Financial advice on budgeting for renters
Are you thinking about moving into a new apartment? Are you worried you won’t have enough money? Try setting up a budget which will help you save money and establish good spending habits before you make your move. Financial advisor Nancy Dunnan and MetLife came up with the following guidelines to help you create a reasonable balance of expenses:
|Housing||25 to 30|
|Food||8 to 15|
|Health care||5 to 7|
|Insurance/pensions||7 to 9|
|Clothing||6 to 8|
|Entertainment||5 to 9|
|General savings||6 to 10|
|Total spent||62 to 80|
Of course, these percentages will vary depending on your individual needs, but this is a general guideline. You’ll want to have about three month’s rent saved before you move so that you can pay the security deposit and first month’s rent, and then have some left over so that if for some reason you go over budget one month, you won’t have to worry about making any payments.
Once you’ve moved in, you should continue to follow the budget. If you feel you need to save even more money, there are other ways to cut back. Consider spending less on food, transportation, and entertainment. This doesn’t mean you have to starve while you sit at home doing nothing, but there are easy ways to save money.
According to the Statistical Abstract of the United States, the average American spends about 10 percent of their income on eating out. One easy way to save money is by packing lunch for work or school rather than stopping at a local cafe. You’d be surprised how much of a difference this could make.
For instance, Mr. Smith usually leaves work for lunch every day to go to a burger joint. He spends around $8.00 each time. Five dollars a day turns into $2,040 a year!
According to the Insurance Information Institute, the average American spends about 16 percent of their yearly income on transportation. To save money in this category, consider carpooling or public transportation instead of commuting alone. You might cringe at the thought of ride sharing or riding a bus , but if moving to a new apartment is your ultimate goal, you really should consider it.
If Mr. Smith took the bus to work instead of driving, he could eliminate many expenses, gasoline, car maintenance etc.
According to the Insurance Information Institute, the average American is spending 32 % of their income on housing, 16 % on transportation and 14 percent on food (62 percent of their total income).
If you reduce the amount of money allowed for the transportation and food, that leaves more for the housing category. For example, by bringing his lunch to work every day as well as using public transportation, Mr. Smith has now increased the amount of money he has for his home by 6 percent.
If he chose to, Mr. Smith could also decrease the amount allowed for entertainment, clothing and other unnecessary expenditures, and so could you. Consider going to a dollar movie or even a matinee rather than the $8 or $9 night time movie.
Don’t give up on moving out until you’ve thoroughly evaluated your budget. You might be able to pinch enough pennies to move into a new place, and you will establish some better spending habits in the mean time.
Another tip — The Millionaire Next Door recommends that in order to build wealth and have a cushion, a rental payment should be no more than half the realized income. (income after taxes.)
MetLife says you should spend no more than 65 percent on housing, transportation and food combined.
Learning Center Move.com