Can you live on $500k in NYC?

JTH's picture
Rank: Senior Orangutan | banana points 472

I saw this article breaking down the expenses of a 4 person family making $500,000/year living in NYC with 2 income earners and 2 young children. They give a basic model in the article, and it essentially shows that after a 40% effective tax rate, childcare, home mortgage/student loans, and various other living expenses, there is almost no money left over.

Most of you on here are living in urban areas like NYC that have a high cost-of-living. Do you think that this article's idea is accurate? Would it be tough to have a family in the city making $500,000 per year?

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Comments (30)

Mar 27, 2017

You can give me any starting salary and i can create a budget to show that i'm barely getting by. They also didn't back out the the 40% on the portion of their mortgage payments that are interest as well as property taxes. Also cut out the absurd amount on lessons for their kids and the $18k charity donation and it paints a different picture.

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Mar 28, 2017

Seriously, more like $0 charity donation.

Mar 27, 2017

Dumbass article. They don't even account for the savings of less insurance and gas when talking about the cars and then rant and rave about how Europe is better because they get more vacation without mentioning that it's nice to have jobs that pay $0.5mm a year and that it's hard to take time off when you're in demand.

Just a few issues:

You're paying for lessons for your kids but putting them in childcare? Your three year old isn't going to learn the piano from Yoyo Ma. Schooling will get expensive but that'll take the price of childcare.

80k on 1.5mm home?! What type of rate are you paying?! You could rent a super nice two BR in Midtown for less than that or a decent three bedroom apartment in UWS/UES for less.

You don't need to spend 10k on cars in the city, you don't need vehicle insurance. And 5k on gas?! If you fill up both cars, every single week you're in town then you could get there if you're filling up at city pumps but if you're driving 400 miles a week then you're definitely getting out of the city and can fill up for cheaper. Also, no car and you've already saved 17k.

Three vacations? There's no way that you'd be able to take off enough time to take three vacations that amount to 18k unless you're only staying in really nice hotels or flying in business class. And this is assuming that you can take time off from your job that pays a lot to take three separate vacations.

If you're being a little more realistic then you're saving 12k on the cars (assuming you rent one like once a month or more and metro passes for everyone), and saving another 12k ish by just not having a horrendous interest rate. So now you're saving over 30k each year and there's other opportunities for saving a couple grand here and there without even hitting your charitable donations (ship kids off to grandma's for a couple weeks in the summer, take less vacation, rent instead of own your home, etc).

Mar 27, 2017

You don't need to read an article to answer that dumbshit question.

heister:

Look at all these wannabe richies hating on an expensive salad.

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Mar 27, 2017

Any real New Yorker should plan on eating at 11MP at least twice a week and 2-5 times during/before/after bonus season.

Given the undeniable statistic provided above (source: 'The Art of the Deal') - $500k/year is not nearly enough.

NEXT QUESTION PLEASE.

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Mar 27, 2017

I didn't find the numbers realistic, and I'm from the NYC area. Personal comments on the numbers: 1) who the **** donates 5 figures, per year, to their college/university? Unrealistic. 2) There's a general sense of confusion / lack of clarity b/w 'childcare' and 'academics' (private school per year for kids ranges from 6-20k but there's places in the 40's and 50's). 3) Would a couple not pay down student loans completely before taking out a mortgage on their 1.5mm home?

Mar 27, 2017

The only thing I am giving any university is tuition.

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Mar 27, 2017

We're on the same page, if anything my highschool was more needy of donations I feel

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Mar 27, 2017

Same, I would give to my high school before my university, no question.

"He was an idiot! He was a bouncer who got his Series 7" - Josh Brown

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Best Response
Mar 27, 2017

I answered the same question on Quora in 2015. Got 37 upvotes, woo hoo! Here it is for anyone interested.

Is a salary of 500K USD, including food expenses, etc., enough money to live in NY?

*The snarky answers you received before I wrote this reflect ignorance of the realities of living in NYC. I'm thinking specifically of the Upper East Side of Manhattan. Consider:

Taxes: There's an effective 15.3% FICA tax rate on the first $117,000 of wage income (and an actual rate of 15.3% if the earner is self-employed.) Plus a Federal income tax rate of 10-25% for the first $150K of income for a married couple, and a rate of 28-39.6% on the rest of the income.

State income tax is 4-6.85%. City income tax is 2.9-3.6%. Sales and use tax rate is 8.875%, and with this, you pay tax on income you've already been taxed on.

So, roughly half the income of you and your spouse goes to taxes.

Housing: By an old rule of thumb, you should spend no more than 30% of your income on rent or mortgage payment. For $500K, that's $150K or $12,500/month, which would include a maintenance payment if you own instead of rent. That will get you a very nice, if smallish, two-bedroom place in a top neighborhood. But now you have only $100K left for everything else because of all those taxes. So, you and your spouse probably should compromise on your living space, settling for something smaller or less desirably located than you'd prefer -- even though you make half a million dollars a year.

Food & drink: Eat out much? A decent meal for two costs about $100. Eating out twice a week will cost you $10k/year. You will eat out, or order in, more than that. A cocktail in a bar is $12, so doing most of your drinking at home is prudent -- even though you make half a million dollars a year.

Vacation: That nice summer rental in the Hamptons is really out of your price range, even though you make half a million dollars a year; and besides, both of you work way too hard to get out there more than two or three weekends.

Auto: You can afford the BMW and indoor garage if you really want, but you'll have to make some financial sacrifices, and the car will cost an average $1,000 for each time you drive it. Not a prudent choice, even though you make half a million dollars a year.

Kids: You can send your kids to private school for $40,000/year or to the crappy local public school for free. By the way, no matter what school they attend, your kids need expensive clothes, phone, etc. or they'll get bullied by the other kids. If your kids aren't old enough for school, they'll need daycare or a nanny. It is socially unacceptable to be a stay-at-home parent in NYC (that is, on the Upper East Side), even if unemployed.

Get the picture? This is why so many couples earning $500K/year move to the suburbs. It's quite possible, even common, for all practical purposes to be poor in NYC even though belonging to "the 1%."*

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Mar 27, 2017

Awesome info. I may just be an idiot not understanding it, but can you explain the "and the car will cost an average $1,000 for each time you drive it"? I'm curious to know the logic behind it.

"He was an idiot! He was a bouncer who got his Series 7" - Josh Brown

Mar 27, 2017

Pretty sure he's saying that you'll drive the car so little that it basically comes out to $1000 per use.

Mar 27, 2017

I haven't really read the article, but the gf and I have recently gone through a similar exercise to figure out what level of income would we need once we have kids to live comfortably and I completely agree with your approach. $500K in NYC with 2 kids doesn't get you that far...

Mar 28, 2017
ErnstBlofeld:

I answered the same question on Quora in 2015. Got 37 upvotes, woo hoo! Here it is for anyone interested.

Is a salary of 500K USD, including food expenses, etc., enough money to live in NY?

*The snarky answers you received before I wrote this reflect ignorance of the realities of living in NYC. I'm thinking specifically of the Upper East Side of Manhattan. Consider:

Taxes: There's an effective 15.3% FICA tax rate on the first $117,000 of wage income (and an actual rate of 15.3% if the earner is self-employed.) Plus a Federal income tax rate of 10-25% for the first $150K of income for a married couple, and a rate of 28-39.6% on the rest of the income.

State income tax is 4-6.85%. City income tax is 2.9-3.6%. Sales and use tax rate is 8.875%, and with this, you pay tax on income you've already been taxed on.

So, roughly half the income of you and your spouse goes to taxes.

Housing: By an old rule of thumb, you should spend no more than 30% of your income on rent or mortgage payment. For $500K, that's $150K or $12,500/month, which would include a maintenance payment if you own instead of rent. That will get you a very nice, if smallish, two-bedroom place in a top neighborhood. But now you have only $100K left for everything else because of all those taxes. So, you and your spouse probably should compromise on your living space, settling for something smaller or less desirably located than you'd prefer -- even though you make half a million dollars a year.

Food & drink: Eat out much? A decent meal for two costs about $100. Eating out twice a week will cost you $10k/year. You will eat out, or order in, more than that. A cocktail in a bar is $12, so doing most of your drinking at home is prudent -- even though you make half a million dollars a year.

Vacation: That nice summer rental in the Hamptons is really out of your price range, even though you make half a million dollars a year; and besides, both of you work way too hard to get out there more than two or three weekends.

Auto: You can afford the BMW and indoor garage if you really want, but you'll have to make some financial sacrifices, and the car will cost an average $1,000 for each time you drive it. Not a prudent choice, even though you make half a million dollars a year.

Kids: You can send your kids to private school for $40,000/year or to the crappy local public school for free. By the way, no matter what school they attend, your kids need expensive clothes, phone, etc. or they'll get bullied by the other kids. If your kids aren't old enough for school, they'll need daycare or a nanny. It is socially unacceptable to be a stay-at-home parent in NYC (that is, on the Upper East Side), even if unemployed.

Get the picture? This is why so many couples earning $500K/year move to the suburbs. It's quite possible, even common, for all practical purposes to be poor in NYC even though belonging to "the 1%."*

I agree with a lot of the point, but your housing section is pretty terrible. 7-8k is more than enough for a good sized luxury three bedroom near a subway in the UES with all the normal amenities. There is 50k right back into your pocket.

See: http://streeteasy.com/building/the-colorado/16c

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Mar 28, 2017

He's probably talking west of Park.

Mar 28, 2017
ErnstBlofeld:

By the way, no matter what school they attend, your kids need expensive clothes, phone, etc. or they'll get bullied by the other kids.

If I was a therapist I'd say, "why don't we start there"

...now tell me about your childhood

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Mar 28, 2017

Your point about the school system is key. You may technically have access to free education, but if the local school districts suck then you are stuck with a huge private school bill. $40,000/year with a 50% tax rate requires $80,000 of salary just to cover tuition!

Mar 27, 2017

Why are you living in NYC with kids. Move to the suburbs, eat at Applebee's and move on with your life. The city isn't designed for people with kids and modest incomes (yes, it's a modest income if you and your wife only make 250k each in your mid 30s).

NYC and the bullshit tax system they have exists because it draws in foreign money and dumb 22 year olds who think the city makes them special. I love NYC, but the tax structure is a total joke. The state taxes are pathetic as well since the vast majority of the state is agricultural.

Mar 28, 2017
TNA:

dumb 22 year olds who think the city makes them special

read this and immediately thought of the Sex & the City girls

Mar 28, 2017

read this and immediately thought of the "Girls" girls

Mar 28, 2017

@stth_167 @stth_167

Absolutely. The same kind of kids who brag about NYC, drink andre mimosas for brunch, can't imagine "living" anywhere else, but in reality fit 4 people in a 2 bedroom flex and hide from their landlord all the time. Clowns.

NYC is awesome, but if you have two kids and middle income (for NYC) you move. If you love city living, you move to any number of nice, but smaller and more affordable cities and live there. And if you decide to have kids, you decided basically to subject yourself to inconvenience for the sake of raising a human pet. That's your choice so being salty about it is pathetic.

Most people are living in NJ or LI, with far cheaper housing options, better schools and the ability to still commute into NYC. That's life when you are a parent.

Mar 28, 2017

Or you just pass all the stereotypes and live peacefully with your family in the city and figure out how to make it work. The idea of living in some suburb and commuting into town for more than half an hour fills me with dread, and no, I am not a twenty something. I just turned thirty and I am making it work with a small family in Chelsea London (Comparable costs of living to the US before the GBP fell).

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Mar 28, 2017

These things are always an exercise in "who can best spend all this money while having the fewest people realize how inane this article is". The author did OK at best. 36k 401k contributions, mortgage on a 1.5m dollar home, three 6k vacations a year, 12k saxophone lessons, donating 18k a year to feed the children? The struggle is real.

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Mar 28, 2017

Tricks McGee...

Mar 28, 2017

I have a lot of issues with the specifics of the analysis, but the overall theme is not incorrect. Living in the city (even in Brooklyn not Manhattan) is very expensive and you can make a ton of money and not be saving a ton (on a percentage basis). Also, the point of the original analysis is not that they ARE poor, but that they FEEL poor with all their expenses and then laying out how easy it is to throw away $500k.

However, the specific couple focused on in the link is maxing their 401ks, saving and donating to preferred charities, which not counting the portion of mortgage and student loans going to principal, yields them saving (I count donations towards that) 12% pre-tax and 20% post tax. Including principals payments on debt that number is much higher (18/30% ish).

My major problems with this are in 3 line items. Specifically, no car (seriously in NYC very few people have one car with a real job let alone 2), no 3 vacations (who has time for that with a real job), and no student loan debt (should have been paid down by time you are making $250k each). All together that yields ~$57k more FCF and a savings rate that would make anyone happy.

As someone with a family making good money and living in NYC, it's totally doable and there are many reasons to do so making ~$500k with kids. What some of the previous posters are either ignoring or don't understand are the quality of life benefits to being in the city as a busy working couple. Some of the biggest are minimizing commute (so you see your kids), the ability to actually find childcare (getting a nanny outside of the city is hard), walking to bars/restaurants/shopping, etc.

You are also not living in NYC to make $500k if you have this sort of family/life/job. You are living in NYC because 3 years later that number will be much higher. Making bank in one of the other cities with a lower cost of living is really hard jobs usually cap out much lower.

TLDR: Article is right and wrong, living in the city is expensive, but it can be worth it for specific families and jobs

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Mar 28, 2017

Well said. It's all about what you're willing to sacrifice and NYC will force that out of anyone save a very select few.

Now if you're lucky and your kid gets into one of the specialized high schools that takes a big load off.

Mar 28, 2017

Speaking of sending your kids to private schools, there's actually been some compelling research that for upper middle class to upper class kids, it matters very little where you attend school. Economic and educational outcomes are pretty consistent among children of high-achieving parents regardless of school. What's better, being valedictorian of a mediocre public school or being middle of the pack at a prestigious private school?

Where the research says it DOES make a difference is among lower and lower middle class kids. Kids with poorer parents who attend better schools have much better results.

This suggests that parents are massively wasting money on high property taxes in good school districts and private school tuition.

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Mar 28, 2017

When I got admitted at my school I went to the financial aid office and asked them to give me a bigger scholarship because what they were giving me wasn't enough without me taking on shit tons of loans (yes, I was poor but I was hungry to grow a BSD). They very politely told me that because I wasn't an athlete and wasn't a minority, the scholarship I received was generous enough so I should go fuck myself and if I still wasn't happy I was told maybe this wasn't the school for me. Imagine my surprise when a couple of years ago I went to an alumni mixer after a recruiting event and the same bitch who told me to yank it back then came up to me to ask for a "generous donation to contribute to the community and school spirit and make it possible for other kids like me to go there." I somewhat politely reminded her of how they treated me and that I didn't believe for a minute they were actually going to spend the money on kids who actually needed it but on some fancy new stadium so I took great pleasure on telling her to go flick her bean.

That was a long way of saying: unless you got cash to burn and want your name on a building for like 20-50 years or if the school was actually nice to you and helped you out when you went there then you have to be a massive moron to give them any more money.

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