Leaving home for the first time? Moving into your first apartment? Chances are, you’ll be privately renting. It’s an exciting time and a big step in gaining independence and learning to live on your own.
But now you are partly or fully in charge of your finances, you need to manage them effectively – especially as 28% of private renters aren’t far from struggling to pay their housing costs.
Budgeting is key for renters. Here are some tips on how you can avoid missed payments, marks on your credit history, and financial implications that impact other aspects of your life.
Understand your income
It’s important that you properly understand your income when creating an effective budget. If you’re paid the same amount each month, this is a simple task, but if you work shifts or are a freelancer, your income may differ significantly from month to month.
If this is the case, work out your average monthly pay since you began working, then jot down the lowest monthly amount you earned over the period. Ideally, you should budget with the smaller figure if you want to be well prepared and then any excess is a bonus.
Work out your expenses
To understand money going out, study your bank statements and bills, listing and categorising your outgoings. This should include all your regular bills, such as council tax, electricity, gas, water, internet, TV license, vehicle costs, insurance, credit payments, and rent. If your food costs are generally the same each month, add this total in too.
Sort your disposable income
Once you know your income and regular outgoings, you can subtract the latter from the former to work out how much money you can spend on non-essentials, savings, as well as food – if you don’t want to track it as a regular fixed expense.
At the start of each month, pay your bills and allocate your disposable income into various ‘pots’, such as your savings account, a debit account for purchases, your pension (if not sorted by your employer) and so forth. This will ensure that you don’t run out of money by the end of the month.
Create a buffer
In life, emergencies and accidents happen. Starting a budget is a brilliant first step, but you need a cushion in case your laptop breaks down, your car requires maintenance or anything else unforeseen arises. If you don’t have an emergency fund available when disaster strikes, forms of credit such as long-term loans may be helpful. However, you should always consider the financial commitment involved before applying.
Once you’ve established your monthly budget, contributing to an emergency fund is a very smart idea. Building this over several months will provide a safety net in case you are unable to work for a prolonged period, or you lost your job all together.