Whether you’re moving to a new apartment (like me) or calculating your current budget for job or life changes, we all end up asking the same question.
How much rent can I afford?
With all the excitement of moving into a new place and getting settled in, we might have a tendency to overlook some important factors. But you can use these simple steps, to help determine how much you can afford to pay.
Start by Calculating a New Budget
A good rule of thumb is to spend about 25 – 30% of your monthly take-home pay on housing costs (rent, mortgage, insurance and etc). My current rent is 19% of the net income from my full-time job, which of course, gives me a little wiggle room.
I’m not including my freelance writing or social media gigs, since I’m only starting to get those off the ground.
Any extra income I make will go towards traveling and investing my Roth IRA. I don’t want to make the same mistake I’ve made in the past and become house rich and cash poor.
Then Test it Out.
Just to be sure I can actually afford a higher rent payment, I will be “paying myself” an extra $300 for the next 2 months.
I’ll be including it within the budget and taking the money out when the rent is due, just like a normal expense. This method has a dual purpose for me:
- I can truly see if affording a higher payment is easy or difficult
- The extra money I’m paying saving, can be used towards incidentals
Speaking of extra costs, there’s lots of other variables to consider when moving to a new place. Below is a list of added expenses to think before moving to a new apartment.
1. Apartment Fees
Apartment fees vary widely, since some rentals are owned by companies, and some are owned by individuals.
Most landlords will require a security deposit equal to one month’s rent and possibly even a move-in fee to hold the apartment. Many of them even tack on application fees, administration fees and pet fees.
2. Commuting Expense
If you plan to stay in the same general location, there won’t be much of a change in commuting or transportation costs. But if you start thinking of moving further out of the city, you might need to allot for a longer commute, which means higher gas and maintenance costs.
On the flip side, if you move closer to your job, you will be saving money each month which provides more cushion within the budget.
3. Replacement Costs
Whether you hire movers, or get friends to help, once you start moving your personal belongings, there’s no guarantee your stuff will arrive in one piece.
Plus theirs a much higher chance of damaging the apartment with so much going on, which means you might ruin any chances of getting the security deposit back.
So you might have to shell out extra cash to replace broken furniture and fix any damaged areas of the apartment.
4. Utility Changes
Unless you’re downsizing, you’re probably moving to a new bigger and better place, like I am. But along with the extra space comes higher utility bills.
Likewise, some rental companies include water/trash in the monthly rent while others do not. There’s additional expense for moving the electricity, TV/cable and internet to the new location which should be included in the budget as well.
5. Rental Insurance
For me rental insurance is a must, and only costs $72 a year to have all my stuff completely protected from fire, floods and theft.
Factors that determine the insurance rate include how secure (or not secure) the rental complex is, if the buildings are made out of brick or wood, in what year they were built and so on.
The monthly insurance premium might go up or down, once you move to a new place.
6. Double Rent Payments
Unless you have perfect timing, your rental payments from one apartment to another will overlap. It’s hard to find a new place, move all your stuff and cancel your old lease right when your new one begins.
The added cost could be pretty significant, so try wait for as long as you can, before making the move to the new place.