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How to avoid budget blowouts?
Looking ahead to your first home is a majorly exciting time. It’s so close you can almost see it in your head: You, thriving on your own, cooking a delicious dinner in your impeccable kitchen before settling down in your well-styled living room for a Game of Thrones binge on your brand new TV. But before you get carried away with the fantasies of your first place, let me get real with you: Who’s paying for all of it?
Answer: You are. With a great home comes great responsibility, and you’re the one in charge of figuring out how to pay the bills now. Before you set out on your search for the perfect place, make sure you’re crossing all the t’s and dotting the i’s when it comes to figuring out how much you can afford.
3 things to avoid a budget catastrophe
1. Planning to spend too big a chunk on rent
You don’t want to be apartment poor. Stretching your housing budget even a little bit (to be able to get into your top-choice neighbourhood or have a freshly remodelled kitchen, for instance) will have compounding effects. It’s not like splurging on a pair of shoes; you’ll have to reach and pay that extra $100 over and over, month after month until your lease is up.
So what is a good rent budget? As a general rule. finance experts suggest that your housing costs take up no more than 30% of your income (calculated before taxes).
2. Underestimating what you’ll pay each month
I’m using the term “housing costs” instead of “rent” because there’s way more to consider than just what you write on the cheque to the landlord. On top of rent, your monthly housing costs may include gas and electricity bills and water fees. And if you’re moving from student accommodation where your internet was included, you’ll need to account for yet another addition to your “rent.”
You can ask your property manager to provide you with an estimate of utility costs for the building and the area, and get quotes for the internet from a local provider before you make a decision.
3. Forgetting all the added move-in costs
So you’ve done everything right and determined exactly what you can afford to spend on housing each month. Fantastic! But you also need to budget for a small sum of up-front cash to actually get you inside the door of your first place. Depending on your landlord or property management agent, you may be expected to pay an application fee, a credit check fee, a pet fee and a security deposit. Plus there are deposits to get your electricity and gas turned on in your name. (And that’s all to say nothing of the expenses of actually moving your stuff from point A to point B.)
These fees will vary wildly, so it’s best to just ask up-front when you’re house hunting and use them to help make your decision.
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We hope you enjoyed this article
The information contained in this article is based on the authors opinion only and is of a general nature which is not indicative of future results or events and does not consider your personal situation or particular needs. Professional advice should always be sought relevant to your circumstances.
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