Columbia, I lived just outside the city limits in various types of housing, garden-style apartments, high-rise apartments, and townhouses and commuted into DC for my job.

I was able to save money on housing in the DC area by using several methods I highlighted above. I started out having roommates – at some point as many as four roommates! There really is no better way to cut down on housing expenses than by sharing expenses. And when you are young and single, it’s often more fun to live with friends, anyway. The lowest rent I paid (this was the early 1990s) was about $250 when I was splitting an apartment with two friends. As I got older and was making more money, and had frankly gotten tired of sharing living space, I decided to move out on my own. Costs had more than tripled to live on my own! My rent was $800 per month! That was a huge difference in my monthly expenses.

Monthly rent for a one-bedroom apartment for $800 might sound like a lot to someone in Kansas, but it was a bargain – even for the 1990s. Going rates at the time in comparable commercial apartment buildings were about $1,000, but I was able to rent a condo from a private owner who lived overseas. He may not have been aware of how much housing was, so when I found the deal, I grabbed it. (Today the same place would probably rent for $1500.)

Most of the time I lived near the subway (Metro) line. Because I was commuting into the city, the higher rent still made it worth it to me. Saving a few dollars each day in parking, gas, and insurance fees made up for the higher rental cost (and saved a lot of hassle of driving in traffic as well).

I lived in older buildings. The high-rise condo I lived in wasn’t as fancy as some of the newer ones. And there were no washer/dryers in the units. But living in an older building saved me about $300 per month (factoring in the going rental rate, rather than my discounted rate I was paying to my overseas landlord) over comparably-located newer buildings.

I waited to buy a home once I got to know the city better. I was tempted to buy a condo a couple of years after I moved to the DC area. But in addition to not wanting to be tied down, I was unsure for several years about which part of the city I liked best to live in. And when I finally did figure it out (Bethesda for those familiar with the DC area), I met my husband and needed to relocate to a different part of the city as his job is in the outskirts.

The only advice from above that I did not follow was to not move around often. In fact, since moving to DC 20 years ago, I have lived in 7 different places – the first 5 were in the first 10 years. There were many reasons – the first place was temporary housing. The second place was in a neighborhood that I didn’t really like. The third place got crowded with too many roommates. And after the fourth place I wanted to branch out on my own. So I suffered the consequences and put up with moving costs as well as all of those utility deposits and turn-on fees. But overall, I have done okay with housing in this big, expensive city I live in by following most of the advice I gave in the first part of this post.

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