How to Budget For Life in a Rental Home
Step One: Make Some Money
If you’re moving into a rental for the first time, you might be surprised and how complicated it can be to keep track of your money, even when it comes to something as simple as paying your rent on time. Creating a budget is one of those skills that everyone should have, and almost everyone could learn a lot more about. Here’s some of the budgetary guidelines that all rental dwellers should follow:
- Don’t Forget One-Time Expenses: There’s quite a few one-time expenses involved in moving into a rental unit. You’ve got your security deposit, your pet deposit, your first month’s rent, your last month’s rent, your utility connection fees, your application fee, your moving costs, furniture to buy, and possibly any of several other less-common but still significant costs. They can add up quickly; don’t get caught off-guard!
- Save Money on Utilities: There are a ton of cute tricks on the Internet for reducing your electricity, gas, cable, telephone, Internet, and other regular bills. For many rental properties, the electricity is the major expense — but spending one day every few months just executing some basic insulating and other energy-saving techniques can shave dozens of dollars off your bill.
- Skip Some Bills Entirely: Everyone needs electricity, and everyone with gas-powered heat needs gas. Everyone needs some way to communicate — but do you really need a cell phone bill, a land line bill, and an Internet bill? Switching to a VoIP service and using a wi-fi device as your phone can cut two of those bills — and wi-fi is common enough today that you’ll find it’s not that difficult to stay in touch even while you’re out shopping. (If necessary, you can get a $5/month emergency-only cellphone.) Similarly, many people are cutting the cable TV bill and trading it in for a Netflix or Hulu subscription. If you insist on watching a TV instead of a monitor, use a Roku or Chromecast other similar device.
- Never Skip Renter’s Insurance: We’ve seen too many awesome people completely destroyed by a theft, natural disaster, or other catastrophe to ever see a tenant without insurance for their stuff. Just don’t do it.
The One-Third Rule: If you’re spending more than one-third of your gross monthly income on rent, you’re almost certainly spending too much. Some landlords have income requirements set as a percentage of gross income, but you should stick with net income as your guideline — you don’t want something you ‘qualify for;’ you want something you can afford. In fact, before 2008, the guidelines was not to spend more than 25% of your income on rent — but that’s just simply not a realistic goal in today’s market.
There’s a lot to think about when you’re moving into a rental and balancing your budget — but there are also a lot of tools at your disposal, and a surprising amount of options in front of you. Keep your mind open, overestimate all of your expenses and underestimate all of your income, and you’ll end up just fine in the end.