Establishing Your Apartment Budget

Establishing Your Apartment Budget

October 17, 2013 | Apartment Hunting, Apartment Hunting Advice

When you’re looking for a new apartment, it is important to know whether it fits in your budget. With some serious analysis of your monthly income and expenditures, you can be sure you can afford the place. Here’s how to establish your apartment budget:

Where to Begin

Start by calculating your net income–in other words, how much your take-home pay is every month. Next, take a look at where your money goes. A monthly bank statement or your online bank account will tell you all of your purchases.

Create categories and break down the statement that way. Credit card bill, phone bill, groceries and going out are just some category ideas. You should be sure all your expenditures land in a category.

You can get this step done very quickly with Mint.com. They do all of the hard work for you and it’s completely free.

Break Down

Split these categories into two major sections: necessary and optional. Necessary expenditures are things you cannot live without. You need groceries. You cannot drive without paying insurance or without buying gas. These are fixed expenses, meaning you must pay them every month at the same amount. 

Optional spending includes eating out, unnecessary clothing and your daily cup of coffee. Be rigorous and honest. When creating a budget you will be more successful with your money if you don’t try to lie to yourself.

[Save More Money by Cutting Out Unnecessary Expenses]

If you can’t admit that you don’t need a cupcake from that cute new bakery, have a friend come over who will ask you hard questions. Optional spending should be prioritized. Things with the lowest priority will be the first you cut if money gets tight.

Apartment Budget

In your apartment budget, rent is a necessary cost. A general rule of thumb is that you should never pay more than 30 percent of your take home pay on housing. This includes utilities, internet and cable if you choose to have it. That apartment you loved may have a rent right at the edge of your 30 percent limit, but if utilities are separate, you probably cannot afford it.

If you find a place that leaves enough wiggle room for utilities, start asking around. Potential neighbors may be willing to share how much electric or gas has cost them each month. You can also call the company that provides it for the complex. Ask what the average unit pays. This way, you’ll at least have an estimate to work into your budget.

Though 30 percent is a rule of thumb, staying underneath that cap is even better. Don’t flirt with the line. The goal is to barely see it. Emergencies and unexpected expenses come up. Having space in your budget will make those times less stressful.

Ready to Move?

You have found a place in your budget that allows you to stay on top of your bills and have room for entertainment. Are you ready to move in? Remember: There are some up-front costs to moving into a new apartment. Most places want the first and/or last month’s rent along with a security deposit when you sign the lease. If you have pets, that’s another deposit.

[Beware of Hidden Moving Costs]

Don’t let these catch you off guard. Have the money saved up ahead of time. If you found your new apartment on Rent.com, don’t forget to claim your $100 Reward Card. Every little bit helps.

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