CREATING AN EFFECTIVE BUDGET AS A TENANT
Are you are currently looking into renting a house or apartment in Redding? Do you have a budget determined? Will this be your first time living on your own? If so, it is essential that you understand that when you move into a rental house or apartment, you will be required to take on specific financial responsibilities as a tenant. These financial responsibilities will include rent payments and utility payments. You will need to ask the landlord upfront how much rent and utilities will cost, and then determine whether or not you can afford those payments before you commit to the rental property. The best way to determine whether or not you can afford to live in a certain rental house or apartment is to create an effective budget upfront. Creating an effective budget is important and aids in your ability to have a great relationship with your landlord and a great experience as a tenant.
Grab a piece of paper and a pen or a computer. Now find a cozy seat that you can sit in for about a half an hour.
The first thing you will want to do is figure out your total revenue. Your income is any money that you receive on a regular basis through work. Do you currently have a job? How many hours do you work per week? Do you get paid by the hour or are you on a salary? If hourly, much money do you make per hour? Write all of this down under your income section. Include any other kind of income you might make outside of your job on a monthly basis. Now calculate and write down your total income per month. You can do this by adding up the total hours you work per work and then multiplying that number by the amount of money you make per hour. Then you will multiply that number by 4 to get your monthly income amount. For example, if you work 40 hours per week and you make $10 per hour, your weekly income will be $400. Your monthly income will be $1,600.
Now start a new section for your fixed expenses. A fixed expense is an expense that will be the same total amount every month. It is a fixed cost. The amount does not change or vary.
An example of this would be a rent payment or a cell phone payment. It is a fixed amount that has to be paid every month. Ask the landlord what the rent payment would be for the rental house or apartment you are looking into and write it down. Now write down any other fixed expenses that you know you will have to pay every month and then add them all up to get your total fixed expenses.
Now start a section for your flexible expenses. A flexible expense is also an expense that occurs regularly, but the amount may change depending on the circumstances. For example, a utility payment is a flexible expense because it occurs every month, but the cost may change depending on your usage of electricity, gas, water, etc. Write down the average amount you might spend on utilities each month. Now write down any other flexible expenses you may have. It is also important to include gas and groceries in this list of expenses. How much do you spend on groceries per week? Multiply that by 4 to get your monthly cost. Now do the same for gas. Now add up all of your flexible expenses to find out your total flexible expenses.
TOTAL INCOME VS. TOTAL EXPENSES:
Now, add your total fixed expenses and your total flexible expenses to find out what your total expenses will be per month. Now take a look at your total income. Are your expenses higher or lower than your income? If they are higher, the rental house or apartment you are looking into is unaffordable for you. If they are lower, how much money do you have leftover after you would pay all of your expenses each month? That amount is your discretionary income. It is money that you can use at your discretion. Are you satisfied with the amount of money you have leftover? This is up to you. If you are satisfied with it, you may decide to move forward with the rental property you are looking into. If you are not satisfied with it, you may want to check out some other rental houses or apartments.
Ultimately, a budget will help you determine where you want to live and it will also effectively help you manage your financial responsibilities when you do decide on a rental house or apartment. A budget is a safeguard against mismanagement, late payments, debt, stress, and conflicts with your landlord. If you would like more information on how to effectively manage your responsibilities as a tenant, feel free to call us at Authority Property Management! We have done property management in Redding and Shasta County for years and would love to help you in any way we can! Give us a call at (530) 410-6085.
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