Never Retire - The Nightmare Of Expensive Expectations
As noted in the last installment of the Never Retire newsletter (below), we will cover ways to view and organize spending and saving in the next two paid subscriber posts.
As I started outlining those stories, it felt like I was putting the cart before the horse.
You can’t spend or save effectively without setting realistic expectations.
On that note, let’s extend the thinking we introduced at the end of this post—
When you set spending—and, subsequently, savings—strategies and goals, there’s a push and pull between preferences and expectations so you can live the life you wanna live now and for the duration on the personal financial cards you’re dealt.
The illustration that resonates with me most? Where and how I want and choose to live.
About 23 years ago, I concluded I would only live in big cities.
About 23 years later, I have yet to deter, save a two-year stint in suburban Orange County, California, for graduate school. During that time I lived in super affordable—and super nice—student housing in otherwise expensive Irvine.
We all have built environment preferences. Mine is decidedly urban and relatively dense. For the record, I have an urban studies degree (from San Francisco State University) and studied urban planning, policy, & design (at UC-Irvine).
Like so many people, I don’t view the prospect of home ownership as an escape from apartment living. In fact, if my partner and I end up buying a “home” it will be an apartment in a decidedly urban and relatively dense—most likely—Spanish city.
So there’s something inherent in both of us—you might call it strange(!)—that makes our default preference apartment living in dense cities.
That said, we both made choices along the way to maximize this preference within the confines of our respective personal finance—
More than five years ago now, I needed to find a place to live.
Long story short, I could have afforded a $2,000-plus apartment in a top-tier neighborhood in urban LA. However, this would have produced a situation where I’d come right up against or close to my typical monthly earnings.
It also would have keep me comfortably within the confines of 50/30/20 budgeting.
Instead of commit to $2,000+ rent, I opted for a cozy studio in a second-tier neighborhood — literally adjacent to many of the top-tier neighborhoods — for $1,300 a month.
This move saved me at least $1,000 a month. That’s meaningful savings.
While I absolutley do benefit from rent control now, I didn’t benefit from it on the front end of finding an apartment in Los Angeles.
Here’s how rent control works here — when somebody leaves a rent-controlled unit, the landlord can set the rent wherever they’d like for the next tenant. Of course, that’s usually at or around market rate.
So, when I was apartment hunting five years ago, I was looking at market rate rents.
Same for my girlfriend—
Years ago, when I didn’t know my girlfriend, she was looking for an apartment.
Instead of taking on $2,000+ rent, she opted for a $1,400-a-month one-bedroom apartment in a top-tier Los Angeles neighborhood. She got this deal because the apartment, while large by urban LA standards, needed work. Mostly cosmetic.
She did the work.
End result — thanks to rent control, she’s living in a $1,400-a-month one-bedroom apartment that could easily rent for $2,500 today.
Two people who didn’t know one another, making similar housing choices, independent of one another.
She found a screaming bargain. They existed then. They exist now.
You just have to find them, then be willing to take them.
It’s the last part — be willing to take them — that sets lots of people who have the luxury of choice down the wrong — or at least a more expensive — personal financial path.
Breaking it down.
You want to live in Los Angeles. Fantastic.
Are you going to pay the median rent of $2,870 in West Hollywood? The median rent of $2,742 Downtown? The median rent of $2,435 across metro Los Angeles?
Or are you going make sense of what median rent actually represents—the middle number in a range—and situate yourself in the lower 50th percentile?
For lots of people, this is where the struggle lies.
They love city living, but on their terms. These terms often include new construction, outdoor space, room for a home office, parking, or some other amenity or mix of amenities that come at a premium price in places such as Los Angeles.
Giving into these preferences can take you into the upper 50th percentile, easily bringing your rent hundreds, if not thousands over the reported median.
This is because they lament the median as cost of doing life, rather than take a second to realize they don’t have to pay the median.
This is a budget—spending and savings—crusher. A personal financial nightmare.
So, some people opt to venture to surroundings that are not their first choice. Less-than-desirable urban neighborhoods or suburbia.
Can you better live with this trade off or an adjustment on your expectation of what city life is within, again, the constraints of your personal finance?
Sure. You can afford $2,435. But $635 saved each month on $1,800 rent makes a big difference in any budget of modest means. Do you need this savings more than an amenity or succumbing to whatever 30% of your monthly income equals?
To that end, when situating spending and saving, it’s these types of decisions you must make across the board. This requires an unconventional approach to budgeting, which basically means not budgeting at all.
We cover this angle—in-depth—in the next two paid subscriber posts.
We’ll even get personal and pull numbers from a recent month of my personal finance to illustrate.
My old studio apartment in East Hollywood, Los Angeles
