When you’re first creating a budget for rent, there are lots of things to consider. You’ll have all your necessary bills, of course: phone, electricity, car insurance, gas, and food.
Then you’ll have other expenses, both expected and unexpected, come up, such as medical bills, car maintenance.
And of course, you’ll want to have some extra cash set aside for spending on things you’d like to have and putting away in savings.
Perhaps, though, the biggest expense you’ll be looking at including in your budget for rent or housing.
If you’re just starting out on your own, planning out your first budget can be a daunting task, but it’s important to get it in place so that you can ensure you have enough for everything you need.
Learning how to budget in advance will offer you some peace of mind while you work toward both your short and long-term goals.
In this guide, we’ll show you how you can prepare to make sure that you are ready for living on your own.
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Why It’s Important to Budget for Rent?
Monthly Rent
Most people, when first starting out, will opt for renting a room, apartment, or house, often for several years before they consider purchasing their first home.
No matter where you live and what you do, it’s likely that your rent is going to be your largest monthly expense.
It’s crucial to ensure you always have enough cash to cover this expense though; if you fall short of being able to pay it, you may find yourself at risk of eviction and struggling to find another place to live.
Additionally, you may find yourself in breach of your lease, which could damage your credit score or even put you at risk of a lawsuit.
It can be quite overwhelming to suddenly find yourself spending more money than you ever have before, so preparing yourself in advance with a good budgeting rule will ensure that you always have enough to cover those basic expenses and to cover any unexpected costs as well.
Of course, no budgeting plan is perfect, and you’ll likely need to make some adjustments once you’ve been supporting yourself for a few months; it’s not unusual to find that things are more expensive than you expected, or that your paycheck doesn’t go as far as you thought it would.
However, if you are realistic and reexamine your finances from time to time, you can surely find the sweet spot that will allow you to cover all your necessities and give you a little cushion.
Why Consider A Budgeting App
A Budgeting App to Manage Finances Actively tracking your monthly expenses can help you stay within your budget and cut down on costs that make it harder to build an emergency fund.
A spreadsheet may make more sense if you prefer to track your expenses manually. But a budgeting app can streamline the process.
To calculate how much rent you can afford, we multiply your gross monthly income by 20%, 30% or 40%, based on how much you want to spend.
You can use the slider to change the percentage of your income you want spend on housing.
If you use the additional options, we deduct the rent from your income and subtract your debt, expenses, and savings from the remaining funds left.
While budgeting can be an effective way to manage your finances, it only works if you account for all of your monthly expenses.
For that reason, determine what your total monthly costs are, what bills you need to pay each month, and how much you can afford to spend on rent. Keep in mind that some costs can vary throughout the year, so account for seasonal changes based on previous charges.
Remember: Whenever you get the urge to spend money on something, picture yourself in your future house (or on a beach vacation—whatever your goal is). Seeing another movie in the theater this month might not look so tempting after all. Budgeting apps can help you meet your goals.
Having a savings account—even if it’s small—does more than just help you reach financial goals. It can save you money. When an unexpected expense comes up, paying for it out of savings rather than a credit card helps you avoid paying interest. Look closely at all your bills—and cut back.
Budget Planner – Monthly Finance Organizer
How Much Rent Can You Afford?
Before you even start looking for a place to live, you’ll need to figure out how much you can afford for rent.
Financial experts generally recommend that you keep your rent costs to 30% or less of your monthly income.
If you already have a general idea of how much you’ll be bringing in each month, you can easily calculate this percentage, but if you haven’t found an appropriate job yet, it might be a good idea to research typical rent prices in the area where you want to live to get an idea of how much you’ll need to bring in each month.
Gross Monthly Income
To find your gross income, take a look at your most recent paycheck and find the line calling out “Gross Pay” (what you’re paid before taxes, health insurance, 401k, and any other benefits are removed from your pay).
The location, size, and type of property will also play an important role in how much you’ll be looking at spending on rent each month.
Do you want the privacy that living in a house affords? Chances are, you’ll need to expect to pay more for a rental house than you might for an apartment; but an entire house might have enough room for you to invite a roommate or two to split expenses with you.
Larger places are going to typically cost more than a studio or efficiency.
You may be able to save money by finding a room in a house or apartment that’s available to share with roommates or a private family; some people with their own property may create garage or basement apartment that they then decide to rent out for a little extra income.
If you want to live closer to the city, you’ll likely pay more than you would if you rented a place in the suburbs; however, safety of the neighborhood and your transportation costs can play a factor in the location you choose to live as well.
Keep in mind the importance of signing a lease, to ensure you can keep the same monthly price on rent for a set period of time.
Most properties will allow you to rent month-to-month as well, but you are subject to changing prices if you go that route, which can make it difficult to keep a balance on the money left.
Unless you plan for your living arrangement to be truly temporary, signing even a short-term lease will probably save you money in the long run.
Other Important Rental Expenses
It’s important to remember that the price you see on a rental ad is not the price you’ll actually be paying.
There are other expenses that come both up front and from month to month that you’ll want to factor in as you figure out how much you can afford.
For one thing, you’ll want to find out about any utilities that you’ll be required to cover.
Some rental properties may include certain utilities, such as gas, water, or electric, but chances are that you will be responsible for paying at least one of these.
It’d be worth it to ask your potential landlord how much these utilities typically run in a property you’re considering.
If you do have to cover utilities, remember that you’ll also have to pay a deposit to get the utilities set up in your name.
Whether you opt for a house or an apartment, your landlord will be responsible for any maintenance that needs to be done to your unit or any major issues that come up while you live there, but be aware that you may have to take care of some general upkeep yourself along the way.
Monthly Expenses To Consider
For instance, if you rent a house, you may need to provide your own lawnmower and keep the yard neat and trimmed.
Your new home may have in-unit laundry available, but in some cases a washer and dryer are provided, while in others you will only find hookups and will need to provide your own appliances.
A few apartment complexes do offer included internet and cable, but more often than not, you’ll likely have to cover these charges if you need or want them, and you may have to pay an installation fee depending on the provider, or get permission from your landlord to have a certain type of service installed.
When you first apply to move into your new home, there will be lots of upfront costs as well.
Almost every rental property, whether house or apartment, will require some sort of security deposit.
Privately-owned properties may only require you to pay a small, refundable deposit, but many places require at least one month’s and sometimes two months’ worth of rent up front.
You may also need to pay an administration fee so that the property owner can conduct a credit and background check on potential tenants.
Depending on the property, you may be able to take advantage of special offers on fees and deposits, or negotiate a lower, non-refundable security deposit, which would require you to pay for any excessive damage to the apartment after you move out.
If you plan to bring a cat or dog with you, you will likely also have to pay a pet deposit (in this case, ensure you are looking at pet-friendly properties!), and some rental companies require a monthly fee, usually around $20, for each pet living in the apartment.
Apartment complexes may offer additional amenities like storage space or garages, trash pickup, and pest control, but these may or may not come at an additional expense.
Private landlords may also require you to cover these things on your own.
When touring properties, ask about any of these services that you deem important, so that you can factor them into your budget.
You’ll also want to include renter’s insurance in your budget.
This is usually fairly cheap, between $20-50 a month for most people, and we highly recommend it as it covers all your belongings in the event of a fire, robbery, or other damage to your home that’s out of your control.
Many rental properties actually require proof of insurance before accepting you as a tenant. To save even more on it, consider bundling your renters insurance with your car insurance.
It Goes Beyond Rental Costs
Although your budget for rent and its related expenses will likely take up the biggest percentage of your budget, they’re certainly not the only costs you’ll need to factor in.
Don’t forget that if you’re supporting yourself, you’re responsible for all of your living expenses – and life can be quite expensive if you’re not careful!
As we mentioned above, the location of your new home can make a big difference.
Because city centers are hot spots, landlords can charge more for houses and apartments near them, whereas homes in the suburbs or edges of a city are typically cheaper.
It might also be worth your while to spend a little more money to get a rental home close to your job or school, which could save you money on transportation.
Calculate the Rental Cost
Try to calculate the costs it would take you to get the places you need to go if you live closer or farther away; it may just even out.
Once you’ve found your new place to live, there are lots of things you’ll need to make it home.
Ideally, you’ll have a few furnishings and other items you can bring from home, but there will likely be many things you need.
Furniture for your bedroom, living room, and dining room are all important, as well as cookware, dishes, and small appliances for your kitchen, linens like towels and sheets, and other items.
Your first home is also a place where you can express your personality, so you’ll no doubt want to get some fun décor as well.
Other Things To Determine
Try shopping around at thrift and bargain stores, yard and estate sales, and online classifieds like Facebook Marketplace and Craigslist for great deals on furnishings and decorative items at low prices.
Bargain Shopping
Perhaps you can even hold a housewarming party to celebrate your new place with your loved ones; they’ll no doubt be excited to provide you with some items you need to make it a home.
Everyone has to eat, so you’ll need to be sure to include your food costs in your monthly budget.
It’s better to err on the side of caution when you’re first starting out and keep your food expenses as low as you can until you know better what you can afford.
Try to stick with eating at home rather than ordering takeout or going to restaurants as much as possible.
Use weekly sales and coupons when you go shopping, meal plan, and stick to your lists so you don’t spend more than you want.
Try to stick with ingredients rather than prepared foods, and search the internet for easy, affordable recipes that travel and reheat well.
After a few months of budgeting, you may find that you can set aside a little money here and there for your favorite takeout or breakfast from your favorite coffee shop.
If you have a car, you’ll need to fill it with gas and keep up with regular maintenance like oil changes and tire rotation, so be sure you factor these costs into your budget as well.
General Rule Of Thumb
Keeping up with necessary car maintenance will save you loads of money in the long run by keeping you safe from expensive repairs down the road.
Everyone needs new clothing from time to time, so figure out how much you can devote to your clothing budget each month.
If you need specific items for a particular job, compare prices at different stores to find the right items at the best prices.
For other items, try to shop after-season sales or shop secondhand or discount stores to save money.
Finally, you need to be able to let loose and have a little time from time to time, so be sure to set aside a portion of your spending for entertainment.
However, it’s wise to be cautious about how you use your extra cash.
If you don’t watch a lot of TV, you might opt for a couple of streaming services rather than an expensive cable package.
Spending Habits
Tidy up your spending: If you frequently eat out at restaurants, spend a lot on entertainment, or travel, consider how these expenses affect your monthly budget.
If you would rather live in a more spacious apartment or more appealing neighborhood, cutting back on these extras can help your affordability.
You can rent many recently released movies on the internet rather than pay for a ticket at the movie theater.
The public library is a wonderful resource for print books and other physical materials, and many of them have apps now that allow you to access ebooks, audiobooks, and even movies and music for free.
Look for fun, free things to do in your city, like special events, museums, parks, hiking trails, and walking tours.
Reassess Your Budget from Time to Time
Your budget for rent should never be set totally in stone, as anything can change anytime.
You may find that your income changes, and one thing you can count on is that the cost of living is always going to go up.
You may have to negotiate a rent increase at the end of your lease terms, and inflation means that groceries, gas, utilities, and other important costs are likely to increase as well.
It’s a good idea to sit down every few months and review your budget to make sure it still works for you, and make adjustments where necessary.
As intimidating as it may seem, please don’t be afraid to budget for rent and other expenses.
Supporting yourself can be a really rewarding experience, and we promise if you use the advice you’ve found in this guide, you will be prepared for anything that might come up.
You’ll also find that it’s easier to put cash into savings or use on something that you’d really like.
Budget carefully, and you’re sure to love living on your own in your first rental, and find yourself well on the way to success in working towards your long-term goals as well.
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