Are you considering renting a place? If so you must be wondering about the amount of rent you can afford. There are of course many ways to approach the same. The following are some basic ways to do so:
How To Determine How Much Rent You Can Afford
In the opinion of some financial experts, you should not be spending more than 30% of your monthly take home pay on rent. The only problem is that keeping your rent under this ceiling may not be possible in some of the major cities, which have extremely low vacancy rates. Thus instead of this a better way of looking at it is to also consider all of the other expenses you will need to pay apart from rent. The following are some other key considerations as well:
Are you considering planning to move close enough to work that you can take advantage of public transportation
Would you be required to pay utilities in addition to rent?
Are you having other financial obligations like student loans, credit card debt, etc?
If you pay the proposed rent would you have the ability to save for other important goals like owning a home and saving for retirement? Once you move out on your own?
A Realistic Budget is the Best Way to Go
Apart from answering the questions mentioned above you need to determine your overall costs before you move out. If you are a first time renter you might get shocked at how much it costs to live on your own when you add all the costs involved. Thus the best way to do this is to create a realistic budget that covers your anticipated monthly expenses including the approximate amount of rent you will be paying, other fixed and variable monthly expenses. It must also include allocations for seasonal and annual expenses as well as the money you need to set aside for debt repayment. You must not also forget to include renter’s insurance in your budget as well. With this you would get a clear picture of the anticipated expense involved of your moving and staying outside on rent. If you find that this anticipated expenses involved is more than your income it is better not to shift and continue at the same location. Or in case you are to shift it is better to take up a place where the rent is lower and would fit in your budget.
To conclude we can say that advance planning and knowing your financial numbers are critical while you are considering if you are ready to move out for the first time. This is indeed a major step and one you don’t want to take lightly or figure out as you go along. You need to get it absolutely right so that you do not regret your decision in future. So be patient and consider all the pros and cons carefully before taking the final decision.
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