Marketing Executive
$200,000

Matthew, in his mid-thirties and involved with a steady girlfriend, is contemplating buying an apartment. In New York, it's as difficult as finding a mate -- and certainly more expensive. The recent real-estate boom has meant windfalls for apartment owners that gave them head starts that tenants can scarcely ever hope to surpass. And for Matthew, scraping together a down payment is tougher than ever. New York housing costs have risen far faster than incomes over the past thirty years, according to economist John Mollenkopf of the City University of New York, and the trend accelerated between 1996 and 1998. Average inflation-adjusted housing costs rose 3.1 percent while incomes rose just 1.3 percent. In certain parts of Manhattan and Brooklyn -- the ones Matthew likes -- apartment prices nearly doubled.

Until a couple of years ago, Matthew worked in the arts, where he held a relatively lucrative position, making over $100,000 a year. "That sounds like a great salary, but after taxes it was like $50,000. That's $4,000 a month, and if you are paying $1,500 a month for a studio in Manhattan like I was, it disappears very quickly."

His savings slipped through his fingers. "You start thinking, What if I want to buy an apartment? For starters, forget Manhattan. You start looking in Brooklyn, and suddenly even in neighborhoods that aren't even so special, it costs $500,000 or $600,000 to buy a place, with a down payment of at least $50,000. It takes a long time to save that."

So Matthew set out to bolster his balance sheet, raising revenue and cutting his expenses. He swapped his art job for a position in marketing, doubling his salary to $200,000 a year. And he quit his Manhattan studio for a floor of a Brooklyn row house, brightening it with a few carefully selected furnishings.

But -- surprise, surprise -- a funny thing happened on the way to Brooklyn: "All of a sudden your life gets bigger. You moved into a bigger place, and your expenses are higher." He decided to buy a used car, for one thing, paying about $14,000 for it. "The garage is $200 a month, because you don't want to leave it on the street. Then my car says coolant level low, so, damn, I got to get that fixed, for another $400! I'm trying to save $1,000 a month. It's really hard, and after a year, I'll have the whopping sum of $12,000! It'd be more than four years until I have a down payment. Ideally, you want to have a certain amount of money in the bank that you just don't touch, the buy-a-house fund. But then you start using it to pay your credit-card bills! I look at the bills, and I always think there is a mistake. So I call up the bank to complain. You know what I've learned? They never make a mistake."

Where does it all go? This may be the greatest mystery of all. "You spend all this money for stuff you can't account for. Last night, I came home late, so I got a pork chop, rice, beans, and a beer at the Cuban restaurant around the corner, and it was $15. Boom. You go to the Chinese restaurant, and it's $20. In the morning, you get the New York Times, a yogurt, a bagel, orange juice, and a PowerBar for later -- bang, it's $10. I try to be good and take the subway all the time. But you take a car to Brooklyn one night, and bam, it's $25. I spend $60 a day. Then suddenly you realize your shoes are a disaster, and you realize you have got to buy new shoes, and bang, it's $200. I know: Poor little boy -- he's spending $200 on shoes. I'm not complaining, but you get into the groove of a lifestyle. I imagine what happens when you start making a million a year. All of a sudden the shoes are like $500. Who knows what it's like for David Geffen? Maybe it's really important to have $500 shoes.

"Maybe the trick is to make more money but not live any different. But you feel like a jerk living in the same studio apartment."

Matthew grew up in New York, so he suffers from a different form of financial anxiety than people who moved here from somewhere else -- the recollection of a happy Manhattan childhood. "When I was a kid, I went to the country every weekend. What about that? How much do you need for that? The reality is that it's just going to be a lot harder for us. My dad and mom had a very nice life. Finding an apartment was easier. A house in the country was $25,000. To live that life now, I think you need at least half a million dollars a year."