Yesterday in class we worked on Phase II of our Real Life Project. I am really enjoying this project and thankful we are doing it because Mr. Hallam is right, most graduates won't budget and will just buy expensive things with their credit card. With the help of this project, I will be prepared to face the real world once I graduate. In Phase II we went over a couple costs: Transportation, Home Savings, and Food. Transportation will be pretty easy to handle. Living in New York, I don't really need a car since I'm in a large city with lots of public transportation. Plus, it's better not to buy depreciating assets. An MTA (NY subway and bus) unlimited monthly card costs $104 per month, or $1,248 per year. There will probably be emergencies where I want to take a cab instead of a subway, so I will put aside $160 a month for cabs. For food, according to http://budgeting.thenest.com/average-grocery-budget-family-two-3421.html, an average NYC couple spent $274 a month on groceries. This was in 2010, so with a 6% interest it would come to $290 per month. Zack and I would split this, so $155 a month each. As young single males, we'll probably going out and on some dates, so we would put aside $500 a month for eating out. Now for housing, I'm not completely sure where I will want to buy a house, but I just said I want a $500,000 house in Westchester, New York. According to http://www.ginniemae.gov/2x_prequal/le_detail_estimate.asp, I will need a $90,715 down payment in order to receive at 30 year loan at 3% interest. This is a bit under 20% of the total cost, so it is realistic. I think $15,000 a year is a realistic amount to put aside a year towards the downpayment.
I had a conversation with my Dad about living on his own after college. After graduating from Amherst College and before attending Cornell Law School, my father lived a few years with roommates. His first year out of Amherst, he lived near school in Hadley, Massachusetts. He worked in the office of space management at UMass. He lived with three roommates, and they split the rent. My father said he had no issues over paying rent, they all paid up every month. They also split the cost of groceries, and would switch off who would go out and buy them. My father lived there for one year. He moved to New London, Connecticut and once again shared a house with four new roommates. He worked as a systems analyst at United Technologies Research Center for two years. Since Connecticut doesn't have much public transportation, my father bought his own used car. He had some money from his grandmother to pay for it. During that time, he bought an engagement ring for my mother. He put a downpayment on it and took out a loan for it. My father agrees this project is a great idea.
Financially, this month is a bit hectic for my family. Not only is Christmas at the end of December, but my mother and two of my siblings also have birthdays during this month. My parents save money all year to prepare for buying this month's presents. Also, my sister in college and another sister and her husband are coming here for Christmas. Fortunately, my sister and brother-in-law had frequent flier miles on Singapore Airlines from my father's credit card. That is an example of some perks of using your credit card, but there are no perks if you do not pay off your credit card debt.
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