We dig into the big issues of renting your first apartment or basement suite.
Are you ready to make the big move?
There’s more to it than paying rent- living on your own creates new expenses that you may not have considered, such as rental insurance, commuting expenses, and furnishing your new place. Here are several things to consider as you plan for your big move.
Build a Budget
You will need a budget before you move. It’s the only way to understand what you can afford, and it will help you make sense of all the expenses that come with your new freedom.
If you’re just starting out, a spending ratio, like the one below, can help you evaluate your spending habits and understand what you can and can’t afford.
Spending ratios are a general guide. Add categories to better reflect your personal situation. For example, students will need to factor in tuition and textbooks into their spending ratio.
How Much Rent Can You Afford? The rule of thumb is to keep housing costs below 30% of your net income. So, you will need to add up your regular household expenses like rent, renter’s insurance, electricity, utilities, internet, parking, and divide the result by your monthly net income.
Reality Check Time!
What happens when you find an apartment you love, but it’s way outside your spending ratio?
Average Rent Across Australia
Housing costs in certain rental markets like Sydney and Melbourne are very high. If you're spending ratio is a few percentage points above 30 for housing, you’re OK. But when it starts climbing over 45%, you should probably re-evaluate where you live, consider living with a roommate or look at saving in other areas.
More Than Just the Rent Check. When taking your total housing costs into consideration, be sure to look past your rent payment. Here are a few items to take into consideration:
Save Up Before Making the Leap! Just because you have a steady job and your housing spending ratio is in line, that doesn’t mean you’re done just yet. You will need to have a few thousand dollars saved up prior to making the final leap to renting your first apartment.