One of the most exciting parts of becoming an adult is moving out of your old place and starting your own life. However, as is the case with most major life events, moving out comes with a lot of added responsibility. Part of this duty is knowing and understanding your budget when shopping for the perfect apartment, condo, duplex, or rental house. So how much should you really spend on rent?
The 30 Percent Threshold
The first step in deciding how much you should spend on rent is calculating how much rent you can afford. This is done by finding your fixed income-to-rent ratio. Simply put, this is the percentage of your income that is budgeted towards rent.
As a general rule of thumb, allocating 30 percent of your net income towards rent is a good place to start. Government studies consider people who spend more than 30 percent on living expenses to be “cost-burdened,” and those who spend 50 percent or more to be “severely cost-burdened.”
When calculating your income-to-rent ratio, keep in mind that you should be using your total household income. If you live with a roommate or partner, be sure to factor in their income as well to ensure you’re finding a rent range that’s appropriate for your income level.
If you’re still unsure as to how much rent you can afford, consider an affordability calculator. Remember to consult a financial advisor before entering into a lease if you’re unsure if you’ll be able to make rent.
Consider the 50/30/20 Rule
After you’ve set a fixed income-to-rent ratio, consider the 50/20/30 rule to round out your budget. This rule suggests that 50 percent of your income goes to essentials, 20 percent goes to savings, and the remaining 30 percent goes to non-essential, personal expenses. In this case, rent falls under “essentials.” Also included in this category are any expenses that are absolutely necessary, such as utilities, food, and transportation.
Let’s consider a hypothetical situation in which you make $4,000 per month. Under the 50/20/30 rule with a fixed income-to-rent ratio of 30 percent, you have $2,000 (50 percent) per month to spend on essential living expenses. $1,200 (30 percent) goes to rent, leaving you with $800 per month for other necessary expenses such as utilities and food.
Remember to Budget for Additional Expenses
Now that you’ve budgeted for rent and essential utilities, it’s time to make a plan for how you’re going to furnish your apartment. One of the biggest shocks of moving out on your own is how expensive filling a home can be. From kitchen utensils to lightbulbs and everything in between, it can be pricey to make your space perfect.
For the most part, furniture falls under the 30 percent of personal, non-essential expenses. Consider planning ahead before a move and saving for home goods so that you don’t go into major debt when it comes time to move out.
Be on the Lookout for Savings
If your budget is slightly out of reach for your dream apartment, try to nix unnecessary costs to see if you can make it work. Look for ways to cut down on utilities, insurance, groceries, and rent.
Utilities: Water, heat, and electricity are all necessities, but your TV service isn’t. Cut the cord on TV and mobile services that may not serve you and your budget anymore. Consider swapping out your light bulbs for eco-friendly and energy-efficient light bulbs to cut down your electric bill.
Insurance: Instead of paying monthly renters insurance rates, save a fraction of the cost by paying your yearly cost in full. If you have a roommate, ask to share a policy together at a premium rate.
Groceries: Swap your nights out for a homemade meal. You can save up to $832 a year with this simple habit change. When grocery shopping, add up costs as you shop to ensure your budget stays on track.
Rent: One of the best ways to save on rent is to split the bill. Consider getting roommates to save 50 percent or more on your monthly rent.
A lease is not something to be entered into lightly. Biting off more rent than you can chew can lead to unpaid rent, which can damage your credit score and make it harder to find an apartment or buy a home in the future. By implementing these best practices, you’ll hopefully find a balance between finding a place you love and still having room in your budget for a little bit of fun.
Sources: US Census Bureau
The post How Much Should You Spend on Rent? appeared first on MintLife Blog.
Original Source: blog.mint.com
Many have asked for a new budget. My last update was kind of a pie in the sky budget which quickly came to a screeching halt with the advent of the quarantine and resulting business loss.
This budget reflects the money that’s been going out for the past couple of months and the plan going forward while the Pandemic/Quarantine is our reality.
Line ItemMonthly Amount
Auto – Gas$30
Auto – Maintenance$75
Gifts – birthdays, misc$50
Princess Senior Year$150
All monies beyond this are going into savings.
Pandemic Money Updates
Some specific line items updates….
Line items removed due to tightening our belt: Personal, Prepare for Moving and Family Vacation
Line items reduce due to Pandemic induced lifestyle changes: Gas, Auto Insurance, House/Yard Maintenance, EF Savings
Life items increased due to Pandemic induced lifestyle changes: Groceries, Allowance
I believe those are all pretty self-explanatory when you factor in that we have added two additional boys to the household. Our grocery budget has returned to our previously budgeted amount. And since Gymnast is here I have begun giving him an allowance as well.
Line Item Updates and News
Several ongoing money updates…
Princess Senior Tuition
Princess has once again earned a merit scholarship for her hard work and resulting grades. This knocked an additional $1,000 off her senior year tuition. Because I had been saving $500 a month since January and then I picked up a couple of large projects, I now have her tuition saved in full. Yeah! I have greatly reduced the savings toward her senior year, but kept it to have some savings toward extraneous senior year expenses.
Our auto insurance is going to go up at the end of next week, but I don’t know how much. Our insurance company has been giving us 20% of our premiums back the last 2 months. However, Princess will begin driving next week. (Thanks to our governor for removing the road test requirement.) I still do not know what her dad is doing about a car or if she will be sharing with me. In addition, History Buff is beginning to look for a car…but not rushing. So we will definitely be adding a new driver and possibly 1 or 2 cars in the next couple of months.
Car Loan – Until the uncertainty with Princess’ car is cleared up, we are paying a minimal car payment. I did confirm this month that we owe less than it’s worth. But I have no plans to sell it at this point.
Student Loans – I have put the minimum student loan payment in to commit to paying it. But the plan as previously posted is to pay additional monies toward the lower of the two student loans every month.
As many point out, my income is variable. But thankfully, after a really slow 6 weeks as a result of the pandemic, things are booming again. Less than two weeks into May and I’ve earned the income to put us back on “living on last month’s income,” have previous clients returning, have referrals rolling in as people are returning to pursuing their dreams and have picked up several new steady clients.
I may have to work in the dining room with our full house and crazy schedules (Sea Cadet is working overnights at one of his jobs.) But life is good and I am so grateful.
The post Hope’s Budget – Pandemic – Summer, 2020 appeared first on Blogging Away Debt.
Original Source: bloggingawaydebt.com
Courtesy of Michelle Juergen
Michelle Juergen is a freelance writer and editor in Los Angeles who was recently let go from her job at a travel trade publication.
Her current monthly income is about $4,000 with unemployment benefits, and her minimum monthly expenses come to around $3,100.
For Business Insider’s “Real Money” series, Juergen tracked her spending for a week. Between groceries, business purchases, and personal items, she spent $682.84.
Visit Business Insider’s homepage for more stories.
My monthly expenses usually total $3,078, and are broken down into these categories:
Miscellaneous items include my $60 cell phone bill, $120 yoga membership, Netflix and Spotify Premium accounts, random Amazon orders, and emergency costs like DMV or doctor visits.
But before I share a snapshot of my spending as a newly unemployed person, I must address something crucial you’ll see: $16 bacon.
Yes, I paid $16 for slices of fatty meat I could have gotten for $5 at an ordinary grocery store. But these are unsure times, and fancy bacon is a small, superfluous luxury that, writ large, assuages — even if just for the time it takes to eat breakfast — my constant unease about the future of my life and the world around me.
I was let go rather suddenly from my job as a Los Angeles-based writer and editor for a travel trade magazine, as the pandemic and travel’s uncertain future forced the company to downsize. But determining how to wisely spend my income — which, as of April 1, comes from unemployment insurance (UI), a couple freelance gigs, and some severance pay — isn’t new to me. I’ve always had a tighter budget because of student loans and car payments (both of which I paid off last fall), so I’m used to leaner finances. When I splurged, it was often on food: dinners and drinks with friends, or solo steak frites and wine after a long work week.
So although I’ve had to make tweaks to my monthly budget after being let go, and am keenly more aware of every dollar I spend, I’ve not had to profoundly change my spending habits. And thanks to the CARES Act, which adds $600 per week to the $450 I receive from UI (the maximum allowance in California), I’m actually making more per month than I did as senior editor of the travel magazine.
While simultaneously elevated and disheartened by this fact, I’ve been able to save more per month than I was formerly able, as well as had time to pursue creative projects like contributing unpaid time into “Fly Brother,” a new travel show on public television; joining free online writing seminars; and duct-taping my iPhone to the ceiling to experiment with self-portraits.
My spending will, however, have to decrease in the coming months, especially as the CARES Act’s extra $600 ends July 31. But I plan to mitigate this by increasing my freelance work and moving somewhere more affordable.
Here’s how I spent my money during a recent week in May.
Courtesy of Michelle Juergen
Bobo’s Oat Bars: $32.89
Every day is Blursday now, but somehow, my inner Garfield always feels the acute Weltschmerz of a Monday. During this particular one, I sweat and stress-ate my way through a freelance copywriting project I was on deadline for. During my frenetic sprint, I received a “We miss you!” email with an offer for 30% off from Bobo’s, a Boulder, Colorado maker of tasty oat bars. The sentiment worked: I bought protein and oat bars, a purchase that will count toward my grocery budget.
Courtesy of Michelle Juergen
Lady & Larder groceries: $61.70
Maybe it was the aftermath of a Monday, but Tuesday begat the $16 bacon binge. I do most of my grocery shopping at Trader Joe’s, but as the product of two organic-food-loving parents, I’ve built certain splurges into my dining budget for things like $9 cherries from small farms, a $10 loaf of locally-made sourdough bread, and, yes, $16 pasture-raised, antibiotic-free, non-GMO bacon from a nearby purveyor. (Side note: Though I do pay more for certain grocery items, I’d never actually bought expensive bacon before.) I picked up these and a few other purchases from Lady & Larder, a local cheese shop that pivoted into a takeout store when the coronavirus severely impacted its business.
After assembling and savoring an epic BLT, I joined my therapist online for our weekly video session. Therapy has been built into my budget for the last five or so years, and I’ve been fortunate to find sliding-scale clinics and counselors that work with my finances. I anticipate the cost will become tougher to maintain in the coming months, but it has been so essential to maintaining my well-being (particularly now, as I navigate constant uncertainty) that I’ll make it work.
Courtesy of Michelle Juergen
Paula’s Choice retinol: $45.55
Before the pandemic, performing the ubiquitous lengthy skincare regime for which women are often mocked was keeping my skin clear. Now, I’m dealing with rogue breakouts that seem to magnify the haphazardness of life these days.
And it’s not just me: Experiencing adult acne in isolation is a thing — one that’s making headlines. So while the pixelation of weekly Zoom calls hides my blemishes from friends, it doesn’t conceal the ever-present unease I feel over my growing list of Things I Can’t Control.
Thus, a $45 purchase of Paula’s Choice retinol. When it comes to beauty- and household-related spending, I generally only buy things that I’ve researched thoroughly and aren’t full price. So I made sure to get a deal: I used a code that snagged me a 20% discount, free shipping, and a bonus travel size retinol.
See the rest of the story at Business Insider
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READ MORE: The 3 smartest ways to cut costs and grow your savings during a pandemic, according to a personal finance guru
SEE ALSO: I live in rural Costa Rica and spend $1,000 a month on travel. Here’s exactly where my money goes in a typical week.
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Here in the Northwest, we’re in Coronavirus mode. It showed up close to home far faster than I expected. We’ve had some cases in our immediate area, and it’s put everyone on high alert. It certainly motivated us to pay the price of stocking up last minute on essentials, including some of the basics Hope mentioned when preparing for a pandemic.
I know this has become a controversial topic for a lot of people, but I think we can all agree it never hurts to be prepared. Here is one of our main concerns: what would we do if we were quarantined for 14 days? That’s already happened with some families, and we know it’s a very real possibility.
So this weekend we focused on:
– Stocking up enough food for 14 days
– Getting sufficient medicines, especially for my asthma
– Creating a plan for our business
Stocking up on Food
I ran to the store early Saturday morning, buying two weeks’ worth of what we’d normally eat. We usually have a lot of dry goods and canned foods in our garage, but with moving on our mind we’ve been eating through it. Dangit. So I begrudgingly restocked some of those staples, juuuust in case. This bonus grocery trip cost us nearly $100, but it did mean I can avoid the stores this week.
By Saturday evening, apparently, store shelves were becoming bare. Rice, beans, and soup cans were gone. A friend went to Costco and texted that they were in line all the way to the BACK of the store. Toilet paper and water were the hot items, although people were also joking about the wine and beer in their carts.
I’ve since seen stores are cleaned out (pun intended) of hand sanitizer and cleaners like Lysol and Clorox Wipes. There’s been some price gouging, so I’m grateful we already had enough of these non-food items.
Keeping Medicines on Hand
We made sure we had fever reducers for us and the kids, and then I started getting more of my asthma and sinus prescriptions. They’re so expensive and because of insurance limits I often don’t get extra. Calling in all my meds at once reminded me just how much we pay for my medications each month!
– Asthma pills $14/month
– Allergy pills $30/month
– Nasal Rinse $45/month
– Steroid Inhaler $45
– Rescue Inhaler $45
That’s a total of $179.00. And those don’t include a few over-the-counter vitamins and pills I take. Oof!
(I have to put in perspective that before I started this cocktail of prescriptions about five years ago, I was having non-stop sinus and respiratory problems. I needed regular sinus surgeries, I wasn’t sleeping well, and I was really struggling. So I’d rather pay for my better lifestyle now than endure that miserable existence again.)
That total was bothering me though. I already take all the generics that I can, so I decided to finally look into online coupons. I came to the pharmacy with a coupon I found on GoodRx.com that I thought would make one of my $45 inhalers only $18. Unfortunately it wasn’t for the exact same one, and the kind pharmacy tech searched and couldn’t find a coupon that would work either. If you have any coupon advice, I’d love to hear it.
Planning for our Business
We’ve had some cancelations at work either because people weren’t feeling well or they were being cautious. We are bracing ourselves for a possibly slower March and April due to all of this. We’ve been tweaking how we schedule and getting even more strict with our cleanliness and hygiene.
We also may have to close our business down for a time if my husband or too many of the employees get sick or quarantined. If only we could work from home! We’ve been bracing ourselves for what that could mean for our bank accounts.
All this prep has really reset our typical budget, but it’s money we would have spent eventually in the month so we’re making it work. Plus, I suppose this is a time to be grateful for emergency funds. Stocking up and preparing has given us some peace of mind, so it’s definitely been worth the price.
The post The Price of Stocking Up appeared first on Blogging Away Debt.
Original Source: bloggingawaydebt.com