In my last post I mentioned that we have a couple of good apartment choices lined up. Both sets are classified as luxury apartments. While I’m sure many apartments call themselves luxury apartments, these do seem to be a notch above some of the others in the area.
One is a fairly standard apartment community of three story buildings with exterior stairwells and breezeways. This one has nice sized rooms inside the apartment, and nice amenities within the apartment community.
The other is even nicer, and was originally intended to be condos, but was converted to apartments when the housing market took a dive a few years back. These apartments are more city-central style, with interior hallways and an attached parking garage. These are easily the nicest apartments in the area, and possible on that entire side of town.
For the sake of this discussion, I’m going to refer to the first apartment as “Nice” and the second as “Super Nice.” Nice rents for $1200 per month. That is a fairly average price for nice apartments in this area. This is Super Nice rents for $1500 per month. This is also a fairly average price in this area for super nice apartments. The price difference between the two apartments is $300 per month.
We really like the Super Nice apartments. The parking garage, the interior hallways, the upgraded kitchens and baths, and the huge bedrooms, make these apartments really desirable. After touring them we were certain this was where we wanted to live.
Later that day, we paused to consider the reasons we were moving out of our house and into an apartment.
- Live closer to work to save time and money associated with commute – check
- Free up time involved in home care and maintenance – check
- Save money on our living expenses so we can have more money for fun and savings – ???
That last one got us thinking. $300 extra per month is $3600 extra per year. That is equivalent to a really fun seven day cruise ship vacation – one of the items on our list of things we want to do.
We had to come to terms with how much we really wanted to spend on living expenses. I am reading a book that addresses this topic quite nicely. The book is “All Your Worth” and it lays out a very simply plan to decided how much to spend in different areas of life.
- 50% on must haves (things that are required to live – housing, utilities, food, commute)
- 30% on wants (things for our enjoyment)
- 20% in savings (saving for the future, children’s education, retirement)
That is the core concept of the book, with the rest of the book going into the reasons behind that and how to achieve those ratios. In our house, we are at about 75% on must haves. That’s a crazy high percentage, especially considering that we are roughly in the typical suggestion of a monthly mortgage payment that is 25% of your salary.
For me, “All Your Worth” is the missing piece of the Dave Ramsey plan that we followed to get out of debt. It lays out a firm guideline of how much we can spend on different parts of our life to maximize our fun and our savings.
Honestly, I think that living on 50% of your salary for must haves is pretty difficult. For us it would mean either a much cheaper house or an apartment. Those are big changes that most people wouldn’t be willing to compromise on.
The key for us though, is that we want to maximize our fun. We want to travel more, we want to treat our family to dinner once in a while, we want to visit more theme parks, and we want to experience more local events. Most of these things require extra money in the fun part of the budget.
We also want to maximize our savings, so that we can provide for our daughter’s college education, pay for her wedding, and buy her a car. We also want to maintain, and expand the fun when it is time to retire.
To do all this, we really want to get our must haves below 50% of my salary. Adding up all our other must haves, like food and utilities, the Really Nice apartment clocks in at 57%, while the Nice apartment clocks in at 51%.
For us to meet the goals we have set for ourselves, we’re planning to go with the cheaper alternative. It is tough to give up the Super Nice, and it is tough to give up the house we are currently living in, but it really is the right thing for us. Now we wait for our house to sell so we can move ahead with our plans.