Thy Neighbor’s Budget

Just what does it cost to live a decent middle-class life in New York? That nagging question came to mind one Saturday last December as my friend Emily and I were strolling along Smith Street in Carroll Gardens, Brooklyn. The district has gentrified into a poor man’s SoHo of boutiques and bistros, and after admiring some overpriced handbags made from secondhand upholstery, we stepped inside a bicycle shop, hoping for an off-season bargain.

I’ve wanted a bike for years, but I need one that’s respectable, since I plan to park it in my living room and some of my friends are serious cyclists. Even in December, an acceptable bike turns out to cost about $350, plus $90 for the special New York-edition Kryptonite lock. “That’s a lot of money,” I told Emily. “Maybe I can get my parents to buy me a bike for Christmas …”

The idea had a disconcerting familiarity. I had made that request before – twenty years ago, as a 9-year-old. It’s not that I’m immature, though Emily may have her own opinions on that score. I have steady work writing for magazines and newspapers. In my small way, I have even partaken of the unprecedented affluence now surging through New York – the crush of Internet start-ups has increased the demand for journalists (and inflated salaries nicely). I am sure that I’m not poor – far from it. But as I stood in the bicycle store, my bafflement soon gave way to deeper worries. My parents were 30 years old on the day I was born – 30 years ago this June, in Buffalo, New York. I’d like to have a family, too, provided I can locate a willing accomplice. If a nice bike seems pricey, how will I ever afford day care?

Anyone with any claim to membership in the city’s middle class knows the feeling: We are, as a city, wildly prosperous. Yet it is the stubborn paradox of city life that almost everyone still feels like he or she is barely getting by.

Part of the problem is a national trend: The share of the national income made by the richest 5 percent of families has risen from about 15.6 percent in the mid-seventies to more than 20 percent today, according to Frank Levy, an economist at the Massachusetts Institute of Technology. The 560,000 families that make up the top one-half percent now receive more than 11 percent of the nation’s income. Blame for this injustice falls on changes in the tax code, the decline of labor unions and public employment, and the rise in foreign competition for jobs.

But whatever the explanation, the increase in inequality has also taken place in microcosm at every income level, from the bleachers to the skyboxes. The top 2 percent of households are taking a bigger share of the top 10 percent’s income, and the top one percent are pulling ahead of the top 2. The rich are getting richer, and the extremely rich are creaming the garden-variety plutocrats. Wherever you live on the income curve, some of your neighbors are piling up toys much faster than you.

Nowhere is this more true than in New York, where once-in-a-lifetime windfalls have poured into Wall Street at the same time the bottom has fallen out from under the poor and working-class. Wall Street bonuses have pushed up the prices for apartments, Hamptons houses, parking, contractors, nannies, and anything else in finite supply. In the past decade, changes in the city economy drove New York from twentieth to first in a ranking of states by the magnitude of the disparity between rich and poor.

One reason New Yorkers feel poorer than before is that, as a group, most actually are. Despite what you read in the papers about the low crime rate and the Times Square cleanup, only the richest fifth of the city’s families have seen an increase in spending power over the past 30 years – or even the past decade. (In constant 1997 dollars, the top fifth’s average income rose from $132,112 in the late eighties to more than $155,485 in 1998.) For everyone else, there just isn’t as much, plain and simple. The middle fifth of families fell from $43,499 to $38,416. And the very poorest have lost the most. During the same period, the income of the bottom 20 percent of families in the New York City area fell from $8,938 a year to $7,774.

It may be unseemly for anyone comfortably within the city’s lucky top fifth to complain of feeling hard-pressed, but in New York the truly poor have no monopoly on a sense of deprivation. “It’s the yuppies’ lament,” says Matthew, a marketing executive making $200,000 a year. “You feel like such an asshole: Things are great for me. There are so many poor people, why am I complaining? You wonder, When can I ever be happy?

The truth is that rising prices and stagnant wages don’t, by themselves, add up to the difficulty of attaining a decent life here. New York imposes on its inhabitants a unique psychic and financial burden – our own expectations.

The Freelance Writer

Newcomers to the city are cheap dates, easily intoxicated by its resemblance to our dreams. And many of us labor under the misapprehension that an entry-level job in just about any white-collar profession is a ticket to a solid, white-collar life in the city. Maybe once, but not anymore.

Lea started out on a path very much like my own – she graduated from an Ivy League school and moved to New York to write. Her clips from college papers were strong, and she managed to land an entry-level job at a magazine, making about $20,000 a year. She found a share in a sunny, rent-controlled three-bedroom on the Upper West Side with an older woman who worked for the city. Her rent was a blissful $575 a month.

She soon began landing freelance writing assignments covering the entertainment business for newspapers and magazines. She quit her day job to focus on writing, augmenting her income with intermittent word processing. As her bylines proliferated, Hollywood studios began flying her on junkets to Los Angeles. They treated her to elaborate meals and put her up in hotels to get her to cover their movies and stars. In a tough business, she was an enviable success. She imagined a time in the not-so-distant future when writing alone would support her.

Self-sufficiency proved elusive, however. Her income ranged from $25,000 to $35,000 a year, including office work. She lived frugally – she ate in, she never bought expensive clothes. Still, her paychecks never quite covered her meager budgets, and she relied increasingly on credit cards. After five years, her debts hit $37,000. Even then, she didn’t question her career choice. “I was addicted to the proximity to fame and power, to the feeling that it made me an insider,” she says. “It was like a parable for the whole culture of living in New York.”

In 1995, Lea was in the middle of an interview with the actor Jim Carrey when the true magnitude of her mounting debts finally hit her. His family was dirt poor, Carrey told her, but as a young man he had privately written himself a check for $5 million, stashing it away and vowing that someday he would have the money to cash it. Now he could.

But instead of writing imaginary checks to herself, Lea realized, she was drawing ever-larger advances against an uncertain future. “Here I was sitting opposite this guy making $7 million a film, and I was worrying about whether the $20 in my pocket was enough to get back to the airport. I couldn’t pay the rent. I wasn’t even opening my bills. I suddenly realized my life was a mess. It was all about to crash.”

To straighten out her life, Lea started attending meetings of Debtors Anonymous, a loose translation of the alcoholics’ original. At her suggestion, I attended a meeting myself, one of about 40 held weekly in the New York City area. In a church gymnasium on the Upper East Side, about ten men and twenty women gathered in folding chairs, milling around and chatting amiably while I sat nervously in the corner. They were a good-looking bunch – men in suits, stylish women, one with a Frédéric Fekkai shopping bag. They introduced themselves in customary twelve-step fashion – “I’m Paul, and I’m a recovering debtor. I have been 90 days solvent, ‘not debting’ every day …”

I expected sermons on cutting back and doing without, but that’s not what Debtors Anonymous is about at all. In the group’s lingo, there are two kinds of debtors – “bulimic” and “anorexic,” or overspenders and underearners.

This meeting turned out to be nothing but underearners. Like Lea, they felt they just weren’t letting themselves make as much money as they really needed and truly merited. “I think tonight I am just going to say it,” stammered one handsome twentysomething young man, with shoulder-length dark hair and a V-neck cashmere sweater. “I deserve to make $80,000 this year.” Applause and congratulations all around.

Most of the crowd turned out to be artists, writers, musicians, and entrepreneurs of varying degrees of success. One woman, trying to keep her decorating business afloat, reported that the “action” she had taken this week to stay out of debt was sending out flyers and mailings.

Debtors Anonymous, Lea told me, helps people accept that their fantasy career may have to wait, that it is okay to settle for a boring job that pays the bills. Lea herself stopped writing and found a position as an administrator at a Park Avenue law firm making about $55,000 a year – “That was a lot for me, although still not middle-class in New York,” she says. New York’s chapters of Debtors Anonymous, it seems, often specialize in helping dreamers postpone their dreams.

Lea was lucky. A year and a half after she took her office job, an agent called with an idea for a book, and she landed an advance. A couple of months ago, her book was published – Teach Yourself Personal Finance in 24 Hours.

Investment Banker

Andrew knew that the kind of life he wanted – raising a family in New York, with private schooling, a weekend home, the works – costs money. So when he graduated from college, he went straight to Wall Street. He spent two years working as an analyst in New York (about $50,000 the first year) and then in London ($150,000 a year, with free housing). After a few years, he decided to go back to school to earn a master’s in business administration at Columbia. But living off his (considerable) savings hasn’t been easy.

“As an investment banker, I just always knew that I had enough,” Andrew says. “I knew the sort of things I could afford to do and the sort of things I couldn’t. In London, I could afford to eat in any restaurant that I wanted anytime I wanted, and I didn’t have to worry about it.”

Andrew left with a nice nest egg – more than $100,000. But last December, when the $15,000 bill for his final semester of business school came due, he was virtually tapped out. The only money he had left was in euros, and he was loath to access it because of tax penalties and the exchange rates. “Paying my tuition emptied out my bank account,” Andrew says. “I maxed out my credit line there and my two credit cards all at once. It’s probably about six days now of absolutely 100 percent cash void.” As we talk over lunch, he takes a cell-phone call from his mother, to arrange a meeting at a nearby cash machine so he can pick up a loan.

“It has been educational,” he says. The biggest difference: taxicabs. “I used to take a cab to the gym and then work out. Why not walk? I would sit in my apartment watching TV, and then realize that I’m late and have to take a cab. It was ludicrous.”

He also discovered resources he didn’t know he had. “It’s all about eating all the things that are in your cupboard, the stuff that you bought in a fit of domestic exuberance, when you were at D’Agostino’s thinking I love tomato soup! and you bought eight cans and never ate them.” His ace in the hole, he says, was his “change bucket,” the repository of all the coins left in his pockets every night. He found $52.80, rolled it up, and took it to the grocery store. “I offered to count it out,” he says bashfully, “but the cashier said, ‘No, honey, that’s all right.’ “

How does a single man living in New York run through so much cash? “It wasn’t even that great a life,” he says. “I paid $1,600 a month in rent my first year in New York, for 480 square feet – it was hardly a mansion. I’d go out to Orologio, on Avenue A, or Kin Khao in SoHo – not like Nobu or something. But I’d drink Tanqueray martinis – straight up with three olives – which will set you back about eight bucks apiece. On top of rent, I spent a total of $66,000 that year. That grosses up to over $120,000 pretax – you’d need to make $120,000 a year to live that life!”

With his first nest egg already built and squandered, Andrew faces the next milestone in a young man’s life – finding a mate. I pressed him to estimate the costs. “First there is the cost of nights out with friends, just to identify a woman you want to date, which can be pretty expensive,” Andrew says. “Then you have at least half a dozen dinners at about $150 apiece – just getting started. I’m a good dancer, so I’ll take her to a couple of benefits with ballroom dancing – that’s where I’ve had my greatest success. But that usually costs $200 a ticket, and only sometimes includes dinner – so $400 or $500 for the night. You definitely have to take her away for weekends, which will put you back $800, between getting the car and three nights at a bed-and-breakfast in the Hudson River Valley or New Hope, Pennsylvania. And then there are nice clothes. If you are going courting, you aren’t going to do it in your shabby old Gap sweater. I invited a girl to a benefit once when I was working, and my tuxedo just was not what it once was, so I had to buy a new one – $800! Thank God for the six suits I had made in England – they last forever. When you are dating, you inevitably do more things in New York, too. Days out. Shopping. Museums. There’s a $20 walking-out-the-door tax in New York – $20 disappears from your wallet and you have no idea where it goes. A few taxis, some food – a day out in New York can cost you $150 or $200. God forbid you should be dating around the holidays.” For Andrew, the cost of winning a woman’s heart can run over $7,000.

Marketing Executive

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.”

Small Businessman

Mark is a 45-year-old who works in the music business and runs a small business from his home. He and his wife are raising their 4-year-old on a little more than $100,000 a year, or about $5,000 a month after taxes. And doing just fine. “Needing $500,000 a year is just silly,” he says. “Those assumptions of what it is to be comfortable aren’t middle-class assumptions. Middle-class means not having to worry about where your next meal is coming from, that you don’t make your living from physical labor, that your education goes beyond high school.

“You only need that kind of money if you want a two-bedroom apartment in Manhattan, a country house, and private school for your kids.” Still, he admits upon reflection, his own parents – his father, who worked in the labor movement, was hardly a fat cat – managed to provide all that for him. With a publicly subsidized apartment in Manhattan, they could even afford to rent a house in Amagansett for the summer.

An irony of New York’s recent history, Mark says, is that professional-class children sometimes find themselves taking handouts from their thrifty working-class parents. Mark and his wife, who both attended excellent colleges, were living in a tiny co-op in the Village in 1996, and the birth of their daughter created a crisis of space. His mother-in-law, a schoolteacher, rescued them by putting up part of the money for a down payment on a brownstone in a then-sketchy neighborhood of Brooklyn – $100,000, a third of the $330,000 the building cost. “It was a big break for both of us,” he says.

They rent out two floors of the brownstone, which pretty much covers the mortgage if not the $1,500 a month in upkeep. Still, the family has to keep a tight budget and almost never eats out. “For birthdays and so forth, there are cheap Jamaican and Mexican places,” he says. “I can get a chicken tamale for a buck fifty. Our groceries we buy mostly in bulk, or at Key Food – pasta, pork chops, chicken, lentil soup. We are fortunate in that we have a 15-year-old American car that belonged to my parents, which we park in a friend’s garage.” Last year they took a rare vacation, a week at a relative’s house on the Jersey shore.

Next challenge: educating his daughter, who is now in preschool. “We’re concerned about the quality of the public schools in the neighborhood as they stand now,” Mark says. He is busy looking at his options – maybe trying to get his daughter bused to a lower-Manhattan public school, accepted at a Catholic school, or maybe even a coveted private-school scholarship. “You hustle whatever way you can in New York,” he says.

Miraculously, Mark and his wife have managed to stow away $5,000 in savings over the past few years, which they invested entirely in stocks. Its value has soared to around $22,000. “The way the stock market goes can save you or it will kill you, because you become dependent on that for your retirement,” Mark says. “I do work a lot of hours – usually at least 60 a week. But there is nothing wrong with working real hard, and I can’t complain. I’m in a good position compared to a lot of people – we have shelter, and I don’t have to worry about getting kicked out. As long as I hold up physically, I’m all right.” He hopes soon to buy life insurance, just in case. In all, he reflects, “maybe middle-class is just something that exists outside of New York.”

Retail Executive

Jacob was a full-time lawyer and spare-time artist when he married Francis, an executive at a large clothing retailer. But after they married, his work began to sell some, she won a big promotion – suddenly making about $250,000 a year – and they had their first child. So he decided to become an artist full-time, augmenting her income with the occasional sale. In their late thirties, they are currently confronting one of New York’s most hard-won status symbols – remodeling the kitchen of their two-bedroom Manhattan apartment. “I know so many people who get a Sub-Zero fridge, a microwave,” Francis says. “We didn’t do any of that. We went through Ikea. You credential it by mixing in stuff from the flea market.”

Francis insists she doesn’t miss what she can’t afford. She makes about $10,000 a month after taxes, of which $4,000 goes to cover rent. “We do pay for a doorman building – it’s a necessity with a stroller. Disposable diapers are expensive, and those kinds of things add up,” she told me over the phone from her apartment one evening, baby in hand. “But with the baby, we stay in – no long social evenings – which saves a lot of money.” Still, it goes fast, and aside from what they’re putting into retirement plans, they aren’t saving anything.

What they can’t afford, at $250,000 a year, is a country house. “Renting a place in the Hamptons would be phenomenally expensive. To live those kinds of lives, you need at least $300,000 a year.”

She doesn’t feel deprived, she says, because she grew up in the Midwest, where, she says, she learned to pack her own lunch, and not to pay $1.75 for a cup of coffee because she was too lazy to make it. “The people who are really scared are the people whose parents were lawyers and professionals in New York, back when lawyers made money,” she says. “There is a terrible fear in New York of not keeping up with your parents.”

People like her who grew up outside New York simply get used to less, she says: “I was recently talking at a dinner party with a person who I know for a fact is making about a million a year, and this person was just overjoyed that she owns this terraced house in SoHo and her children have access to a garden. One of those tiny little squares of green. The idea that you should declare triumphantly that your children have access to a garden is bizarre. I wouldn’t have thought that for a million dollars that was such a great feather in your cap. But I guess people’s caps just have fewer feathers.”

She does resent “the mystery cases,” friends who carelessly earn $40,000 a year in publishing or the arts but still live improbably well. “I remember when I turned 30, and suddenly friends of mine who really hadn’t done much with their careers were starting to buy apartments! Now I see junior members of my staff buying apartments!” she says. “Where the hell did that come from? Inheritance and parental subsidies are incredibly annoying – I think about that every day.”

Her husband, Jacob, the lapsed lawyer, has a gloomier assessment. “The fact is,” he says, “that we will never be able to live in New York anywhere near the way our parents did elsewhere. With $250,000 from Francis and occasionally something from me, we make a lot of money! But we don’t look very wealthy at all – a two-bedroom apartment with a half-kitchen! It is comical. To reproduce our parents’ standard of living even moderately, we would have to be very, very rich. In New York now, you have to be a capitalist. Only the people who own property and stock are increasing their wealth, and everybody who relies on their labor is just getting fucked. Even the doctors and lawyers, like me! It is a grotesque situation. The idea of selling your time is a waste of time. The best thing to do is sleep in and call up your money manager and ask how your stock portfolio is going.

“Now,” he adds, “praying for the crash is basically my only financial strategy. Otherwise, if we want to have a second child, what are we going to do, live in a two-bedroom the rest of our lives? The idea of finding a three-bedroom apartment in Manhattan that we could afford is just a nonstarter. I mean, sure, our standard of living is comfortable – we are just grumbling that it isn’t commensurate with our inflated salaries. But why not grumble about that?”

For Jacob and Francis, financing their son’s education is like an ominous cloud on the horizon. “I don’t sit around worrying about tuition,” Francis says. “There are good teachers everywhere, I suppose. And I am not against being very active in the public schools, trying to find the best one – arts schools, magnet schools, that kind of thing. You just trust in the kind of … I don’t know what you do, actually. You just do it, and you figure that something always turns up. Usually.”


Peter and his wife, in their late forties, are executing the Herculean feat of raising not two but three kids in Manhattan. A prominent New York endocrinologist making more than $500,000 a year, he has been a vigorous proponent of raising children in the city for years – since long before the city’s vaunted renaissance made it popular once again – partly because he helps recruit doctors to teach at a local medical school. “Sure, I could feel richer someplace else, but my kids have a certain amount of sophistication because it is such an urbane and heterogeneous place to grow up,” he says. He says he is “addicted” to the city’s museums, concerts, and theater, and so are his kids – they stop into the Museum of Natural History for twenty minutes and go to exactly what they want to see. “It is a myth that you have to have a backyard,” he says.

Growing up in the city, his kids have friends at all income levels, from working-class kids they meet in sports leagues to classmates at private school. They grew up understanding that people have different budgets and make different choices. One of his children, he says, came home from first grade and asked, “Did you ever think about being an investment banker? I don’t know what an investment banker does, but my friend’s dad is an investment banker, and he doesn’t seem to work nearly as hard as you do, and they take much better vacations.”

But Peter has begun to wonder if his children will ever be able to afford a life like his for themselves. He recently packed his kids off for sleepaway summer camp and took them out to the theater the night before. They ate at a modest restaurant – $200, without beer or wine. (“What, are you going to tell your kids not to have dessert?”) And then they saw The Music Man: four mezzanine seats, $340. (“Going to the theater – isn’t that part of life in New York?”) With a cab ride home, that family night cost him almost $600.

As he loaded them onto the bus, he thought of his daughter heading to college and trying to move back to town. “I thought to myself, My kids can’t come back,” he says. “Will a kid graduating from college be able to spend $2,000 for a studio apartment? How can she start out unless she is going into business? Should I encourage my kids to go into investment banking? It is a real question how welcoming the city will be to anyone else – a doctor, a lawyer, a teacher, an artist.”

Wall Street’s looming prominence in the local economy has changed the character of the town, Peter maintains. When he arrived in New York, young professionals had options – cheaper housing in Morningside Heights, Kips Bay, Brooklyn Heights – but everything is expensive now. The city’s newfound safety helped retain families who would have left, pushing up apartment prices, and the boom on Wall Street has inflated the price of everything else. “There were always investment bankers; New York was always Wall Street. But people weren’t paying $20 million for apartments,” he says.

Even with “a pretty nice income,” he says, the expense of city living seems forbidding. A doctor or lawyer with two or three kids will want a seven-room apartment – mortgage and maintenance about $8,000 a month, or $96,000 a year. Tuition in New York is about $20,000 a kid – $60,000 for three kids. “If you are in that salary range – $500,000 to $750,000 – do you want a weekend home? Unlike people who have endless money, we have a mortgage on ours,” he says. The mortgage payments on the weekend house are about $5,000 a month, not including paying for an alarm system, someone to mow the lawn, transportation, and other incidentals. “We’re on Long Island,” he says, “but it’s not even near the beach.”

Affording those basics takes an after-tax income of $210,000, or about $400,000 before taxes, and that is just the beginning. Everything in New York costs more than it would somewhere else. “You go to a nice local Italian or French restaurant, you are going to drop $100 for two people. But isn’t going to restaurants part of living in the city?”

People like him are becoming an endangered species, he says. “Professionals like us used to be considered affluent, but in this community, we are considered working-class! We can have such a much more comfortable life outside the city that there is a constant exodus of people leaving, and it is getting a lot harder to get professional people to come here. The economics of the city right now are pushing out a professional class, getting rid of the doctors and law professors and academics, the ones who make the city vibrant and come up with new ideas. Generating new ideas is what makes a city great. New York is suffering a real brain drain. If I was new to the city today, moving here would be totally out of the question. There is no way that a doctor like me could expect to pull it off.”

Investment Banker

Justine and her husband look very much like a young couple who have figured it out. In their early thirties, they own an apartment on the Upper East Side. They rent a place in the Hamptons over the summer. They lease a Jeep Cherokee. When she gave birth to her son a little more than a year ago, she quit her job indefinitely to stay home with the baby. Her husband supports her and pays for a nanny, too. And they are saving steadily to prepare for whatever uncertainty may lie ahead.

What does it take to live like this? Her husband, an investment banker, brought home more than $1 million last year, and, at another Wall Street firm, she made about $500,000 before she quit. “Even if my husband is making over $1 million, that’s not much, you know, compared to a lot of our friends,” Justine says. “Especially when you realize that he gets more than a third of his compensation in stock and we can’t flip it for five years. So the opportunity cost of me not working is high – half a million. But I just can’t imagine not being home with my son.”

Welcome to the Park Avenue middle class. “We have a nice apartment on the Upper East Side – we paid over $2 million, for eight rooms – but it is not a mansion at all,” she says. “You would be shocked. It is not at all palatial. We have a house in the Hamptons, a very basic thing, again, nothing palatial, not on the water. We pay $40,000 or $50,000 for the summer, for three months.”

But housing is just the beginning. When you move into the rarefied world of $2 million Upper East Side co-ops, the little things in life turn out to be pretty pricey, too. Living surrounded by others whose pockets are even deeper raises costs all around. When they dine out with friends – which happens two or three times a week – it is at places like Cello or Pastis, and often tops $100 a head. If they are alone, though, they’ll just have “something simple,” like sushi, for $40 a head.

She has to have a cell phone, of course – $200 a month. “I make a lot of calls from cabs, because that is the time I have to talk,” she says. Clothes add up, too – about $20,000 a year. “With women’s fashion, you have to change so much,” she says. “My husband just takes off his jacket and tie, and it looks like a completely different thing.” Keeping up with her friends in maintaining her appearance is a job in itself. “A lot of my friends get their hair blown out or get manicures or pedicures and stuff. Thirty or $40 for each – you can easily spend more than $100 a week. And everybody gets a massage for $100 a week. Usually they come to your house.”

She belongs to a gym, of course – $1,100 a year, and $150 for each biweekly session with the trainer. And while Justine is out doing errands and taking the kids to their classes, someone has to clean up around the house, so she has a full-time housekeeper – about $450 a week.

Even for Justine, the cost of child-care is eye-popping. “The nanny – oh, God, you don’t even want to know what that costs!” She and her husband pay about $800 a week, or $40,000 a year – a baby-sitter who’s working on the books is considerably more expensive than one who isn’t. The cost that really pinches is child care on vacations. “Anguilla,” she says, “is the island where a lot of our friends go.” Bringing the nanny adds not only another plane ticket but a whole other room – as much as $10,000 extra for a two-week vacation.

What Justine doesn’t have is a car and driver, although a lot of her friends do, and she wants one: “A driver is a big help if you have kids. It is just sick and wrong to have babies on the subway, so I take taxis. It could easily be $30 a day for play dates and things, and a driver can pick up the kids, drop them off at school, get packages, take the nanny to the Hamptons. Why not? Once you have got the nanny.”

Still, Justine knows she is lucky. “Our life is middle-class,” she says, “but it’s not like the real middle class – we’re in a world where people make at least $200,000 a year.”

Wall Street Executive

Not long ago, Eric, a thirtysomething executive at a Wall Street firm who made more than $10 million last year, ate dinner with a former mentor, an investor whose net worth is well over $1 billion. The meal was nice, although the food wasn’t memorable, and they drank wine. The tab came to more than $300. “It’s absurd. It’s offensive,” Eric says. “Even we get sticker shock.”

Strange but true: In New York these days, even multi-millionaires complain to one another about how expensive their lives have become. “When I first moved to New York, I paid $500 a month for an apartment,” Eric says. “Now I pay $500 a month to leave the car in a spot in a parking garage!”

The problem, Eric explains in an analysis oddly reminiscent of Karl Marx, is that an obsession with money is replacing people’s sense of its real value. Dizzy from the stock market’s exuberance, people see the world upside down: They want things simply because they are expensive, and they lose sight of intrinsic worth. Recently, Eric says, he flew to Europe for a business trip and brought along his wife. He paid $300 a seat to fly coach, but his wife wanted to pay $6,000 apiece for first class, arguing that after all, it was a business trip. “I told her she had to be kidding. The plane was practically empty. Why pay for first class when you can stretch out back here? But let me tell you: First class was packed.

“The problem is that there are now so many people who have made so much money they don’t give a rat’s ass. I just got off the phone with a friend of mine who is sitting on $400 million worth of an Internet stock. You can’t spend $400 million. I mean, what do you want? How many houses do you want? Dream big. Four? You still can’t spend all that money. So somebody like that doesn’t even care. Some people’s accumulation of wealth has accelerated so much more than the supply of everything else that the rest of us are getting left on the dock!”

Eric, too, just renovated his kitchen. “No big deal. New floors. New cabinets. New countertops,” he says. “It cost $70,000. It could have been double that – we economized! But nobody cares anymore. That is what is driving up the prices.” Restaurants are another example, he says. Eric and his wife eat out three times a week, paying at least $50 a person, often much more. “You do the math on what that costs. Eating out kills you.”

Even for people like Eric – Manhattan’s millionaire middle class – it is the stunning leap in Hamptons real-estate prices that tests their financial wherewithal. Among his friends, the going price to build a house in East Hampton has risen from about $150 a square foot a few years ago to $400 a square foot today. “The contractor says, I got six houses to build and there are only so many Mexicans in Southampton to hammer the nails, so he jacks up the price.”

The Wall Street boom has raised the stakes considerably in the annual hunt for a decent summer rental. “You can spend half a million for the summer. It’s easy. It’s not hard at all. At the very least, a good summer house – four or five bedrooms, in a nice area a few minutes from the beach – runs about $200,000!” he says. In a house like that, there is enough room for four couples. “But how are you going to have something fun to do with all those same couples every weekend? Could you stand them?” he says. So he splits his house with a friend – $100,000 apiece for the summer – and they invite a lot of guests. “You’re spending so much that you have to take your vacations out there, too! It’s getting to the point that ordinary shmendricks like you and me, working people who might be worth maybe $50 million, can’t afford summer houses anymore!”

After all, making $10 million in a good year doesn’t mean Eric is really all that rich, at least not by the standards of his world. It’s not like he flies around in his own private plane the way some of his friends do. “A jet-share program – that is the way to spend some money,” he says. Indeed. First, it takes a deposit of a million, borrowed and paid off at 7 percent, like a mortgage – $70,000 a year. After that, a share of the jet costs about $6,000 a month, plus $2,500 an hour while you use it. “You get a jet with an eight-seat cabin. Eight people at $2,500 an hour – $300 a head, if you fill it up. That’s cheaper than flying first-class. If you’re running a company, every company needs a jet! And it’s very convenient. If you want to leave Nantucket at 2 a.m. to get back to the Downtown Athletic Club for your last hit of ecstasy at 3 a.m., it will take you!”

From such lofty heights, it can be hard to figure out just what all the ants are doing down below. Eric, for example, can’t figure out why anyone would open another bodega in New York – the return has got to be lousy, so why not just put that money in the market? He agrees with Jacob, the former lawyer: While New York’s cost of living is propelled by the rising prices of stocks, real estate, and other financial assets, trying to make money by selling your labor feels like a losing proposition. “I don’t think there is a middle class in New York anymore,” he says. “There is no Joe Six-pack here. You are either really rich and getting richer and you don’t care, or you are really poor and getting poorer and you should move someplace else as fast as you can.”

In recent years, economists have tried to shed some light on the question of why even rich New Yorkers living in the best of times often feel that they are falling behind. “As economists, we assume that as people get richer they get happier, but it doesn’t happen,” says David Blanchflower, chairman of Dartmouth’s economics department. The Japanese, for example, enjoyed a spectacular increase in their standard of living from the end of World War II, when their country was in ruins, until the eighties, when Japan was among the world’s wealthiest nations. But surveys of their satisfaction showed little improvement. “It is a puzzle,” Blanchflower says.

Blanchflower and Andrew Oswald of the University of Warwick, England, are studying data from surveys conducted across the United States each year since 1972 asking about people’s level of satisfaction. Although prosperity doesn’t do much, relative income buys quite a bit of satisfaction. “If we all go from one BMW to three, it doesn’t make much of a difference,” explains Oswald. “But if I get three while you have only one, then I am laughing. In that case, I will unquestionably get happier.”

A decline in relative position, on the other hand, is extremely painful – a phenomenon economists call loss aversion. In one common experiment, Blanchflower says, students are asked: Would you rather get eight while everyone else gets four or get six while everyone else gets zero? Almost all answer six.

Blanchflower and Oswald say they are concluding that a lopsided boom may actually lower a community’s overall satisfaction. “We are finding that inequality itself has an effect on people’s happiness,” Blanchflower says. “It appears that people care quite a bit about how they stack up relative to the rich, and they don’t like to see the poor suffer, either.”

New York is the perfect test case. Some sociologists argue that Americans feel inadequate in comparison with the luxurious lives they see on television, and that goads them to frenzied consumption. But you can turn off the television. Here in New York, we don’t need to read a book about the millionaire next door. We see him at the deli, picking up a Duraflame log for his fireplace.

But if economic inequality is a recipe for unhappiness, why aren’t Manhattan apartments cheaper? Why do we all still want to live in New York? Perhaps in part because there is a certain glamour in all that inequality. Rubbing shoulders with the wealthy and powerful may demoralize us when we balance our checkbooks, but it is exhilarating too. It feeds our fantasies that we so often seem to be just a step or two away from greatness, in whatever form we choose. Isn’t that Tom Wolfe at the next table? He wrote for this magazine, too, you know. I wonder where he bought that seersucker suit …

What makes life here so hard to afford, even for the affluent, isn’t just real estate and local taxes – it is also New York’s effect on our habits as consumers, the sense of entitlement, the feeling that, as New Yorkers, we deserve taxi rides, weekends out of town, and fancy hybrid mountain bikes. After all, isn’t going to restaurants and the theater part of life in New York? We are a whole city of underearners.

Maybe I could find work as a journalist elsewhere – Texas Monthly, the Chicago Tribune. I could probably afford a bike and a garage for it, too. But in truth, I can already afford a bike in New York if I start trying to impress dates with my well-intentioned cooking instead of my well-thumbed Zagat. Besides, leaving New York would impoverish me in myriad, incalculable ways. I would be giving up the museums, the concerts, Central Park. Not that I see much of them, since I spend all of my time in my office. But they don’t know that back in Buffalo.

Thy Neighbor’s Budget