Creating a monthly budget is one of the most important things you can do as a renter if you don’t want to deal with late fees or missing rent payments. With rent, utilities, groceries, transportation, and other common expenses, it’s easy to underestimate how much you’re really spending. Today, we’ll review why budgeting is so important when you’re renting and how to create a monthly budget that works for you.
Why Budgeting Matters When You’re Renting
Budgeting when you’re renting is extremely important. After all, you have to make sure you can pay your rent each month, and usually, that’s not your only expense. Along with your monthly rent payment, you also have to plan for utilities, groceries, transportation, renter’s insurance (depending on your Austin, TX property management company), internet, and everyday living costs, which can quickly add up.
Without a clear budget, you may find yourself overspending on other things, and if you’re not careful, you may end up short on rent. That’s why putting in the effort to create a monthly budget can help you stay on track and avoid late payments. It also makes it a lot easier to plan for unexpected expenses, like emergency repairs, medical bills, or unforeseen changes with your monthly income.
A lot of people find success using the 50/30/20 budget method, which means you divide your monthly income into needs, wants, and savings. 50 percent of your income should cover needs, like your rent and other necessary bills. Then 30 percent of your income can cover wants, like dining out, streaming services, entertainment, or hobbies. Finally, 20 percent of your income should go into savings.
Calculating Your Total Monthly Housing Costs
Calculating your total monthly housing costs goes beyond just your monthly rent payment. While rent is most likely your largest expense, it’s important to also factor in other housing-related costs to truly understand what you’re spending each month.
Along with your monthly rent payment, it’s important to include utilities like electricity, gas, water, trash, and sewer (if they’re not included in the rent). Then, you have to factor in other costs like renter’s insurance, parking fees, or pet rent, if applicable.
Once everything is totaled, you’ll have a realistic picture of your monthly housing expenses, which can help you set a budget that works for your income.
Here’s an example of what that may look like.
Monthly Rent: $1,450
Electricity: $120
Gas: $40
Water/Trash/Sewer: $65
Internet: $80
Renter’s Insurance: $20
Parking Fee: $35
Pet Rent: $50
Laundry: $30
Total Monthly Housing Cost: $1,890
How to Create a Monthly Budget That Works for You
Once you know exactly what you need to spend on rent and other bills each month, you can get a clearer idea of how to break up your monthly spending on other things. So, let’s say you bring home $3,800 each month (after taxes). We know your housing costs total $1,890 per month, so we now need to factor in other expenses you pay for, like groceries, transportation, and phone.
When you create a monthly budget, here’s what that may look like:
Groceries: $350
Transportation: $200
Phone: $60
Insurance (health, auto): $430
Debt payments: $250
Personal care: $100
Entertainment: $100
Wants (gifts, clothing, travel): $150
Total Spending for Wants/Needs: $1,640
So, now we know that housing costs $1,890 and other monthly spending costs $1,640. If you bring home $3,800 per month, this leaves $270 left over, which can be put toward savings.
Tips to Stick to Your Monthly Budget
Sticking to a monthly budget is challenging–especially with rising costs of just about everything. However, creating just a few consistent habits can make it much easier to stay on track and avoid overspending. Some helpful tips to help you stick to your budget include:
Track your spending regularly so you know exactly where your money is going.
Set realistic goals and limits for variable expenses like groceries, going out, and entertainment.
Automate bills and savings to avoid late fees and make saving money a non-negotiable.
Build in a small buffer for unexpected expenses so that something doesn’t pop up and you’re unable to cover it.
Review your monthly budget regularly and adjust it if your costs or income change.
Prioritize needs over wants, and plan spending ahead of time, especially if you don’t have much wiggle room in your budget.
Sticking to your budget requires some discipline, flexibility, and diligence. By checking in on your finances and knowing where your money’s going, you can stick to your budget much more easily.
How to Adjust Your Budget When Rent Increases
If you decide to renew your lease, you may be faced with a rent increase, which can put some pressure on your monthly budget if your income doesn’t change. While you may not be able to avoid a rent increase entirely, you can adjust your budget a bit to help you stay on track. Here are some things you may consider.
Recalculate your monthly housing expenses to see how much extra you’ll pay with the increase and how it might affect your overall budget.
Review variable expenses like going out to eat, entertainment, and shopping to see if there are any areas you can cut back on.
Try to reduce unnecessary spending in non-essential categories.
Reevaluate subscriptions and memberships, and cancel or downgrade anything you don’t use regularly.
Adjust your savings goal if necessary, but try not to eliminate it–remember, even small contributions matter, too.
Look for ways to increase your income, even if it’s negotiating pay, picking up side work, or selling things you don’t use or need anymore.
Find a Rental Within Your Budget
If you want to create a monthly budget that works with your income and expenses, the first step is looking at where you’re spending. Are there any areas that you’re overspending in? For many people, rent is their biggest expense each month, so finding a rental property that fits within their budget is crucial.
If you’re looking for a rental property near Austin, TX, work with Stone Oak Management to find one that fits your needs. Our team of reliable property managers can help you through every step of the rental process. Contact us today to learn more about our full-service management.
