Renting your first apartment or relocating to a new city are very exciting milestones. Your head is probably full of plans about living near the city’s nightlife or furnishing your new place with the very latest from Pottery Barn. Hold those thoughts … at least just for a minute. There will be plenty of time for all the fun stuff, but first, you need to take a hard look at your finances and see what type of apartment you can afford. Here are some practical guidelines when planning your budget.
- Think 50/30/20. This ratio is a bit more realistic than the outdated 30 percent rule, as it takes into account all of your monthly expenses, not just rent. Fifty percent of your net income should go to essentials such as rent, food, transportation and utilities. Thirty percent is for your fun stuff like subscriptions, entertainment, memberships, clothes, etc. The remaining 20 percent should go towards savings and paying down debt such as student loans or credit cards.
- Watch for extra deposits and fees. Moving into a new apartment is more than just paying rent. In the beginning, be prepared to pay an application fee and for the leasing company to run a credit check. The good news is that these are pretty nominal, usually ranging from $20-$35. There will also be a security deposit and if this is the first time establishing utilities in your name, you may need to pay deposits for those. These days, more apartment complexes require a pet deposit and a small monthly pet rental fee.
If you are relocating, there will be moving expenses, if your company won’t cover them. Lastly, most apartments raise rental rates at least once a year. These can vary from $15-$250+. Usually, they cover increased property taxes and maintenance fees, but amounts at the higher end could be expected if the apartments underwent some major upgrades or renovations. Don’t be caught by surprise, so plan accordingly.
- Location. Location. Location. If you are moving for a new job or just uprooting in general, think carefully about the cost of living in the area you’re moving to. A tiny studio apartment in New York City is going to be 2-3 (or more) times more expensive than a two-bedroom in Fayetteville, Arkansas. Rental rates can also vary widely within the same city. An apartment on the Country Club Plaza in Kansas City, Missouri, will cost 2-3 times as much a larger place 1 mile away in Midtown.
- What are you paying for? Many rental rates factor in any amenities such as a swimming pool, on-site health club, coffee bar, dog park, community clubhouse, covered parking and more. Think carefully about which of these extras you will actually use. If you belong to a gym, you can cancel your membership and work out at the apartment complex, which should save you some money or at least break even.
Washers and dryers save money on laundromats (and those annoying quarters!) and time as you can do your laundry at home. If social events aren’t of interest to you, steer clear of places that focus heavily on resident activities. Your commute to work should be another consideration. You might pay a lot more to live closer to your job or if you like public transportation, how close is the apartment to a bus stop or train station? Working from home may require a second bedroom.
There is a lot to consider when renting an apartment, but hopefully these tips will help prepare you for planning your budget for the big move. Once you are settled in a place you can comfortably afford, it’s time to get into the fun stuff like outfitting the apartment with furnishings and other decorative and personal items that make your new home uniquely yours!