What a $20k/Month Rent Can Tell You About Your Personal Finances, According to Ramit Sethi (2024)

At the end of 2022, the median rent price rose to roughly $2,305, according to data from the national real estate brokerage HouseCanary. That represented a 4.8% increase from the end of 2021, when the median rent was $1,855.

For many renters, that's a lot of money. If you took out a mortgage loan on a $320,000 home, your monthly payment would be $2,305. (This is with an 11% down payment and a mortgage rate of 5.75%.) But believe it or not, some renters are paying 767% more per month to rent an apartment.

Some time ago, Ramit Sethi, author of I Will Teach You To Be Rich, came across a Twitter conversation about a New York City apartment renting out for roughly $20,000 per month. The thread's participants were trying to figure out who would pay roughly $240,000 per year to live in an apartment when the average home price is $428,700 -- or less than two years of this apartment's rent.

What a $20k monthly rent says, according to Ramit Sethi

Being the kind of person who doesn't accept things at face value, Sethi took a step back to think about who would rent an apartment this expensive. Here's his response:

"One of the reasons I also write about people with high incomes is I want you to know…

1. There are jobs that pay enough for people to rent a $20k/month NYC apartment
2. There are very good reasons to rent that place -- instead of buy
3. With this knowledge, you can decide if a high income is a goal for you & what it would take

We should shine a light on money!"

What Sethi is trying to say is that ordinary people -- that is, non-celebrities or beneficiaries of immense generational wealth -- can afford to pay $20,000 in rent if their careers allow it. Secondly, for certain workers, it's worth it to pay $20,000 per month to live in an apartment in New York City. And finally, if you want to wake up every morning in that apartment, you need to identify the careers that will allow you to afford the monthly payment.

But really -- who can afford $20k a month in rent?

Let's start with Sethi's first point.

Fundamentally, your rent payment should be no more than 30% of your take-home pay. For $20,000 to be under 30%, you need to earn around $66,700 per month or $800,000 per year.

Already, I can hear the objections. Who earns $800,000 per year? Admittedly, very few jobs pay an average salary of $800,000. But top performers in already high-paying jobs can realistically net between $500,000 and $10 million in annual income. In fact, Sethi and his team list several of these high-income paying jobs on his website. Here are just a few:

I Will Teach You To Be Reach

Moving to Sethi's third point, if you're an average person and you want to live like Don Draper in the middle of downtown New York, these careers could put you on the right track.

It's not an easy track. Top annual earners often start out earning small amounts because they're inexperienced and haven't achieved their own personal economy of scale. Through dedication to their careers and continued education, these top earners can reach a point where they can finish more work in less time or take on more complicated projects that pay higher amounts.

It's tough to achieve. But, returning to Sethi's advice, it's not impossible. An excellent place to start is with your own expectations.

Part of the reason Sethi responded to this tweet was to correct false assumptions about wealth. If you think wealth is for other people, then you might subconsciously limit how much you can earn. By adjusting your perception slightly and including yourself among the candidates of high-income earners, you might find the motivation to actually do it.