Budgeting Guide for Renters

by Redeeming Riches on December 10, 2014

Budgeting is imperative for any person – regardless of whether they rent or own a home; however, in it is even more important for a renter. Creating a budget may prove to be an exceptionally daunting task. Once you have found the place that you want to live in, you must determine if you are able to meet the expenses associated with the residence. A budget is a necessary component that allows you to ensure that you successfully live within your means. It also helps to make sure that you are able to stay on track with your finances, and that you avoid acquiring debt. As a renter, this is imperative so that you may ensure that you do not lose your home.

When budgeting as a renter, you must live by what is known as the “50/20/30 Rule”. It goes as follows:

  • It is important to figure out your average take home pay. Then, you should make sure that no more than 50% of that amount is designated to pay the essentials. These are your home, heat, and the food that you consume.
  • Next, 20% of your take home pay should be designated towards your financial priorities. Examples of such priorities include the repayment of the debts that you have acquired throughout your lifetime, retirement savings, and any other types of savings that you are investing in for emergencies and other potential future expenses.
  • Finally, 30% of your take home pay may be placed towards your lifestyle expenses. That is, if you are able to afford it. Many prefer to put more in savings and paying off debts than lifestyle expenses. Common lifestyle expenses include, but, are not at all limited to, shopping, entertainment, and even gym memberships.

A budget is designed to assist you in prioritizing your finances. The money that you need to survive from month to month should be taken into consideration first, using the 50/20/30 rule. These expenses usually include your rent, your household bills, car payments, and any type of maintenance fees that pertain to your home and vehicle that you are directly responsible for paying. The amount of these expenses should immediately be deducted from the amount of money that you take home each pay period. Then, you should determine any other types of financial obligations that you have and work to pay those. Anything that is left over after your monthly expenses may then be used towards lifestyle expenses; however, if you wish to develop a sense of financial security in the future, it may be best to put additional funds towards any outstanding debts that you have or any savings accounts that you currently have open.

When budgeting, it is always important to keep your financial responsibilities lower than your income. This way, you are able to avoid developing debt and will have the ability to save money. Out of all of the steps involved when it comes to budgeting, the commitment to stick to your goals is the most important. Without having the commitment to fulfill the terms of your budget, you will never achieve the success that you desire in being financially secure as a tenant.

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