How much to spend on housing vs. discretionary items?
Hey guys, recently got the offer of my dreams at a bank in midtown Manhattan with an EB. Comp slightly above street average of $85k base. Did some research, and while there isn't a ton of comp information, I heard the analysts get paid pretty darn well, especially considering the size of the firm. Obviously things will probably be different now because of the outbreak but I was looking at housing options and wondering how much to spend.
I'm totally open to living with a roommate and my two roommates as of now are headed to Citigroup and JPM respectively, so we could link up again in the city if needed, but the issue there is that Citigroup is all the way downtown and my other roommate doesn't know where JPM will settle with their new office, so I wanted to explore 1BR/studio options just in case. Optimal housing situation would honestly be a 1BR/studio as close to midtown as possible. Would love to walk instead of taking the train.
This may seem like a dumb question, but the finmeme community is wrought with jokes about designer watches and loafers, but I feel like with the cost of NYC housing, there isn't much opportunity to spend lavish amounts of Rolex watches and Ferragamo shoes. Is it common for bankers to splurge on things like bottle service, watches, and other things they don't need rather than important things like housing? I was raised by Chinese parents so maybe I grew up in different circumstances but I would rather live in a nice apartment and wear a cheap Seiko then split a 1 BR three ways and have an AP. Saw a funny thread on here about the correlation between living like a 19c Italian immigrant and being a billionaire like Stephen Schwarzman, but I really hope it doesn't come to that.
I'm still in college and know nothing, so happy to hear any personal finance insights from any current people in the field!
For housing keep in mind that outside of what you can afford, nyc apartments have rules around how much income you need to rent apartments. Most apartments require 40X rent for income (so if you want to rent a place that is 2k a month you need 80k a year), it can be as high as 60x, but 40 is normal.
Additionally, most places will not count bonus in that calculation, especially for new hires (without a track record of receiving a bonus). So with that you are looking at a max of $2,125 a month. And make sure you have first month and security deposit at a minimum (so you need 5-7k in cash). So there is your max, unless you have a guarantor for your apt.
At this price range in nyc (if you want to live in a reasonable area of manhattan or Brooklyn) you aren’t going to be finding a “nice” place, it’ll be fine, but if you are coming from anywhere outside of nyc the apartment won’t feel nice. The reason many junior employees have roommates is not so they can go out and buy bottle service, it is because nyc real estate is extremely expensive and affording a reasonable apartment on your own is tough. I also think going above the 40x limit starts getting pretty expensive, especially with the uncertainty around bonuses.
I would use StreetEasy to look. You’ll find stuff but depending on the area it won’t be all that great. Upper East, upper west, Hell’s Kitchen would all have the more reasonably priced units. $2125 is tough though and that will feel like a large monthly expenditure.
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