So you’re looking for your first apartment. Maybe you’re a college student who is moving off campus for the first time or you recently graduated and are moving into the big city to start your career. Maybe you finally got sick of living with mom and dad (or they politely encouraged you to move out) and you have to find a new apartment. No matter the reason, now that you plan to live on your own, you’re going to need money to afford your new place and living expenses. Having money is great, but knowing how to manage your financial situation and save money is what’s going to ensure you have enough cash to pay rent each month. The process of saving, managing, and allocating your income is called budgeting and there are a few easy ways to do it.
Download Your Bank’s Mobile Application
It’s important you have immediate access to your bank accounts so you know exactly how much money you have in your checking and savings accounts. If you have a credit card with the bank, you can check your spending and credit limit as well. With the ability to constantly check your balance, you’ll always know whether or not you can splurge on that $60 pillow from Urban Outfitters or if you should look for your bedding decor at a store like Target.
You can download some of the popular banking apps for iPhone here:
You can download some of the popular banking apps for Android here:
Use a Spreadsheet
One of the most basic, but most effective, ways to keep a budget is to write it all down on paper. Whether you use Google Docs or Excel, mapping out your monthly spending and financial goals in a spreadsheet will benefit you in a few different ways. First, you have the ability to decide how much you’d like to spend on certain expenses based on your monthly income, which is helpful because it will instill a more conscious effort to keep your spending in check. Second, you’ll be able to compare what you’ve budgeted per expense to what you’re actually spending per expense. This will tell you where you might need to cut back or where you have flexibility to spend a little more. A spreadsheet can be particularly helpful in the first few months of moving into your first place, as many additional expenses pop up that you may not think about when financially planning for your new place. There are big one-off expenses like paying a security deposit, a broker’s fee if you live in a city like New York, and a potentially a pet deposit if you are bringing a furry friend to your new apartment complex. Little things, like buying new cleaning supplies, hitting up the grocery store to stock your fridge, and buying all your new IKEA furniture, add up quickly as well. Believe us, you’re going to want to track your spending on these likely one-time expenses to make sure you can still afford first month’s rent payment. Lastly, spreadsheet budgets give you a way to see how all of your money is moving in one, simplified place.
(To use the Budget Tracker, open, go to File –> Make a copy… and create your own)
Use a Mobile App
You might find writing down every single purchase and expense a little tedious and would prefer a simpler way to keep track of your spending. You’re in luck because there are mobile applications that were created to do just that. Apps like Clarity and Mint help keep track of your spending by connecting to your bank account and credit cards, and organizing your monthly expenses into standard spending categories like bills, entertainment, and groceries. With these apps you’ll be able to see real-time updates on your spending as well as create alerts for when you’ve overspent in a specific category. A small catch of using an app over a spreadsheet is that sometimes the apps don’t properly categorize certain purchases. However, you always have the ability to go in and categorize an expense if need be.
Use the 50/30/20 Rule
If you’re someone whose purchases and expenses change frequently or you don’t want to be bothered with tracking every dollar in an app or spreadsheet, a good rule of thumb is to use the 50/30/20 rule. Essentially, this rule breaks down your spending into three categories: necessities, wants, and savings or debt repayment. The rule applies to your take-home pay, meaning what you receive after taxes, not your gross income. According to the experts, 50% of your income each month should be spent on necessities. This includes monthly rent, bills, groceries, renters insurance, and healthcare. Remember, depending on location and seasonality, your air conditioning and heating bill may dramatically increase, so don’t forget to account for that in your planning. The next 30% of your income can be spent on “wants” which includes entertainment (think streaming services Hulu and Netflix), shopping, and gifts. You then want to put the remaining 20% of your money into savings or use it to pay off debt like student loans or car payments. This rule is an easy way to set a monthly budget without getting too bogged down in tracking every expenditure.
Gaining insight into your finances is incredibly important when it comes to renting on your own. Knowing and tracking how much money you spend on recurring expenses will not only tell you how much rent you can afford in the first place, it’ll also help you estimate how much you should expect to pay for certain apartment expenses each month. If you budget correctly, you should be able to avoid living paycheck-to-paycheck, and may even end up with a little extra cash to spend. Especially for first-time renters, monthly budgeting will keep you informed and hopefully out of debt, so don’t wait to get started!