Tips on figuring out how to set a budget for rent
Tenants | Tips for Tenants | 18/04/19
Whether you’re a first-time renter or you’ve been renting for years, figuring out how to budget for rent can be difficult. There are so many things to consider: from the obvious, like rent prices, to the ones everyone always forgets, like phone bills. However, Roomlala is here to help you figure out how to set a budget and put these worries behind you.
How to set a budget: what do you need to pay for each month?
Unfortunately, rent prices aren’t the only living expenses that you need to budget for. Before you can figure out how much you can afford to spend on rent, you need to work out how much you’ll need to spend on other living costs every month. These are:
- Water/Electricity/Gas bill
- Council tax
- Loan/Credit card payments (if applicable)
- Service charges (if applicable)
- Home/Contents Insurance
- Childcare (if applicable)
- TV license
- Phone/Internet bill
These costs can vary depending on the person, area and provider so make sure you use up to date statements or quotes when factoring these in to your budget.
How much should you pay for rent?
For years, the rule of thumb regarding the amount you spend on rent has been that it should be 30% of your income. However, this rule has been around since the 80s and, as prices have heavily increased since then, this rule has become slightly outdated and harder to follow in recent years.
Recently, renters have started to follow Elizabeth Warren’s 50/30/20 rule, which says you should spend 50% of your income after tax on your needs (housing, groceries, utilities, insurance, etc.), 30% on your wants (hobbies, dining out, shopping) and save the remaining 20%.
Differences in budgets depending on where you live
‘How much should you pay for rent?’ is a question asked by many but the answer can vary greatly, depending on the area you live in or are moving to. It isn’t a secret that some parts of the UK are cheaper to live in than others. In 2016, those living in the North East of England had to pay 22.53% of their income for rent, whereas those living in London had to shell out a whopping 48.87%. This drastic difference in rent prices means that it isn’t always possible to stick to guidelines about how much of your income you should be spending on rent.
How to set a budget as a student
Are you a student moving into uni accommodation or a student house? It's important to find out how much student finance you'll be eligible for (if you are eligible for it), how much your parents are willing and able to pay for and if you're eligible for any grants or scholarships as soon as possible, so you can make a budget and figure out how much rent you will be able to afford.
Some universities offer their accommodation on a first come, first served basis, so it is important to figure this out early so you can apply for the accommodation you can afford.
However, university accommodation rent prices can be quite expensive, particularly if you don’t get a choice in the type of accommodation you get. One thing students in this situation often worry about is how to budget for rent, especially if your student finance doesn’t cover it all.
If you are in this position, flat sharing or renting out someone’s spare room is a great way to save money on rent. You get to meet new people, find your ideal location and share the chore list - all while saving money. On Roomlala, we have accommodation to suit everyone’s needs so why not check out the rent prices for your area and sign up to find your future home.
You can find more ways to save money as a student in our article 6 Tips to Help Students Save Money.
The dreaded agency fees
Unfortunately for tenants, there are some added rental costs that need to be taken into account outside of figuring out the answer to ‘how much should you pay for rent’.
Until 1st June 2019, renters in England can be asked to pay added fees by their agent/landlord (the ban against them is already in place in Scotland). These fees are mainly administrative and cover things like:
- Drawing up contracts
- Reference checks
- Credit checks
- Renewal fees
After 1st June, English renters will no longer have to pay fees for the things listed above, but will still be able to be charged for replacing keys if they lose them, if they are more than 14 days late paying rent and if they want to change their tenancy or bring it to an end.
While the ban on agency fees is a bonus for renters, some agencies are encouraging landlords to increase their rent in order to not lose money so there could be a rent increase on the horizon.
On Roomlala, we only charge 4% of the monthly fee as a service charge, and you can benefit from reduced service fees if you become a Connect Pass member. Also, as our landlords are often renting out spare rooms to earn spare cash on the side, our rates can be lower than those found through agencies.
Don’t let one-off costs slip your mind!
Although how to budget for rent is often at the forefront of renters’ minds, you shouldn’t forget to factor in the one-off costs that come with moving to somewhere new. These include:
- The cost of transporting your things to your new home
- The cost of travel if you are moving to somewhere far from your current accommodation
- Storage fees if you are unable to move everything in right away
- The cost of furnishing the accommodation, particularly if it’s unfurnished.
These costs can add up quickly, so we recommend planning for these in advance as travel costs tend to increase, and movers’ availability can decrease as your moving date approaches. Also, furnishing your accommodation can be expensive if you don’t already own things to furnish it with, so why not check out our articles on decorating your accommodation on a budget.
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