Making It Work in an Expensive City Without a Roommate or Credit Card
By: Rocco Pendola
Tags: Los Angeles, San Francisco, Money, Personal Finance, Cities

Sacrifice Versus Compromise

There’s a difference between the two. This distinction might be the single most important ingredient to sound personal finance, particularly sound personal finance if you’d like to make it work in a big city on a relatively modest salary. On a budget!

I break it down in a recent Making of a Millionaire article:

It comes down to striking a balance between sacrifice and compromise. When you sacrifice, you give up something you‘ll miss. When you compromise, you make a choice in one area to get something you want more in another. Compromise isn’t a bad word. It’s the foundation of all relationships — be it interpersonal, intimate, or your relationship with money. It sounds painfully impossible to “only” spend $3,000 versus $4,000 in monthly cash flow, or to “only” spend $4,000 versus $6,000 in monthly cash flow. It sounds tough to have a significant surplus left over at the end of the month. Except, it’s not. Not if you sacrifice a little and compromise a little more.

For goodness sake, rents have come down 25% in San Francisco since March. For one- and two-bedroom apartments, you’ll pay closer to $2,000 than $3,000, $4,000, $5,000, or more. It’s a similar, though not quite as striking story in Los Angeles. Depending on your cash flow, you might not even need to sacrifice or compromise any longer.

If you’re willing to live in a studio apartment, you can easily secure a rental in both of these cities for under $2,000. And, quite possibly, considerably less than $2,000. You can rent a cozy studio with original hardwood floors in the 1924 East Hollywood building I live in for roughly $1,350.

For some, this represents sacrifice. I call it compromise.

Your mindset around lifestyle and money as a means to whatever ends certainly dictates which word you’ll choose to use. This is exactly where the sweet spot — the beauty — of personal finance exists. In making these difficult — potentially agonizing — decisions.

Maybe you set your target rent at $1,500. You’ll do the best you can, neighborhood- and apartment-wise, with that $1,500. If you sacrifice a little, you can probably hit that number or better. The real beauty exists when you start to define your choices in the positive context of compromise rather than sacrifice. This is when you become the city dweller you never thought you could be.

The lifestyle sacrifice of spending so relatively little on rent opens the door to the insanely low cost of living amid a great life that makes sacrifice feel more like compromise. As in you simply made “a choice in one area to get something you want more in another.” You don’t miss what you gave up because you want and subsequently enjoy what you’ve gained more.

You want to live in a big city, but you don’t want to spend more than $2,000 on rent (and you really don’t want to move to a smaller city or the suburbs). Compromise.

You want to have money left over at the end of the month to save and invest so you cook at home 80% instead of 40% of the time. Compromise.

You want to invest more money each month and have a few hundred dollars to blow on whatever — dining out, takeout food, a hobby, a passion, something seemingly extravagant and indulgent — so you eschew the monthly car payment. Compromise.

You’ll forgo the thrice a week $80 dinners and explore San Francisco’s sophisticated burrito culture, Los Angeles’s expansive taco landscape, or New York’s by-the-slice culture for a fraction of the cost. Compromise.

This is the flavor of compromise some of us make to live in America’s — or the world’s — big and truly great cities.