Just because you're a celebrity doesn't mean you have to spend like one
We’ve all heard the refrain: To keep your finances in order, you must live below your means. It appears that comedian Amy Schumer is taking the advice to heart. While speaking with BBC Radio 1’s Scott Mills as part of the press tour for her film Trainwreck, Schumer said that she still lives in a tiny one-bedroom apartment in New York City.
“I’m like the richest person I know and I have like a one-bedroom and a walk-up. I don’t even have a nice apartment,” Schumer said on the program, before (jokingly) adding, “my bed folds up into the wall, and I iron there.”
While Schumer didn’t delve further into her housing specifics on the radio show (though she did say she’s worn the same clothes three days in a row), as Business Insider noted, she did tell Brick Underground back in 2011 that she loves her one-bedroom apartment, even if it comes with some faults.
“What irritates me is the size,” Schumer said. “With my bike housed in my apartment, it is tiny. It has everything that a big house would but shoved into a ridiculously small area. The closets weren’t built correctly so to open one door I have maneuver myself in weird positions, like Indiana Jones.”
We’re used to hearing about celebrities and pro athletes shelling out insane amounts of money for lavish new pads when they hit it big, so Schumer offers a refreshing example of what to do after you reach a major milestone in your career or get a raise. Namely, your lifestyle shouldn’t necessarily reflect the change, especially not right away. That’s the main premise of living below your means, and of Thomas Stanley’s personal finance classic, The Millionaire Next Door. Most millionaires don’t look like millionaires — instead they’re masters at underconsumption.
Lifestyle inflation is one of the most common and insidious personal finance mistakes. Just because you can afford to pay more on your rent or mortgage doesn’t mean you should. Instead, personal finance experts recommend saving the extra income to build up your nest egg, pay down debt, or finally start investing. And there are other ways to treat yourself, besides upgrading your apartment to the penthouse or buying a flashy new car.
Schumer has had plenty of commercial success of late: She’s running and starring in a successful show, “Inside Amy Schumer” on Comedy Central, her first movie has made almost $112 million in global box offices on a $35 million budget, and she has a comedy special debuting soon on HBO. Surely, she can afford nicer digs. But, as Stanley noted in Stop Acting Rich, another book about building wealth, “Nothing has a greater impact on your wealth and your consumption than your choices of house and neighborhood. If you live in a high-price home in an exclusive community, you will spend more than you should and your ability to save and build wealth will be compromised.”
Living below her means is something Schumer has in common with Warren Buffett, someone who knows a thing or two about personal finance. Buffett, famously, still lives in the same house he bought for $31,500 in 1958, and is well-known for his frugal ways despite having an estimated net worth of $65.7 billion, according to Forbes.
So how much should non-famous people pay in rent? The standard advice is 30% of your net income – that’s what you take home after taxes have been deducted.
If you’re living in a place like New York City, where the average price of a non-doorman studio apartment in Manhattan is $2,396 per month, according to MNS’ Manhattan Rental Market Report, or another expensive city, that’s nearly impossible. (In Manhattan’s Upper West Side, where Schumer has lived for years, the average price per month for a one-bedroom apartment in a non-doorman building is $2,840.) It’s especially difficult for recent college grads and other people not employed by a hedge fund (or starring in a TV show and movies) to find a place to live that falls within the 30% guideline.
Increasingly, economists and housing experts are coming out against the 30% rule, which in some ways is too simplistic. As Leonard Baron, a.k.a. America’s Real Estate Professor, notes for Zillow, “The truth is, you need to look at your own personal income, spending habits and debts to get a picture of what you can afford. Make sure what you can ‘afford’ is calculated after all your expenses and most importantly after you are socking away some money for your future.” If you’re spending an outsized proportion of your income on rent or your mortgage, then cutting back in other places — such as dining out or on a car or vacations — makes more sense for you.