Can I Afford to Move #3: My Tiny Apartment is So Cheap!

Is a deal always a good deal?

Key Takeaways

• Cheap rent is only a good deal if it’s buying you something. A rent-stabilized NYC apartment can buy you a fully funded escape hatch.

• One year of the money you’d save by staying, invested and left alone, can be worth more than the nicer apartment ever will.

• If you have a side hustle that generates profit, a SEP IRA lets you invest your savings and get a tax deduction for doing so.

  

Welcome back to CAN I AFFORD TO MOVE?, a series where we take real housing dilemmas and talk through how the numbers stack up, what your nervous system is telling you, and why those two things are often in conflict. Last time we explored draining all of our savings to buy our dream home.

Today’s question is about comfort. A reader is torn between cheap rent in an okay place, or upgrading to something nicer because they spend so much time at home.

Reader question: Okay I need help thinking this through. I have a rent-stabilized apartment, $2,200/month, really good neighborhood in Brooklyn. I know. I KNOW how that sounds right now.

But it’s TINY. It’s called a one bedroom but it’s basically a studio and I work from home so I’m in it all day every day. It’s fine! Nothing’s wrong with it. But I think about moving every day.

I started looking and everything I like is around $4k. Basically double. I make $160k, probably closer to $200k this year with freelance stuff, so I can technically afford it, it’s just that giving up a rent this cheap feels crazy? Am I insane?

Do I stay somewhere I’ve kind of outgrown because the deal is too good, or is “it’s cheap” a dumb reason to keep living somewhere I don’t really want to be anymore? How do you even do the math on this?

Thanks, love the column.

---

There is no right answer here, and I want to say that up front. But let me think through the options and weigh the trade-offs, in hopes of helping you make your own decision.

Let’s start with the easy part: you’re fine either way. If you find a gorgeous apartment you absolutely must have, you could easily afford it. You’ll catch up on savings later. And on the other hand, you could stay, and also be fine (but still think about being stuck often). But let me pitch you a third option, one that makes the decision for you and changes the way you think about money and freedom for good.

Can you delay the nicer apartment for twelve months? Even ten would be amazing. You can make it through one more winter, right?

One more winter = hundreds of thousands of dollars

You have an amazing opportunity right now to save $1,800 a month toward your future. That’s the gap between your $2,200 rent and the $4,000 apartments you’ve been ogling. Over twelve months, that’s $21,600 you would otherwise hand to a landlord for the privilege of more square footage and better light.

But you told me something else very important: freelance income could push you from $160k to around $200k this year. So let’s be greedy. Take $10,000 of that freelance money and put it to work too. Now you’re not just saving $21,600. You’re saving $31,600 in a single year, savings that would not be possible if you double your housing costs without other dramatic lifestyle shifts. And you’re not just going to save it, you’re going to invest it in the stock market.

I don’t know how old you are, so I’m going to assume 30. $31,600, invested once this year and then left completely alone, is about $318,000 by the time you’re 60, assuming an 8% average annual return, which is roughly what the stock market has delivered over the long haul. Give or take, the market does what the market wants. So one year of discomfort can turn into more than $300,000 while you sleep. But it’s not even discomfort. You told me it was fine—so let’s do fine for another year or two?

The $4k apartment will never do that for you. It just costs you $1,800 more a month, every month, for as long as you live there.

Doubling your fixed housing cost is not just a lifestyle upgrade. It is one of the most expensive financial decisions most people make on a whim, and they make it because a bigger apartment feels like an achievement. It isn’t. Sure, in a perfect world you’d find something gorgeous and enormous for 30 percent more than you pay now. But that is not the reality of the real estate market you live in. You have an incredible deal, the current market rates for the thing you want are wildly more expensive than what you have now.

Here’s what I want you to sit with: Some people win the lottery. Some people get a surprise $50,000 bonus at work. Some people get an inheritance. But you got something better and more durable. You got a genuinely good apartment in a great neighborhood at a price that affords you a real shot at financial freedom. That is your windfall. Most people never get one. Please do not set fire to yours for an extra bedroom you’ll end up using to store a Peloton that you also don’t use.

Your cheap rent is your ticket to freedom. Don’t burn it yet.

That $2,200 rent is not just a low number. It’s a subsidy. A rent-stabilized apartment in a good neighborhood is the closest thing a renter has to an inheritance. It’s the reason you can invest $31,600 in a year without feeling it, the reason a slow freelance month doesn’t scare you, the reason you have choices at all.

And that upgrade just the first step on the ladder. The day you sign the $4k lease, the $2,200 apartment is gone for good. You’re likely never going back to something cheaper, your housing costs will only go up from here. You don’t get to change your mind in eighteen months and come back to it. Someone else lives there now, paying below market rate. So before you trade it away, be sure you’re moving toward a life you want, not just fleeing a room you’re tired of looking at.

Extra special bonus: Stash that freelance money in a tax-advantaged account

That $10,000 of freelance income? You don’t just invest it. You put it in a SEP IRA, and the IRS gives you a discount for doing so.

A SEP IRA is the retirement account built for freelance and 1099 income. You contribute, you deduct it from your taxable income, and it grows protected until you retire. If you’re in a combined 30 percent bracket, a $10,000 contribution knocks about $3,000 off your tax bill. So the $10,000 you invested really only cost you around $7,000 out of pocket. The government covered the rest. And freelance income is lumpy. The $200k year that you’re currently making might not come back, so the smart move is to strike while the iron is hot!

I wrote a whole love letter to the SEP IRA if you want the full breakdown, but the short version is that it’s flexible, it’s easy, and it’s the best account most freelancers are not using.

So I’m not saying don’t move. I’m saying set a goal of moving twelve months from now and gamify the next year into an amazing stretch where you supercharge your savings. And when you do move, you’ll move as a completely different shopper. Right now you’re browsing because you’re uncomfortable. Twelve months from now you’ll have a fat savings account, a full year of proof that you can carry the higher cost with full conviction and no guilt. You won’t be talking yourself into an apartment. You’ll be choosing one.

Spend it on your life, not your rent

If the apartment feels small, the fix might not be a bigger apartment. It might be a bigger life. You live in the greatest city in the world. Your living room is the whole city: every restaurant, every gallery, every park, every friend’s rooftop. So get out of the apartment. Take some trips. Book co-working days so you’re not chained to the same desk you sleep next to.

Take one month of the rent savings, that $1,800, and spend it! Maybe that’s $800 for a few days of co-working in a nice rented space, and $1,000 on a new lamp. Or hell, a week in Mexico. You could do a version of that a few times a year on the money you’d otherwise burn in rent, and still be investing the rest.

You can make a small apartment feel like a big one

Having cheap fixed costs while living the life you want is more powerful than you think. Could you hire a designer and invest a few thousand dollars to make the space amazing? My Instagram feed is full of tiny spaces that look gorgeous. Yes, I know you’re a renter, but you can still do a lot with furniture and lighting. Hiring a designer costs a fraction of a single month’s rent on the $4k place. Spend a little to love the small apartment for one more year, and let the difference compound into something that outlasts any lease. Maybe you’ll love it so much you’ll decide to stay for another year or five.

Parting shot: One more winter in the small place. Then move, richer for having stayed.