If you are moving out of your parental home or from one rented property to another, it is essential that you take the time to work out how much rent you can afford. People often widely overestimate or underestimate what they can afford to spend on somewhere to live. This is because they have based their calculations on guesswork rather than spending a little more time making an accurate assessment of their financial situation. Overspending on rent can put you under severe financial pressure and lead you into the path of debt. Here is how you can work out what rent you can afford.
Work Out Your Income
The first step in working out what you can afford is assessing your income. This is a simple task if you have only one source of income. Simply look at your payslips to see how much money you are paid each month. Don’t forget that you are looking at your net pay, which is the amount you actually receive after any taxes and work-related expenses are deducted from your earnings. If you have more than one source of income, such as a second job or benefits, it is important to list and total these to give you your overall monthly income figure. It is also worth looking into the future in terms of your income. If you have a second job that is temporary or does not have fixed hours or you receive benefits that could potentially end, it is important to take this into account.
List All Your Expenses
Next, you should list all your monthly expenses. This includes all your utility costs, food, charges, insurances, travel expenses, and so on. If you have some costs that vary from one month to the next, use a higher estimation rather than a lower one when making your calculations. If this is the first time you have rented a property and you are unsure of what your expenses are likely to include, take advice from either your parents or someone who lives in the area and has experience of the costs.
Think About Leisure Costs
Often, people forget to include what they spend on leisure activities in their calculations. If you regularly meet with friends or have a hobby, including these activities in your list of expenses. If the cost of these is limiting your renting options, you should consider whether you are willing to sacrifice your hobbies and leisure activities to afford rent on a decent property.
Calculating What You Can Afford
To work out what you can afford on rent, you need to add up all your expenses and take this away from your total income figure. The amount of money you have left is what you have available to spend on rent. It is important to remember that you do not have to spend all of this money on rent. In fact, it makes sense to spend less than you have available on the rent. This way, you can save some money for the future or as a backup in case of unexpected expenses.
Finding a Property to Rent in Your Price Range
Once you have worked out what you can afford, you can begin your search to find a rental property. A real estate or rental agency can help you to find the right place within your budget. Alternatively, you can look online or at advertisements for properties in your area.
Struggling to Afford a Rental Property
If you cannot find somewhere that you can afford in your preferred location, then you need to consider your options. One option is to widen your search area as sometimes there are cheaper properties available if you search further afield. Another option is to make savings in other areas of your life so you have a bigger budget for rent. This might mean making some cutbacks, using comparison sites to find better insurance deals, or giving up your hobbies. The final option is to accept that affording the property of your dreams is not an option right now. Work out how you can save money or increase your income so that you will find a better property in the future. Think of it as a stepping stone to renting the property of your dreams.