Author Topic: How much to spend on expenses?  (Read 343 times)

hgrimberg01

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How much to spend on expenses?
« on: May 16, 2019, 10:42:05 AM »
I am 27 year old male in well-paid profession living in Manhattan. I live in Manhattan because I am 20 minutes away from work and let's be honest, there probably isn't a better place to spend your twenties in.


Between rent and expenses, I spend about 80% post-tax of my first paycheck, save the rest as well as the second paycheck.

It's important to note that I have exactly $0 in debt. I invest my leftovers.

All in all, I spend $1500 on non-rent things. The single biggest expense I have is dining and entertainment.  Does anybody have any strategies to reduce this amount? Is living off $500 a month in NYC impossible




MoneyOnTrees

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Re: How much to spend on expenses?
« Reply #1 on: May 16, 2019, 12:08:39 PM »
Hi hgrimberg01,

A few follow-up questions about your situation:

1. I'm assuming you are paid twice monthly at a set salary (i.e. no variable comp)?
2. Are you contributing anything to a pre-tax retirement account (e.g. 401K)?
3. Where are you putting/investing your post-tax savings (i.e. the post-tax amount you aren't using on expenses)?
4. Do you currently set up and maintain a personal budget?
5. Do you currently have any type of emergency fund savings?




« Last Edit: May 16, 2019, 12:11:46 PM by MoneyOnTrees »
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Sam

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Re: How much to spend on expenses?
« Reply #2 on: May 16, 2019, 03:10:39 PM »
 I agree that Manhattan is the best place to live life in one’s 20s! I had an amazing time from age 22 to 25.

 The problem was, There was so much temptation to spend money stepping outside my apartment.
 

Are you able to max out your 401(k)? If not, that’s the first up. The second step is to try to invest about 20% of your cash flow after your 401(k). Do that for 10 years, and you will be golden.

See: https://www.financialsamurai.com/achieving-financial-independence-on-a-modest-income/
Regards,

Sam

hgrimberg01

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Re: How much to spend on expenses?
« Reply #3 on: May 17, 2019, 01:05:01 PM »
@MoneyOnTrees

1. I'm assuming you are paid twice monthly at a set salary (i.e. no variable comp)?
Most of it is indeed a set salary but I do get a annual performance bonus of about 15% of my base in February (or prorated thereof).  Taxes cut the gross amount in half so I save the other half.
2. Are you contributing anything to a pre-tax retirement account (e.g. 401K)?
I split my 401k contributions evenly into post and pre-tax. I have maxed out my contribution every year in every job that had one.
3. Where are you putting/investing your post-tax savings (i.e. the post-tax amount you aren't using on expenses)?
A few hundred dollars go toward my emergency fund. The rest is put mostly into a variety of self-managed index fund ETFs, split 40/60 large-cap growth and value respectively (the cheap stuff from Vanguard and Schwab). I reserve 5%-10% on purely speculative bets (e.g. buying individual stocks).
4. Do you currently set up and maintain a personal budget?
For the most part yes. I say for the most part because it's easier said than done. Typically, I spend 80% of my first paycheck and save the remaining 20% and the entire second paycheck.
5. Do you currently have any type of emergency fund savings?
I have enough cash in checking/saving accounts for 6 months of expenses assuming my lifestyle won't change. Whenever it goes beyond the 6 month mark, I cut the excess off and invest it.

I am looking at buying a home in the near future, so a mortgage will really force me to tighten my belt.

@Sam
I try to aggressively save and invest 50% of what I see on my paycheck.