Thursday, May 17, 2007

Jewish Economics - Getting Started

Before I got married, I was speaking to a few different people about the cost of living. One of my rebbeim summed it up nicely: You need to have about $30,000-35,000 for your first year of marriage, living conservatively but comfortably, with the low end being closer if you do not own a car (as we do not) and the high end if you do. But, if you'll ask many young couples to be how much they think they'll spend, most will estimate numbers in the low-to-mid $20k range. I have - and still do - show friends who are thinking of marriage a breakdown of their expenses, and the numbers never cease to shock them... and I only list the basic monthly expenses, leaving out items such as food, clothing, and entertainment.

Why are they so surprised? Part of it is a basic math error they all make: They take their own expenses, add them together, and figure that since they're buying certain things as a couple, they save money. And while all of that is true, they miss out on basic differences that they weren't paying before but our now. A single 22-year old friend calculated yesterday that she needs less than $10,000 a year to live (she has a very low rent)... and she was right when we checked her numbers. Even if most people similar to her live a little more extravagantly, their expenses at similar ages (without a car) are less than $15,000. Double that and subtract a bit and you get that low-mid $20k range mentioned above.

But couples are different. Whether they were living at their parents or in an apartment with friends, their rent - one of their largest costs - will be higher. They will now be paying much higher amounts for medical insurance, which many were not paying for before. Small expenses that some were lucky to dump on parents' credit cards no longer can be dumped... and then there's the landline, the internet bill, the gas and electric bills... and so on. There's the high cost of having guests, of making Shabbos, of making some Yom Tovim. A Shabbos in our house can range from $40-$150, depending on how many guests we have, though I'll grant that we made a conscious choice to have lots of guests. [As the same rebbe said, "There are some expenses that while on the face of it seem unnecessary are necessary for how you want to live your life. If you feel it is important to have guests, that may be an expense worth taking on and you'll have to cut in other areas."]

$30,000-35,000... and we're just getting started.

Out of curiosity, how much did you or do you think it would cost a young couple to live (take into account city/neighborhood - obviously the ranges are slightly lower, but not much lower, outside of NY-NJ)? What about a single person in their early 20's [undergraduate], or in their mid-late 20's [working/grad school]? [I'm leaving married with kids for later on.] Are you or were you surprised in either way once you hit a certain point in life, whether marriage or something else, by the rise or fall in expenses vs. your expectations?


  1. I have a feeling this series is just going to end up depressing me.

  2. In all honesty, I haven't run any numbers and we probably pay a lot less than the average couple because of our lucky apartment situation (even though we have a car).

    It also depends on how much the couple goes to their parents (which brings down costs) and whether having guests is feasible (we don't have a lot of Jewish couples our age in this area, so we have less guests than someone living in KGH or the Heights).

    But one important factor is how much is spent to set up the apartment. If the couple decides to spend big bucks on furniture, then that will add up quickly.

  3. agreed with HH.... please don't go there.... most of us have enough money issues as it is

  4. HH - It shouldn't. Everyone else is just as screwed. :)

    Stam - That's why we need to TALK about them!

    Nephtuli - Agreed. I'm not even up to setting up the apartment... I'm starting off with people's original perceptions. Also agree on how often going to the in-laws, feasibility of guests, how many guests (some people simply can't have more than a couple or two even if they want to), etc.

    A lot of people have lucky apartment situations, or paid for apartments, etc. Those people will generally have an easier time staying ahead anyway, so this doesn't apply to them as much in the first place. But for an average 'on their own' couple, hopefully this will be a good tool.

  5. I'm not trying to deny the facts, i know they are true, it's just very overwhelming to think about, suffocating even...

  6. I know we are all screwed, but I am a bit older than you and I would have thought I would be in a better place (financially) by now.

    And forget it guys, I don't even think ANYONE really grasps their financial situation until they start paying for school. There are building fees, banquet fees, trying to complete your scrip responsibilities or you get charged. Then you got those annoying things like engine problems in your car (if you own one), or in my case, owning two. And ofcourse, not realizing that medical insurance keeps going up and up every year.

    I would never have thought to factor all this in.

    aaaarrgggggghhhh, now Im depressed.

  7. We probably had the opposite situation of most couples. Instead of finding that we underestimated expenses because we only added our current expenses together, we cut our expenses.

    But, we were on the other side of our twenties when we married and had each been living on our own (i.e. no roomates) for a number of years and working.

    The expense that went up in combination:
    *Food (Making our own Shabbat dinners and hosting guests). On the flip side, I've actually lowered our food and drug store purchases 2 years in a row despite increasing the number of diapers bought. I'll write about how I've done that sometime. But, I'd consider our food almost a wash.

    *Medical: I think we get sick more often and needed family insurance right off. We pay a pretty penny for this.

    *Life Insurance: Didn't have a need for this before we were married. Now it is a must.

    Expenses that went down in combination:

    *Telephone Line-only need one line (we aren't cell users).
    *Entertainment/Dining Out-We have each other and we don't have dating expenses.
    *Gas-My gas expense has remained the same as a married person, even though the prices have went up. Guess this falls into the category above. Now that I'm married I can just stay home.
    *Car insurance (married driver discounts and my car just got older, may it live to 120).
    *Housing (only maintaining one residence)-although my former residence was less expensive, oh well.

    And. . . . . . we entered a lower tax bracket as a married couple and my husband was able to take the student loan interest deduction to AGI which he was phased out of before. (Fortunately, student loans are a chapter from the past).

    But this doesn't mean I don't think most singles aren't in for the shock of their life. Just hoping to bring a little happiness to the discussion. :)

  8. Stam - Yet even more of a reason. :)

    HH - I think that's true, but the only way people can have a chance when the time hits is to have an idea of where they're at before that.

    SL - I think there's definitely a difference when you get married later - not only are you more accustomed to living a bit "better", you have more money saved up and a better grasp on finances in general, particularly if (as in your case) you've been on your own.

    Interesting and good list - thank you.

    The tax bracket point is interesting; most people get married around when they finish, so they don't even know anything about brackets. But they find out rather quickly when they only get 60% of their paycheck. :)

  9. This scares me. My parents are always warning me that living on your own is more expensive than I can ever predict, and it seems that they're right!

    How do people do it??

  10. I'm actually surprised that the number is so low. As a single who completely supports herself, and lives alone, I do know how much it costs to be able to afford to live, and honestly, I think I will be in a better situation when I get married because (I would hope) a combined income would just help things out. Yes, some expenses would be greater, but I also think some will go down (for example, I doubt I will go out to eat with my friends as often when I'm married as I do now, which is way too frequently). In general though, I've always found it amazing on how far I can stretch my money when I need to, and conversely, how much I can spend if I have it.

  11. What's the big deal, can't everybody just live like regular people? Just get a regular job with a regular paycheck, problem.

  12. not to dishearten you, in a few years when IY"H you will have anotherkid or two and start with schooling, expect the need in the low to mid $100's to live semi confortably in the NYC area. There are always areas to cut but if you want to live without second guessing almost every purchase, that is what is needed in this area.

  13. I've heard of people in the NY metropolitan area who are literally not making it on a six-figure salary...

    Fortunately, you can move to Israel. Tuition, food, and housing are much lower. If you can tele-commute to your American job, you'll be living pretty well.

    If you have to make it on a local salary, at least your veggies will be tastier ;)

  14. The Apple - A lot of people don't. The ones who do? Great planning, smart spending, wise saving.

    Shoshana - That last line is oh so true. The rest... I think (as with SL) that older singles spend substantially more than younger ones. Not only because they can (better jobs) but because they are more settled, live more independently, and in general live a 'better' lifestyle.

    G - :::sigh:::

    Rescue - Agreed. Yet another reason to move out of NYC. :)

    Trilcat - There are many. And the longterm plan is to do so. :P

  15. Not to get you too depressed, but...When we first got married about 5 1/2 years ago we got by on around $30,000, added another 10 with the first child and it has been up from there. Now, 2 kids tuition, baby sitter, house, insurance, mini van, shul dues ect. we are looking at mid $100s and it only goes up from there. If together a husband and wife aren't earning $150,000 (low end) with 3 kids in Yeshiva and living in a house they are in big trouble and the costs are only going up. We just found out that tuition in our kid's yeshiva is going up by $1500 next year. It is a huge problem. Better financially plan now and put AS MUCH into savings as you can becuase you will need it in a few years from now.