I have this grand notion in my head about moving to New York City, hitting up happy hour with my kappas, lounging at the hottest club, attending broadway shows every weekend...so beautiful. Unfortunately, once I start crunching the numbers, this notion quickly turns into a far-off, very distant dream. Add onto that the fact that I'm already in debt from not watching my spending, and I've really managed to create a recipe for financial disaster. Based on recent conversations with professors and classmates who are searching for jobs, let's assume the following:
- starting salary for entry level communications: $35,000-45,000 (Pittsburgh)
- if i took that exact entry level position and was working for a company doing the exact same thing, but in New York City, I would make: $43,012.
- average cost of living in new york city: $62,179
- that means I'm already roughly $20,000 under
According to Suze Orman, Oprah's financial guru, there are nine simple steps you can take to start ensuring your future financial security.
- save a little bit at a time
- have a little self-discipline
- automate your savings into a Roth IRA or other financial goal
- max out your company's 401(k) match
- invest in a Roth IRA
- Subtract your age from 100 and put that much in stocks; as you get older switch (so 100-23 = 77, meaning 77% stocks, 23% bonds, age 40, have 60% stock, 40% bond, etc)
- buy life insurance to protect your loved ones
- make sure you have a revocable living trust, a will, and two powers of attorney for finances and healthcare decisions
- add a 13th mortgage payment/year to pay it off fives years quicker
For graduation, my mom bought me On My Own Two Feet: A Modern Girl's Guide to Finance. Now, I've read a lot of "personal finance books" and this was the first one that made the most sense to me. Very readable and easy to follow, the two authors (both MBA graduates from Harvard Business School) walk you through everything from setting up a budget to investing, to how to break down your paycheck so that you're getting the most out of your money.
Chapter 5 is all about budget basics. According to these two lovely ladies, you have you inflow, or income (salary and any dividends, cash gifts, etc) and your outflow (gross income - income tax or roughly 25% of total income).
For example, let's go back to the starting salary for an entry level position in communications. We'll low-ball it and go with $30,000. According to one of the principles in On My Own Two Feet, you should divide your expenses accordingly:
- Starting Salary $30,000
- - 25% for income tax ($7,500)
- - 15% for savings ($4,500)
- - 15% for FUN aka shopping sprees, manicures, tanning, vacations ($4,500)
- and the 45% that's left--or $13,500--should go towards your foundation expenses such as groceries, shelter, routine bills, gas, insurance, and other essentials.
So, $30,000/yearly is roughly $1200 per pay period (every two weeks), or $2400/month, $1,080 of which goes towards ESSENTIALS or foundation expenses.
first, can i say that i was laughing at this post because it so applies to me it's scary - and thanks for putting it up! living by bloomingdale's doesn't help haha but i definitely need to learn how to money manage, but can share your sympathies because i love the luxuries of life :) good luck with your finals!!
ReplyDeleteInteresting read! I can tell you right now entry level communications positions in major cities are a lot lower. For example, I made $31 grand starting salary...more than any other of my friends who graduated in my yr (most were in their 20's or just breaking 30 even). In NYC I made $43 grand after 3 solid years of experience and 2 yrs of internships. Starting salary for entry level in NYC...sadly used to be about $27 grand and bc of the current economy, aim lower. They know they can get away with it.
ReplyDeleteI have a HUGE problem spending money. You know what worked for me? First, after you pay your monthly expenses and realize you have no cash left and had to use your creditcard to pay off the rest....that's a nice reality check. And two, like you I can rely on my family for money. But ask yourself this, when your kids are 21, do you still want to be paying for them? When is it your parents turn to finally rest and stop supporting you? Guilt works wonders.
Simple changes in your life can help. Like to drink? Stop buying drinks at bars. Buy a bottle and split the cost with your friends and pregame at home before hand. So, when you go to the bar, buy one drink and nurse it. You're already buzzed from drinking at home.
You don't have to go out every night. Those that do are FLAT broke and in debt and always will be. Negotiate your cable and internet bill. I managed to get both for $60 while everyone else was paying over $100.
Lastly, really ask yourself if you NEED or WANT something. I havent had a mani/pedi in 4 yrs...I can paint my own nails for free. When I get my haircut, I don't ask them to blow dry it. I just saved myself $20.
You'll learn as you go out on your own. Remember...need or want. Big difference.
this blog is sooo useful. I am terrible with money, as soon as I get it from my mom and then from my paycheck, i spend it. and then i have nothing. so i really need to start budgeting now, so that when I have more responsibilities and more money coming in, I actually am smart about it from experience.
ReplyDeletektbates, one thing i've learned in a classic "if i knew then what i know now" moments, I wish i would have saved more from when I worked over the summer and been much smarter about what I spent it on during the year. There's definitely times I can think of that I wish I would have had money to go on vacation with friends instead of blown it on random things I didn't really need. It's something that if you can teach yourself now, you'll be better off. If you have a chance, read the book I mention in the post. It's fantastic!
ReplyDeleteWelcome to LMBL, starrynight2338! I hope you enjoyed the post. I suspect you are right about salaries in NYC. I've had a few friends move there and had to quickly work a second job waiting tables to make up some of the difference. I still love the city though and am anxious to move there! Your point about manis and pedis is right on. I'm definitely guilty of indulging in those too often and am sure that I would be amazed at how much money I'd save over the course of a year if I cut back!
ReplyDeletestarrynight2338, do you have any negotiation tips for things that seem to have a fixed price?
ReplyDeleteLHR, great post! I'm in the process of finally getting my budget together . . . one thing to keep in mind: New York taxes will unfortunately set you back more than 25% :-(
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