Whether you’re a student or a working professional, there comes a certain point in everyone’s lives when they have to get their own place. Finding a place to live isn’t an easy task in today’s economy, and there are a lot of factors that you need to take into account to ensure that paying the rent expense doesn’t stretch your budget, especially if you’re on a limited income.
Most people with a comfortable paycheck or allowance often make the mistake of renting an apartment that’s too expensive though it might seem reasonable given their income. But what they don’t factor in is their monthly budget, miscellaneous expenses, and surprise expenses that eat up a large chunk of anyone’s monthly income.
To make sure you don’t make the same mistake, here are a couple of key things to remember when figuring out the right amount of monthly rent you can afford.
Consider Your Entire Budget
When figuring out your rent, the first thing you need to consider is your entire monthly budget. Most finance management experts agree that splitting your entire monthly income into three parts based on the 50/30/20 rule is the best way to go.
As per this formula, 50 percent of your income should be spent on food, 30 percent on rent, and the rest on transportation and other expenses. When sticking to the rule, make sure to leave some flexibility in the percentages as the lifestyle expenses of different places tend to vary greatly.
In bigger cities like California and New York, you’ll have a hard time finding a place within budget if you stick with the 30% rent ratio as costs of real estate in these states are generally more expensive than in others.
Be Realistic About Your Expenses
The second thing you should take into account is the reality of your current financial situation. You’ll learn sooner or later that budget projections at the beginning of the month often don’t end up matching the actual amount most people spent by the end of the month.
If you take all your expenses into account, you’ll find that sticking to the 50/30/20 rule can be tough. As such, you need to be realistic about your expenses and plan on cutting down on corners as necessary to ensure that you find a good financial balance.
If you haven’t moved out from your parent or guardian’s place yet, note down every expense they make on a monthly basis, not just the rent, and see how it stacks up with the income you’ll have when you move out.
Furnishing and Other Moving Expenses
While these may be one-time costs, furnishing and other moving expenses can put a long-term dent in your wallet if this is your first time renting your place.
Depending on the distance and other details, moving furniture can get quite expensive, bordering on thousands of dollars for just a couple of items if you’re moving to a different city, state, or even country.
If you feel like these expenses are something you’re not equipped to bear at the moment, going for an online installment loan can be the best way to go. But you should also keep in mind that loans also come with interests and other specific conditions which can be restrictive. So make sure to check out a couple of options before settling for one.
Look for Savings
Last but not least, don’t forget to save money on every opportunity you see when calculating your monthly budget. You would be surprised how simply cutting down a couple of soft drinks or eating out on weekends can drastically change the amount you can allot to rent and other necessary expenses.
Some of the common expenses you can save money on include utilities, insurance, groceries, and miscellaneous expenses. You can cut down on cable TV subscriptions, internet packages, streaming subscriptions, and more to save money. If you’re a student, then insurance is something you shouldn’t have to worry about for the time being unless you own a car or a bike.
Making the Best of Everything
Everyone wants to rent a big, spacious property with all the modern amenities, but the reality is that most people starting out in their careers or students can’t afford the best of the best.
Do yourself a favor by remembering that affording the place of your dreams can take time. Work towards finding a place that fits all your parameters and makes sense for your means, most notably, budget.
We hope you found this blog post on How To Calculate How Much Rent You Can Afford useful. If you are planning you next move, more suggestions can be found on this page: Most Common Moving Mistakes
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