Tenants often overestimate what they can afford when looking for a rental. They’re not realistic and don’t sit down and add up all their monthly expenses and as a result end up can having issues paying their rent. Determine what percentage of your income you can afford to put towards your rent while still being able to enjoy life and save a little.
Review your budget
What percentage of your income goes towards fixed and necessary expenses, variable expenses, and how much are you saving? Some people are aggressive with savings while others don’t save at all. Many financial experts recommend a 50/30/20 model, which is:
- 50% goes towards necessary fixed expenses like rent, utilities, groceries, and transportation
- 30% goes towards non-essentials but nice to haves like dining out, movies, shopping, and memberships like Netflix or the gym
- 20% goes towards paying down debt and savings
Since rent is part of the 50% of fixed expenses, what you can afford depends on the other expenses. If utilities are included in the rent or low and you work from home so your transportation expenses are minimal, then rent can be a bigger portion of the 50% of your income than if you pay a lot for utilities and you commute an hour to work in your own vehicle which adds gas and maintenance.
Overestimate instead of underestimating when it comes to expenses
Expenses can fluctuate and so can income, so you want to be conservative instead of thinking best case. If you think you’ll get a raise or promotion, but you haven’t yet, don’t consider it income you already have.
With expenses that fluctuate, figure out an average and then round up so you can be more prepared if they increase instead of blindsided. Rarely do things decrease over time so overestimating your expenses will make sure you’re prepared and not scrambling to pay rent if your expenses are more than you thought they’d be.
Moving isn’t cheap. On top of security and pet deposits, you have movers to pay and any supplies you need to purchase for the move. Most tenants may need to take time off work and need a few days overlap to be able to move their belongings over to their new place and still have a few days to clean and prepare their previous place, so you’ll be paying double rent during the overlap period.
Consider renting with a roommate
If you want to live in an area or unit that you can’t comfortably afford on your own, do you know someone else who is looking to move to the same area? If not, are you okay with living with a stranger (who could potentially become a friend later) to make a place more affordable? If so, make sure you do your homework and find someone that fits your lifestyle and is financially similar so that you’re not having to pay the entire rent if your roommate cannot afford to or decides to move out early and not pay his portion.
You want to find a place that’s comfortable for you but also won’t break your budget. It’s not fun scrambling every month just to pay your rent and not be able to save or have extra money for vacations and other fun things you may want to do.