How many risks should a new grad take?

As you've probably noticed from all the blog posts, I get email questions a lot. It's great. You should email me. I do try to answer as many questions as I can. This past week, I even took my desire to answer all the questions asked of me to the next level. I invited the email-question-asker on my radio show. Dreams do come true, people.

Here is part of his original email to me:

Good morning Pete-

I just graduated college, with very little student loan debt (about $3k), and I'm about to get a job. After taking a few interviews, the chances of me moving to my dream location for one of said jobs are pretty sizable, as I see it. Fortunately, when I'm offered a position with this company, I'll be able to tell them that my living situation is set and I can be mobile and out there at any time.

I'm lucky to have been given an ideal living situation for my personal preference, and when I move out there I'll be paying a total of $850/month for rent/utilities/wifi/everything else imaginable. All this, in a place where the cost of living is *much* higher that where I am now, happens to be an excellent rate (by comparison to other, similar living situations) for the location.

My research indicates that the average person in the position I've applied for with this company makes just over 33,500/year, before taxes. With that said, I have some questions.

I've been told that it's customary and/or smart to pay about 1/4 of your yearly salary on housing, and I'm fully aware Uncle Sam will take a cool 8 grand (at best) of that salary as well. However, at (850 x 12) $10,200, I would be paying closer to 1/3 (maybe somewhere close to 2/7ths, but fractions aren't my thing) of my yearly income to live in a place that I consider my #1 choice going forward.

In your opinion, what is the opportunity cost of living in your dream location, straight out of college, with a steady salary and chances for a raise and upward mobility? Is the risk of potential financial burden and even welcomed financial lifestyle change worth taking the chance on making a dream that's 4 years in the making a reality?

Thanks so much for your time,

Bob

The idea of taking risks at the beginning of your financial life is fascinating to me. On one hand, the risk of running out of money or racking up debt are high. On the other hand, the opportunity for future success based on the amount of risk you are willing to take isn't something to discredit. I didn't feel I could justify Bob's email with an appropriate written response so here's my discussion with him from The Pete the Planner Radio Show:

Courtesy of WIBC