I recently noticed on Facebook that a New York Times article in a column called “The Hunt” has gained some traction, mainly in a negative light. The article is titled, “How to Get to Manhanttan? Save, Save, Save,” and it tells the story of a very young woman who was able to afford a nice apartment on the Upper East Side. The problem with the story is that the math just doesn’t add up.
Annie, a financial services adviser and the subject of the piece, put down 35% on a $426,000 apartment. That’s $149,100. Plus, she spent $30,000 on renovations and remodeling. In total, she used $179,100 of her savings. From the article, it sounds like she worked for about two years and a quarter before making the bid on the apartment. That means she was putting away $6,633.33 a month, at bare minimum. Assuming she was putting away 100% of her take-home pay into savings, her average annual salary was a whopping $79,600. I personally worked in banking consulting until the beginning of this year, starting right out of college just like Annie, and I never made that much even before taxes.
But further questions remain. She certainly couldn’t have saved 100% of her salary. Even though she lived at home she must have used some of her income on transportation (particularly to get to work, even if it is deductible), food, entertainment, clothing, other personal items, and leisure and entertainment. Did she pay for any benefits through her employer, such as health insurance, life insurance, long-term disability insurance, eye care, or dental care? Most likely. What about her 401(k)? Certainly someone as financial savvy as Annie would be putting away money for retirement at her young age and taking advantage of what we can assume was a match from her employer. And then of course there are taxes. Working in New York and living in New Jersey, Annie must have been hemorrhaging paychecks to the Man on those long nights stuck in the Lincoln tunnel. All in all, this article would lead you to believe that Annie was making six digits out of college.
The last question that needs to be raised really doesn’t need to be asked at all. By now, it should be apparent that Annie received considerable financial help, most likely from her parents, in the purchase of this apartment. So one could assume that she doesn’t have any student debt because her wealthy benefactors most likely supported her through Binghamton University as well. And herein lays my major complaint with this story. The article lauds the virtues of saving and what it can get you in the (relatively) long run. However, the subject of the article is a daughter of wealthy circumstance. I concede that she likely saved a large ton of money, especially for someone of her age. But the fact remains that for the 99% a free education is not possible, and even someone with the discipline of Mother Theresa could never afford that apartment after working for less than three years without someone pitching in with a fat check.
My true complaint is not with Annie though. She legally bought this apartment and she has every legal right to live in it and pursue satisfaction and happiness in her life however she pleases. The problem in this case is the NY Times. By failing to run the numbers and fact check this article they failed their readership. But through this failure they have reinforced the false ideal that hard work and discipline alone can help you achieve your materialistic goals. Rather, the NY Times should be espousing alternatives means by which young people and the middle-class can find safe, comfortable housing in New York City and other places around the world. What we need is innovation. Innovation in how we finance shelter. And innovation in how we actually shelter ourselves and how we conceive of adequate and satisfying shelter. This article reinforces materialistic societal norms and makes people believe that they are doing something wrong if they are not walking a taught tight rope towards their “American dream.” Didn’t we learn with the Triple-F Fiasco (Fannie-Freddie-Foreclosure!) that the American dream can easily turn into a nationwide nightmare? Renters can be happy people too. The NY Times doesn’t seem to realize this. With income inequality large and growing the NY Times and its readership need to realize that wealth and assets are not the only way to lead the good life. People can choose their own path.
I suppose since this blog is called “The Economics Of …” and I titled this post The Economics of Manhattan I should talk about economics a bit. I hope that my readers do not think that economics is about making everyone rich or maximizing wealth for everyone. I am an economist because I want to maximize opportunity for everyone – their opportunity to be happy, whether it is through wealth and asset accumulation, or whether it being through less materialistic means. My hope is that societies will put policies in place so that the opportunity is available to everyone, not that society will define what happiness is and have everyone marching towards that goal through the engines of the economy.