What Does It Take to Make It in the Big City? 3 New Yorkers Bare Their Budgets
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"The idea of going from zero to three months' worth of expenses is really intimidating, so start small."

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Living comfortably in the Big Apple doesn’t come cheap. In fact, it costs about $87,000.

That’s according to a 2016 GOBankingRates report that used the 50/20/30 budgeting rule—where 50 percent of income covers necessities, 20 percent goes toward paying off debt, saving and investing and the remaining 30 percent can be spent on flexible expenses—to determine how much it takes to satisfy needs, wants and goals in different cities. Based on their estimates, it costs a whopping $43,700 annually just to pay for needs like housing, groceries, transportation and health care in New York.

Compare that to the median household income of $52,700, and you might be wondering how anyone makes it in the big city. Enter: these three residents.

In the first of our series, “Money and the City,” they tell us how they stretch their paychecks in the city. Then Pamela Capalad, a N.Y. based Certified Financial Planner and founder of Brunch & Budget (and a member of our Ask an Advisor panel), weighs in with a few tips on how they can up their games even more.

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"Smart money habits help me save a ton while earning just over $50,000."

Leah Gervais, 25, a non-profit executive coordinator in Manhattan

"I love working for a non-profit, but making my salary stretch in Manhattan isn't easy. I live with two friends and pay $1,450 in rent, or about 45 percent of my salary. I know that ideally, housing shouldn't eat up more than a third of your take-home pay, but I'm a homebody, so I'm willing to pay the price.

I divvy up the rest of my money between flexible spending (food, entertainment, etc.), student loans and savings. I automate my savings, usually socking away 15 percent every month. Paying myself first is what's gotten my emergency fund up to about three months' worth of expenses. I'm also on track to pay off my student loans, a $700 monthly bill, way ahead of schedule, thanks to refinancing and expedited payments. Otherwise, I'm debt-free.

I'm all about side gigs, bringing in an extra $100 to $1,000 monthly from a mix of blogging, writing and freelance web design work. I put 75 percent toward my loans and keep the rest for fun money, which covers the occasional shopping splurge, seeing a Broadway show or enjoying a rooftop cocktail overlooking the city. As for retirement, I contribute to a 401(k) and Roth IRA. I don't max them out now, but plan to once I eliminate my biggest student loan.

I'm definitely frugal, but certainly not unhappy! I may not take lots of vacations or go out every night, but I'm living in the best city in the world with a 9-to-5 I care about. I wouldn't trade that for anything, even a six-figure salary."

Expert insights: "I'm impressed with Leah's financial know-how! It's great that she's aggressively paying down her student loan balance while simultaneously saving. So many people make the mistake of just doing one or the other.

Aside from paying off debt and maxing out her retirement funds, what are her other big-picture goals? Does she want to travel? Save up for homeownership? It's okay if she doesn't know yet, but she can set herself up for success by upping her investing game in the meantime. She's only 25, so if she opens a regular brokerage account now, the magic of compound interest will grow her wealth big time—and help her check off some medium-term goals—over the following decades.”

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July 17, 2017

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