Q: Should I save, invest, or pay off my student loans?
In certain corners of the internet, student loans are Mount Everest. Google a phrase like "how I paid off my student loans" and, well, you'll probably close your browser by Page 3 like I did, because the results all look the same: There are a lot of people out there who are paying off massive amounts of student loan debt in short amounts of time by side hustling, giving up cable and eating food that comes in cans.
There is no doubt that the level of commitment in these tales is admirable. Student loans are draining, both financially and psychologically. Paying them off early feels very, very good. Not that I'd know: I'm making the minimum payments on mine.
That's a calculated decision because I prioritize the three things you asked about -- saving, investing and paying off student loans -- in exactly the order you listed them, and I'd argue that you and most other people should do the same. Here's why.
A little money in the bank goes a long way Ever look out the window during a rainstorm to find that the roof on your front porch has turned into a waterfall? Tried to replace a light fixture only to realize that your 100-year-old house has 100-year-old wiring? I have, and I can tell you that an emergency fund will come in handy in these and many other situations. If you've sent all available cash to your student loan provider, they're not going to be super receptive when you call to ask for it back.
Putting away the recommended amount for that fund -- typically three to six months worth of expenses -- is about as intimidating as paying off student loan debt, though the process doesn't get nearly as much internet play. So instead, aim to get enough money in the bank to make you feel comfortable for now, but not so much that it kicks your other goals down the road for years. If all you can afford to put aside right now is $500, that is enough to get you out of many common jams; you can go back and add more once you're in a better financial position to do so.
Investing for retirement comes next The people who triumph over their student loans and live to write about it frequently do so at the expense of investing for the future. In the scientific research I did for this post, reading 20 or so accounts of student loan debt wiped clean, only two or three even mentioned saving or investing.
This is a mistake for a few reasons. The first: If you're knee-deep in student loans, you're likely also knee-deep in the middle of the most important time to invest for retirement. When you're young, your money might have 40 years to grow. You can save less and rely more on investment returns thanks to compound interest, which means that over time, those returns start earning a return of their own.
The second reason is math: Undergraduate federal student loan interest rates have ranged from 3.4% to 6.8% over the last decade, plus you may be able to take a tax deduction on up to $2,500 of the interest you pay each year. When you pay off your student loans faster than you have to, you're essentially earning a return on that "investment" that is roughly equal to the interest you don't pay. If your interest rate is, say, 4.5%, you earned a 4.5% return -- a little less, due to that tax deduction -- by skipping out on that interest.
That sounds ... not bad, until you compare it with the average annual return of a long-term investment portfolio, the kind you might build in a retirement plan. History says 6% to 7% is a fair expectation, which means there's a good chance that over the long term, you'll probably come out on top by investing.
This is true if you're investing in an IRA, and it's especially true if you have a 401(k) with matching dollars, which amount to a guaranteed return on your own contributions. Even if your loans are at the top of the above interest rate range, or you have private loans that are even higher, you should get that match before you pay more than the minimum toward those loans (you should also look into refinancing to see whether you can bring that rate down).
Once you're on track for retirement -- you can check your progress with a retirement calculator -- you're free to whale on those student loans all you want.
Arielle O'Shea is a staff writer at NerdWallet, a personal finance website. Email: aoshea@nerdwallet.com. Twitter: @arioshea.
The article Should I Save, Invest or Pay off Student Loans? originally appeared on NerdWallet.
In just a few months, your career will undergo a dramatic transformation. You will leave the office of chief executive of the free world and once again become a civilian — at an age when the average American still has a decade or more left in his or her working life. Like millions of baby boomers, you will have to navigate the final big chapter of your career.
I know you’re quite busy, but as you plan for this next phase, here are five pieces of unsolicited, but heart-felt, career advice:
1.You don’t need a two-year plan, you need a 20-year plan
Most people underestimate how long a career journey is in total and how many miles are still ahead. If you work well into your 70s, as many Americans do, you could easily have more than 30,000 hours of work life still in your future. How will you shape a post-presidential career that is rewarding, purposeful and sustainable?
You have already written three bestselling books, and a number of retired presidents have successfully turned their attention to speaking, writing and philanthropic work. While those who have come before can serve as models, you will have to chart your own course. How many speeches and books do you really want to write? Will that be sufficient to sustain you over another two decades?
As you ponder your options, ask yourself how each one stacks up on the four big career questions:
Will I learn? Will I have impact? Will I have fun? Will I be fairly rewarded?
2. Build on your sweet spot
You will find your sweet spot at the intersection of three things: what you love, what you’re good at, and what the world values. Again, you can look to the paths that other leaders have taken once they’ve passed the peak of their careers. Al Gore built his later stage as a champion for combatting climate change. Mike Bloomberg is backing gun control, and Bill Gates has become a leading philanthropist, with a particular focus on infectious diseases. Judging by the moments where you have shown the most resolve and passion, it feels like your sweet spot can be found somewhere in the vicinity of healthcare and education.
3. It’s time to prune and cultivate your career ecosystem
One of the great things about being president is that you have almost unlimited access to resources and contacts. Everyone takes your calls. As a private citizen, you will need to edit down your contacts. Ask yourself which colleagues, experts and mentors will be important to your next chapter, not just your last one. Which are the relationships that bring you energy and joy, and amplify your expertise and impact? A career ecosystem is a powerful fuel that propels us forward to do even greater things. Which exciting new skills and connections will you need post-POTUS?
4. Keep playing basketball every week
In our work lives, it is often the non-work activities that act as vitamin shots to keep us fresh and energized. Your weekly hoop games have become legendary in Washington and they have probably helped keep you sane during the White House years. Find a way to keep up the tradition. Golf is okay, but basketball seems to hold a special place in your heart. It brings out your trash-talking competitive streak. It lets you bump into people and push them around. So find a way to keep up the ritual of Sunday basketball at Barack’s place. Just don’t be surprised if the competition seems to beat you a lot more now that you’re not president.
5. Stay healthy. If you have the urge to smoke again, take up the harmonica instead
You’ll get to enjoy these next decades and thousands of working hours in top health. By all accounts, you’ve done a great job cutting out the smoking. And you are certainly someone who understands the benefits of moderation — the seven-almond nightly snack makes good sense. But as a former 60- cigarette-a-day smoker, I know that the tobacco demon is an immensely powerful and seductive force. You cannot just wish it away or ignore it. You need to channel it. If the urge comes back, take up the harmonica. It is cheap, highly portable and remarkably satisfying for the orally fixated among us. Keep resisting the Marlboros and get your Mojo Working. Stevie Wonder and I will come over to give you lessons.
Your career to date has been remarkable and unusual, but the stage you’re moving into now is one that all of us will navigate in our working lives. Build on your strengths, invest your time wisely and with purpose, and you will thrive for years to come.
Brian Fetherstonhaugh is author of the new book, The Long View: Career Strategies to Start Strong, Reach High, and Go Far, and Chairman and CEO of OgilvyOne Worldwide.
WASHINGTON, Sept 8 - Wells Fargo has long been the envy of the banking industry for its ability to sell multiple products to the same customer, but regulators on Thursday said those practices went too far in some instances.
The largest U.S. bank by market capitalization will pay $185 million in penalties and $5 million to customers that regulators say were pushed into fee-generating accounts they never requested.
“We regret and take responsibility for any instances where customers may have received a product that they did not request,” the bank said of a settlement reached Thursday with California prosecutors and federal regulators.
The Consumer Financial Protection Bureau will receive $100 million of the total penalties - the largest fine ever levied by the federal agency.
“Today’s action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences,” said CFPB Director Richard Cordray.
Los Angeles officials and the Office of the Comptroller of the Currency were also party to the settlement.
In a complaint filed in May 2015, California prosecutors alleged that Wells Fargo pushed customers into costly financial products that they did not need or even request.
Bank employees were told that the average customer tapped six financial tools but that they should push households to use eight products, according to the complaint.
The bank opened more than 2 million deposit and credit card accounts that may not have been authorized, the CFPB said Thursday.
Wells Fargo spokeswoman Mary Eshet said the bank fired 5,300 employees over “inappropriate sales conduct.” The firings took place over a five-year period, Eshet said, adding that the bank has 100,000 employees in its branches.
Wells Fargo regularly releases numbers about how many products it sells to customers, a practice it calls “cross-sell.” Its wealth and investment management unit, for example, sold 10.55 products per retail banking household in November 2015, up from 10.49 a year earlier, according to the bank’s annual 10-K financial filing.
In the second quarter, however, the bank changed how it tallies up some of those numbers and said it was considering more changes.
Piper Jaffray analyst Kevin Barker said he does not think the crackdown on Wells Fargo will have much of an impact on others in the industry.
“I think this is unique to Wells Fargo and their particular situation and how hard they push on cross-sell,” he said.
(Reporting By Patrick Rucker in Washington and Dan Freed in New York; Editing by Alan Crosby and Jonathan Oatis)
This article is part of HuffPost’s “Reclaim” campaign, an ongoing project spotlighting the world’s waste crisis and how we can begin to solve it.
Andrew Morgan never gave a second thought to the hidden cost of the clothes he bought well into adulthood.
The Los Angeles filmmaker and father of four made a habit of often shopping for cheap garments. When the items he bought wore out or fell apart after a year, he bought more. Morgan admits he simply didn’t take into account the possibility that his choices at the cash register might have unseen or unintended consequences.
“I very much grew up as a product of a modern world where I was taught to not think much about where the stuff that came into my life came from,” Morgan told The Huffington Post.
All that changed on the day he walked into a Starbucks store in Culver City, California, in 2013. As Morgan waited in line for his coffee, he glanced down at the newspaper rack. Eight thousand miles away in Bangladesh, a garment factory that produced clothes for Western brands had collapsed, killing more than 1,100 people. The photo on the cover of The New York Times showed two young boys, close in age to Morgan’s own sons, beside a wall plastered with missing persons signs.
“It did something to me instantly,” he said. “It was that chilling feeling where you realize you’ve been a part of something that you’ve never stopped to consider, and there are actually real people on the other end of it.”
Morgan had finished his latest film the day before the tragedy. He was on the lookout for a new project. Haunted by the image of the Rana Plaza building collapse, and appalled at his complicity in a system that had made it possible, he began contacting people around the world to learn more. He wanted to find out what was happening and to understand the stakes. Most of all, he wanted an answer to “why it was a story I had never been confronted with.”
Last year Morgan released “The True Cost,” a documentary about the fashion industry’s disastrous human and environmental consequences, including the staggering waste that results from an industry increasingly bent on producing cheap, low-quality, disposable clothes.
Courtesy of Andrew MorganFilmmaker Andrew Morgan in Shenzhen, China, during the production of "The True Cost" in summer 2014.
Fashion is a trillion-dollar global industry and the reasons for its wastefulness are varied and complex. But by any measure, the situation has reached crisis levels.
Each year, 80 billion pieces of clothing are bought around the world. Fifteen percent of fabric is wasted during the manufacturing process, before clothes even make their way to consumers. In the United States, where 97 percent of clothing sold is manufactured overseas, the average person throws away at least 60 pounds of clothing every year, according to the Environmental Protection Agency, though other estimates put this figure closer to 80 pounds. Eighty-five percent of that ends up in landfills, where chemically processed textiles can contaminate groundwater if not properly contained.
In June, HuffPost launched Reclaim, a campaign to raise awareness around America’s waste problem and highlight potential solutions, beginning with a focus on food waste. Now, we’re adding fashion waste to the mix. In the coming months, we’ll explore the issue from many angles. We’ll spotlight the efforts of upstart designers and established companies as they strive to improve their practices and reporting on what impact, if any, those efforts are having on the global fashion waste crisis. We’ll also share tips on how to reduce clothing waste in our own lives and open up the conversation using the hashtag #ReclaimFashion.”
Critics of the clothing industry’s wastefulness point to “fast fashion,” a retail method of constantly updating a store’s inventory. Fast fashion brands like H&M, Zara and Forever 21 are not only outpacing competitors, but also redefining fashion cycles, as more and more retailers aim to satisfy customers who expect an ever-replenishing selection of cheap, trendy clothes. Elizabeth L. Cline notes in her 2012 book Overdressed: The Shockingly High Cost of Cheap Fashion that new shipments arrive daily at Forever 21 and H&M, for example, and 400 new styles debut online every week at Topshop, the London-based retailer with more than 500 locations worldwide.
With so much cheap clothing available, so much more eventually gets thrown away. “The relationship between fast fashion and increasing textile waste is now unmistakable,” according to the International Journal of Consumer Studies.
Still, within the fashion industry, a certain amount of waste has long been accepted as the cost of doing business.
“There’s waste at every stage of the textile supply chain,” Sass Brown, interim dean of the Fashion Institute of Technology’s School of Art and Design in New York, told HuffPost. “And part of the problem is the textile supply chain is a very complex logistical nightmare.”
We have these faster cycles, we have more disposable fashion. But we don’t have a sense of where all that is going.
As food campaigns like farm-to-table and Slow Food gain traction, public awareness lags when it comes to the origins and consequences of what we wear, activists say. Sure, we know most of our clothes are no longer made in America. Even GOP presidential nominee Donald Trump gets it – sort of. But as Brown put it, “the average consumer has no idea” about the bigger picture: the chemicals in the fabrics we wear on our skin each day, the waste, the pollution, the lives of those actually making our clothes.
If clothing, like cigarettes, came with a warning label alerting us to these effects, Brown said, “I think we’d end fast fashion in an instant.”
Fashion is built on the idea of planned obsolescence. Much of what’s exciting about a piece of clothing being in style is knowing it may someday go out of style. But fast fashion’s critics say the breakneck speed of production and low prices have blinded us to the consequences of our purchases. The other side of the equation, as Morgan’s film shows, is an ugly mess of environmental damage, low-wage work and waste.
Tasha Lewis, an assistant professor of fashion design management at Cornell University, explained how fast fashion brings more clothes into our lives in a way that often leads to future waste.
“We have these faster cycles,” Lewis told HuffPost. “We have more disposable fashion. But we don’t have a sense of where all that is going. And a lot of consumers may tend to throw this clothing away because they don’t think anyone else would want to wear it. Because it just wasn’t made in the best way.”
The deadly Rana Plaza factory collapse, along with other similar tragedies in a short span, served as a wakeup call of sorts, for Morgan and countless others. To the delight and relief of activists who have worked for years to bring more attention to waste, injustice and abuse in the system, these issues are at last getting a more public airing.
In addition to “The True Cost,” which can be viewed on Netflix, there’s “Slowing Down Fast Fashion,” a documentary out later this year from the British musician Alex James. “It’s staggering how little most of us know about what our clothes are made from, where they come from or who made them,” James told WWD.
Fashion waste has found its way into the cultural conversation in other ways. A segment last year on “Last Week Tonight” with John Oliver took aim at fast fashion. “Saturday Night Live” has skewered H&M’s low prices and disposability. From Lena Dunham’s Lenny Letter to Anne Hathaway’s Instagram account, celebrities have shared tips for socially responsible shopping in a world ruled by fast fashion. Reformed shopaholics who once boasted of their extravagant “hauls” now preach conscious consumption inYouTube videos known as “haulternatives.”
More tangibly, businesses and designers are experimenting with take-back programs and other methods to give clothes a second life. Cities are introducing curbside textile recycling programs that take the time, effort and mystery out of donating used clothing.
Fast fashion companies themselves are taking steps to reduce waste, with varying degrees of commitment and success, activists say. H&M, for example, touts a range of sustainability efforts, from the waste reduction campaign World Recycle Week to an annual Conscious Exclusive collection that features eco-friendly pieces. “Our ambition is to have a circular approach in how our products are made and used, to utilize only recycled or other sustainably sourced materials and to implement only renewable energy in our value chain,” an H&M spokesperson told HuffPost. “To achieve this goal we know we need innovation.” The spokesperson cited the company’s annual award encouraging participants to reinvent the fashion industry and a recent pledge to develop new recycling technology. Forever 21 and Zara likewise outline their own sustainability policies, but they did not respond to requests for comment.
Cline, the author of Overdressed, told HuffPost she’s now at work on a documentary about clothing waste and other impacts of fast fashion. She also works in the secondhand clothing industry, which has deepened her understanding of America’s clothing waste problem. She is amazed by the number of clothes that are donated, and wonders where they can all possibly go. Meanwhile, fast fashion brands are churning out more, more, more ― “far in excess,” Cline says, “of what could ever be worn to the end of its useful life.”
But she sees at least one reason to be hopeful. The idea of fashion being more sustainable and thoughtful isn’t yet mainstream, she says. “But the conversation is at least happening now.”
Power gets a bad rap, but only because people pursue it for the wrong reasons. When power is pursued for the right reasons, it can be a tremendous force for good.
Niccolo Machiavelli spread the belief that people can only become powerful by exploiting the worst aspects of human nature. One of this teachings was, "A wise ruler ought never to keep faith when by doing so it would be against his interests." Machiavelli was essentially saying that you're an idiot if you keep your promises or stick to your values when you'd benefit more by breaking them.
Not only did we hear it from Machiavelli, but also from plenty of voices in our own time, such as Robert Greene, who said, "The key to power is the ability to judge who is best able to further your interests in all situations." It's no wonder so many people think that the only way to get power is to be a jerk.
Fortunately, Machiavelli and Greene had something in common: They were both wrong. Recent research from UC Berkeley shows that when it comes to power, nice guys finish first. The researchers found that the most powerful people (according to ratings from their peers) were those who were the most considerate and outgoing. They also found that those who were the most Machiavellian -- using things like gossip and manipulation to gain power -- were quickly identified and isolated and ended up with no power at all.
Studies like these are rehabilitating power's bad rap. Power isn't inherently evil, and it isn't inherently bad to seek power. Without power, you can't accomplish anything, good or evil. Even those who want nothing more than to make the world a better place, can't do so without exerting the influence of personal power. It's the abuse of power and the underhanded things people do to achieve it that cause problems.
People who earn and use power wisely have a profound impact on everyone they encounter. Yet, they achieve this power only because they exert so much influence inside, on themselves. We see only their outside; we see them innovate, speak their mind, and propel themselves forward toward bigger and better things. Yet, we're missing the best part. The confidence and wherewithal that make their influence possible are earned.
And while what people are influenced by changes with the season, the unique habits of powerful people remain constant. Their focused pursuit of excellence is driven by eleven habits, which you can emulate and absorb until your power and influence expand: 1. They don't wait for a title to lead. It's important not to confuse power with authority. The right title can give you authority, but it can't give you power. On the other hand, you don't need a title to be powerful. You can lead without being a boss and you can have a powerful influence upon your workplace and community without a title.
2. They're graciously disruptive. Powerful people are never satisfied with the status quo. They're the ones who constantly ask, "What if?" and "Why not?" They're not afraid to challenge conventional wisdom, and they don't disrupt things for the sake of being disruptive; they do so to make things better.
3. They think for themselves. Powerful people aren't buffeted by the latest trend or by public opinion. They form their opinions carefully, based on the facts. They're more than willing to change their mind when the facts support it, but they aren't influenced by what other people think, only by what they know.
4. They focus only on what really matters. Powerful people aren't distracted by trivialities. They're able to cut through the static and clutter, focus on what matters, and point it out to everyone else. They speak only when they have something important to say, and they never bore people with idle banter.
5. They master conflict. People tend to err on one of two extremes when it comes to conflict: some are passive and avoid conflict altogether, while others seek out conflict aggressively, thinking that this will make them powerful. People who master conflict know how to approach it directly and assertively, yet constructively. In essence, they practice emotional intelligence. Truly powerful people do not react emotionally and defensively to dissenting opinions -- they welcome them. They're humble enough to know that they don't know everything and that someone else might see something they missed. And if that person is right, they embrace the idea wholeheartedly, because they care more about the end result than being right.
6. They inspire conversation. When powerful people speak, their words spread like ripples in a pond. Influencers inspire everyone around them to explore new ideas and to think differently about their work.
7. They know their strengths and weaknesses. People who get seduced by power and, therefore, start abusing it are often blind to their own weaknesses. To become truly powerful, you have to see yourself as you really are and to position yourself to use your strengths for the greater good. That means taking a clear-eyed look at your strengths and your weaknesses and owning them both completely. 8. They grow and leverage their networks. Those who grow power the Machiavellian way don't bother with people who aren't useful to them. People see this coming a mile away, and it doesn't win any friends. Truly powerful people know how to make lasting connections. Not only do they know a lot of people, they get to know their connections' connections. More importantly, they add value to everyone in their network. They share advice and know how, and they make connections between people who should get to know each other.
9. They ask for help when they need it. It's easy to mistakenly assume that powerful people never ask for help from anybody. Asking for help when you don't know the answer or can't do it all by yourself is not a sign of weakness; it's a sign of strength. It sends the message that you're not so insecure as to put your ego above the mission. It takes a tremendous amount of confidence and humility to admit that you need assistance, and asking for assistance is critical, because there's nothing worse than trucking down the wrong path when you're too embarrassed or proud to admit that you don't know what you're doing.
10. They believe. Powerful people always expect the best. They believe in their own power to achieve their dreams, and they believe that others share that same power. They believe that nothing is out of reach and that belief inspires those around them to stretch for their own goals. They firmly believe that one person can change the world.
11. They do it now. Way back in 1894, Orison Swett Marden made an important point: "Don't wait for extraordinary opportunities. Seek common occasions and make them great. Weak men wait for opportunities. Strong men make them." If you put off growing your power until the right opportunity comes along, it's never going to happen. Powerful people know that developing power is a lot like lifting weights or running a 5K. The only way to strengthen those muscles is by using them, so stop making excuses and just start. You know what you believe in, you know who you are, and you know what you want to become, so act like it. Yes, it will be uncomfortable at times, and yes, some people will tell you you're doing it wrong, but the only way to achieve power and use it for good is to get out there and do it.
Bringing It All Together
Boris Yeltsin once said, "You can make a throne of bayonets, but you can't sit on it for very long." Forget everything you've heard about power, because, in the end, the nice guys really do win. Whether you call it power or influence, it's okay to want it and it's okay to have it. You just have to pursue it and use it with integrity.
Have you seen people abuse power? Please share your thoughts in the comments section below, as I learn just as much from you as you do from me.
Roger Martin Institute Director, Martin Prosperity Institute, Rotman School of Management, University of Toronto
For the past quarter century, capitalism in the advanced economies has moved forward in an impressive but not inclusive fashion. The winners are clear. First, it is industries that trade outside of their own local area, such as pharmaceuticals or software. These innovate and upgrade in order to compete broadly and achieve large scale. They have prospered relative to dispersed industries, such as local banking or healthcare provision, that don't trade outside their own area. Second, it is workers who are asked to use their creativity to engage in independent judgment and decision making at work. Such workers have high job security and have experienced healthy wage growth. This is in stark comparison to those who are asked to carry out routine intensive, repetitive tasks who not only feel intense wage pressure but also have little or no job security.
In combination, the very biggest winners are creative workers in traded industries. This fortunate 13.9% of the American workforce earns a 78.5% premium over the national average - a premium that has grown smartly from 74.0% in 2000. At the other end of the scale are routine workers in local industries. They make up by far the biggest category of U.S. employment at 44.8% of workers. Their wages are low and falling further behind: in 2000, they earned 31.7% less than the U.S. national average and by 2014 the gap had widened to 36.8%. Capitalism gives the former group a warm and lucrative embrace while the latter gets the cold shoulder.
In order to produce a more broadly inclusive capitalism, we need to see a transformation in how work is structured and valued. The economy can't depend solely on the slow substitution of creative jobs for routine jobs. The creative content of routine jobs must be enhanced.
Currently, there is a self-fulfilling prophecy in the routine sector of the economy. If employers discourage or prohibit independent judgment and decision-making, jobs become and remain routine jobs where low pay is commensurate with the low ability of the employee to create value in these conditions. These low-paid, low-skill jobs then cannot attract the kind of applicant that would have the skills to upgrade the job, setting in motion a vicious cycle.
If instead, employers purposefully create workplace environments that promote employee judgment and decisionmaking, even seemingly routine jobs can and will become more creativity-intensive. This, in turn, will improve productivity and enable the employer to pay higher wages. Ultimately, it will attract better talent to these positions, creating a virtuous circle.
In this way, the creativity-intensity of routine jobs will increase and indeed hasten the replacement of routine jobs with creative jobs. While there are undoubtedly those who would argue that this is impossible - believing that routine jobs will always be routine jobs - history shows that leading companies have won in their industries in part by encouraging independent judgment and decision-making from employees who would be seen and treated as routine workers in competitor companies.
Take Toyota, Four Seasons, QuikTrip, Trader Joes, Whole Foods and Costco. These companies have made it a central feature of their strategies to provide workers with more decision-making authority and more opportunities to display independent judgment. They have also paid commensurately higher wages. The result is a virtuous circle of higher wages, higher sales, lower employee turnover, superior customer service, improved productivity, and striking competitive success. This is the fastest and most productive way forward for the U.S. economy: the transformation of a routine intensive exclusionary economy into a more inclusive, creativity-intensive one.
Renting an apartment in major U.S. cities looks a little more affordable this month ― but that doesn’t mean it’s cheap, and especially not in Washington, D.C.
Nationwide, prices dropped about 1 percent for one- and two-bedroom apartments in August, according to real estate site Zumper’s monthly rent report. The median rent for a one-bedroom apartment will run you about $1,150 a month.
In D.C., however, apartments of either size are more expensive to rent than they were in July, the opposite of the trend in other pricey big cities. Median rent for two-bedroom apartments in the D.C. metro area rose to over $3,000 a month. Zumper now ranks it as the fourth-most expensive rental market, up from its previous spot in sixth place.
Credit Zumper
Zumper analyzes over 1 million listings nationwide to determine the median asking rents for the largest 100 metro areas.
In San Francisco, the most expensive rental market, prices for one-bedroom apartments went down slightly compared to the previous month. Still, the median one-bedroom rent is three times higher than the national median. And two-bedroom rents actually went up slightly, to $4,800. Prices also fell in other cities in the Bay Area and other pricey rental markets, including New York, Boston and Los Angeles.
Read more:
Here's How Much Money You Need To Make To Buy A Home
Here’s How Much Income You Need To Afford Rent In Every State
Washington’s extremely high ― and increasing ― rents are due to a combination of forces. The city’s population grew more than 18 percent in the last decade. The number of renters has also increased to over half of the population, and the supply of available housing simply hasn’t kept up with demand.
Since the recession, there has been an increase in new housing construction in D.C., hitting a recent high last year, and the number of rental units grew 19 percent between 2006 and 2013. But many of the new units are luxury apartments with extra high rents, which doesn’t ease the housing issue for people with more moderate incomes.
Meanwhile, the amount of low-cost rental housing has rapidly declined, according to a 2015 report from the DC Fiscal Policy Institute. In 2013, the District had 33,000 apartments renting for less than $800, compared to nearly 60,000 in 2002 (with prices adjusted for inflation).
That means more competition for a smaller number of affordable apartments and rents that are pricier than residents can afford. While incomes are higher in D.C. than many other places around the country, they haven’t increased nearly as fast as rent.
Zumper’s report shows that in many cities, rents went down a tiny bit. But it will still cost you over $2,000 to rent a typical one-bedroom apartment in the five most expensive markets.
If you’re looking for a place where the rent is actually cheap, you’ll find more reasonable prices at the end of the 100 cities ranking. In the bottom three ― Toledo, Ohio; Wichita, Kansas; and Fort Wayne, Indiana ― you can get a one-bedroom apartment for under $500. Maybe it’s time to try out the Midwest.
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Kate Abbey-Lambertz covers sustainable cities, housing and inequality. Tips? Feedback? Send an email or follow her on Twitter.
