Saturday, April 16, 2011

On finding an apartment

A month from now, I will be a college graduate. I will have a Bachelor of Science in Economics and Mathematics. And I will graduate with honors, haven written my thesis. (Assuming everything goes well-- I know there is still lots of work to be done). Holy shit.

So soon begin my adventures in the land of independent-adult land. I'm incredibly excited to be moving to DC to start working in August. So excited that I've looked up apartments on about 10 separate occasions. This is both fun and depressing, since thinking about living on my own, filling the apt. with furniture and good memories-- that's exhilarating. The cost of living in the DC area, however? Does not make me a happy panda.

My biggest concern is knowing how much to pay for rent and utilities. I have never, up to this point in my life, paid for either, thanks to the generosity of my parents. And frankly, the prices in Pittsburgh are so far removed from what I'm seeing in DC, that I can't make any comparisons. As a soon-to-be graduate without credit debt or school loans, making the choice not to own a car so as to save money, I recognize that housing is going to be my main expense, by far. (This is excluding 401K, 529, Roth IRA, and personal savings, which I'm viewing as a necessary, mandatory expense.)

I realize that picking housing is a big choice that has repercussions for my lifestyle-- if I choose a really nice, upscale apartment, I'm not going to have lots of disposable income, so there will be less nights out with friends (oh, these hypothetical DC friends that I will make :)), and more nights in. Or something like that. On the other hand, if I make some sacrifices about the location and age of the apartment I live in, the money I'm saving could be put to other great uses, like skiing trips, a tropical vacation, some fun toys.

Add to the mix my general lack of knowledge about DC, and it's really hard to predict whether I'd be happiest with a place in Arlington, VA within walking distance to work (meaning I'll save on metro), or if I should live in DC, near the universities, bars, restaurants, and night life.

If there was ever a time to save money by renting a humbler abode, now would be it-- I'm used to the student life, an older house and a tiny shower. Still, it's so tempting, now that I'm FINALLY making money (lots of it), to splurge on something nice. After all, I want to come home to a warm, inviting, and comfortable place.

Having googled "what percentage of your income should go to housing and utilities", and reading tons of answers, I can report that general consensus states you should pay 1/3 of your take-home income at most, though certain areas are more/less affordable, and you should vary your spending accordingly. I'm following this advice and looking for a 1 BR that comes to <= 1800/month for rent and utilities. I'll keep you posted.

4 comments:

  1. Dina, I think you underestimate your taxes (it is federal+state+SS+Medicare).

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  2. Taxes are higher than 28%? =(

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  3. There is progressive tax. First 15K for example are not taxed at all. You can check tax code. There are also deductions and exemptions. Basic rule - the more you earn (up to a certain point)the bigger overall % will be. I also have no idea what local/state taxes are in DC. SS and Medicare are always the same %. SS rate for 2011 is 4.2% and Medicare rate - 1.45.

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  4. You'll probably be paying around 30% total. Roughly 20% federal (~half of your income will be taxes at 25%), and then 5% state (at least in Mass) and ~5% medicare and social security (something we'll probably never take advantage of). As for 401K and IRA - while these are great ways to save...keep in mind that this is the money you can't use NOW. Just a thought - definitely not trying to discourage you from saving money for 50 years from now :) But, consider saving in more liquid forms, stocks or even cash, at least partially.

    As for housing - you work hard and you deserve a nice place to come home to from work.. When I was doing an internship in Arlington, I stayed at one of those condos (Park at Arlington Ridge, I think it was called, but they are all similar) - they had a pool and a gym...and everything was super nice.. As for night life -- DC is only a couple stops away, and I think Arlington might be a bit safer than the city... Good luck :)

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