One of the most exciting aspects of growing up is moving away from your old place and starting your own life. As with most major life events, moving out is associated with additional responsibility. Part of this task is knowing and understanding your budget when buying the perfect apartment, condominium, duplex, or rental apartment. How Much Should You Really Spend on Rent?
The 30 percent threshold
The first step in deciding how much to spend on rent is to calculate how much rent you can afford. This is done by determining your fixed income to rent ratio. Simply put, this is the percentage of your income earmarked for rent.
As a rule of thumb, getting 30 percent of your net income to rent is a good start. Government studies consider people who spend more than 30 percent on living expenses as "cost-intensive" and those who spend 50 percent or more as "heavily cost-intensive".
When calculating your income-to-rent ratio, remember that you should use your entire household income. If you live with a roommate or partner, you must also consider their income to ensure that you find a rental margin that matches your income level.
If you're still not sure how much rent you can afford, consider an affordability calculator. Remember to consult a financial advisor before signing a lease if you are unsure whether you can make a rent.
Follow the 50/30/20 rule
AIf you have a fixed income-to-rent ratio, consider the 50/20/30 rule to round off your budget. This rule states that 50 percent of your income is used for essentials, 20 percent for savings and the remaining 30 percent for non-essential personal expenses. In this case, the rent falls under the "essential". This category also includes all expenses that are absolutely necessary, e.g. B. utilities, food and transportation.
Let's consider a hypothetical situation where you earn $ 4,000 a month. According to the 50/2030 rule, with a fixed income to rent ratio of 30 percent, you must spend $ 2,000 (50 percent) a month on essential living expenses. $ 1,200 (30 percent) is rented, leaving you with $ 800 per month for other essential expenses, such as utilities and groceries.
Remember to budget for additional expenses
After you have estimated the rent and the essential additional costs, it is time to draw up a plan for furnishing your apartment. One of the biggest shocks when moving out is how expensive it can be to fill a house. From kitchen utensils to lightbulbs and everything in between, it can be expensive to make your room perfect.
Furniture largely falls under the 30 percent of personal, non-essential expenses. Before you move, plan ahead and save on household goods so you don't incur any major debts when you move out.
Keep an eye out for savings
If your budget for your dream home is somewhat unattainable, try to avoid unnecessary costs to see if you can get it going. Look for ways to cut utility bills, insurance, groceries, and rent.
Utilities: Water, heat and electricity are all necessary, but your TV service is not. Cut the cable from television and cellular services that may no longer serve you and your budget. Exchange your light bulbs for environmentally friendly and energy efficient light bulbs to reduce your electricity bills.
insurance: Instead of paying monthly rental insurance rates, you save a fraction of the cost by paying all of your annual expenses. If you have a roommate, ask to share a policy at a premium price.
Food: Exchange your nights for a homemade meal. This simple habit change can save you up to $ 832 a year. When shopping, add up the cost of shopping to make sure your budget stays on track.
rental fee: One of the best ways to save rent is to split the bill. Consider getting roommates to save 50 percent or more of your monthly rent.
A rental contract is not easy to conclude. Biting off more rent than you can chew can result in unpaid rent, which can affect your creditworthiness and make it more difficult to find an apartment or buy a house in the future. Hopefully, if you implement these best practices, you will find a balance between finding a place you love and space you have for a bit of fun in your budget.
swell: US Census Bureau