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How to Budget for Expenses When Living on Your Own

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Renting a house for the first time? Congratulations! Living on your own is a fun and liberating experience. But you’ll need to work on a budget to ensure your financial health.

How to calculate your monthly budget when renting

Budgeting is part of every apartment living guide. To calculate your monthly budget as a renter, you can try this simple formula: Deduct your monthly savings from your net income. Take whatever’s left and work the amount into your monthly budget. It’s important not to exceed this amount.

Once you have a projected number, you’ll be able to determine whether you can afford to live alone or whether you need to split the bills with a roommate.

Budgeting your basic expenses

Follow the 50/30/20 principle to categorize your expenses into needs, wants, and savings. Most renters can expect to spend about half their income on necessary expenses each month. These include:

Rental fees

Before you can move into a rental unit, it’s customary to pay the first and last month’s rent. You’ll also be required to make a security deposit and renter’s insurance. If you have pets, you may be required to make a pet deposit. Other expenses include moving costs and application fees for each time you apply for an apartment to rent. You need to have enough cash to cover these costs upfront.

After that, you’ll have to plan for monthly rent. Many financial advisors recommend following the 30% rule, which stipulates that renters shouldn’t spend more than 30% of their monthly income on rent.

However, this rule may not work for everyone, especially for those who make very little or those who want to live in an expensive area.

Utilities

In some cases, your monthly rent may cover a few utilities ,but renters typically have to budget for utilities every month. These include water, electricity, gas, wifi, and garbage pickup. Your utility bill will depend on usage and your rental unit’s efficiency. The ENERGY STAR® program estimates that the typical American household spends over $167 each month, or more than $2,000 each year, on utilities.

Car expenses and transportation

If you own a car, you have to budget for car payments, maintenance, insurance, gas, and parking each month. You’ll also have to consider vehicle registration and emissions testing fees if you’re bringing your car to another state.

Using public transportation can help you avoid monthly car-related expenses. In this case, you’ll have to budget for a monthly train or bus pass, and perhaps Lyft and Uber rides.

Groceries

Your monthly grocery budget should account for day-to-day household items like food, drinks, supplements, toiletries, pet food, gardening supplies, and cleaning supplies. There are many ways to cut down on groceries, such as planning your meals for the whole week and using coupons when available. Buying in bulk also tends to be cheaper, so it’s ideal to plan your grocery trips in advance.

Medicine

If you take maintenance medicine for a chronic health condition, make sure you factor the costs into your basic necessities.

Debt

Make room in your budget for monthly car payments, student loans, and credit card debt.

Budgeting for leisure and discretionary spending

It’s never a bad idea to budget for wants like movie tickets or a new pair of shoes. As a general rule, financial experts advise that you spend just 30% of your household budget on your wants.

Shopping

To avoid impulse buying, plan ahead for discretionary spending. This includes non-essential items and special occasions like birthdays and holidays.

Entertainment

Entertainment costs typically include subscription streaming services, commercial-free music apps, video games, and movie or concert tickets. This also includes vacations and cruises.

Dining and delivery

Make room in your budget for restaurant dining, coffee runs, snacks, and takeout. Factor in the costs of delivery, tips, extra food containers, and other related expenses.

Health and fitness

If you have a gym membership, personal trainer, or paid fitness app, you need to make a budget to keep your spending in check.

Remember that your monthly budget needs to be updated regularly. As your income, lifestyle, and personal circumstances change, so will your monthly expenses. It also helps to be flexible with budgeting. For example, you may have to go over budget this month because of an unforeseen expense, then go under budget the next month to make up for it.

Contact Sundance Property Management here for home rentals in Ohio, Kentucky, Tennessee, and South Carolina. You can also call our team 5134893363 x126 or email MLAShells(at)sdpmi(dotted)com. As a national company, we have extensive experience in developing and managing rentals in multi-family communities. We can’t wait to start working with you.

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