Getting your first apartment is an exciting time, but you may end up with more than you can truly afford if you don’t plan well. Before you sign on the dotted line for your first apartment, take some time to budget for your needs. Here are some tips to help you create a budget for your first apartment.
Choose the Right Rent Amount
First, make sure the rent amount is within reach. This is going to be one of your largest expenses. A good rule of thumb is finding an apartment with rent between 25 and 35 percent of your gross income. This will give you wiggle room for other expenses.
2. Don’t Forget Utilities and Insurance
Utilities and insurance are an important part of living on your own. It would help if you had insurance to protect your things, and you will be paying utilities for living in your apartment. While some apartments include utilities in the rent, others will not. In general, you should plan about half of your income for fixed expenses, including your utilities, which will not change much. Since 25 to 35 percent of your budget is on rent, this leaves 25 to 15 percent for your other fixed items.
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3. Make Sure You’re Saving
What happens if you move into your new apartment and lose your job after a few months? How will you pay rent? You need to have enough money in your budget to save for a “rainy day” emergency fund. This fund, which you only tap in an emergency, can get you by a few months without income if a disaster strikes. Look for 3-6 months worth of saving. Aim to use 30 percent of your budget for savings of all types, including retirement and emergency fund savings.
4. Plan Entertainment Wisely
Finally, be prepared for less free money to go out with friends, eat out and enjoy your favorite entertainment types. You will still want to enjoy some of these activities, but you will need to plan more carefully for them to ensure you have the budget to do them. If you’ve created a working budget, you should have about 20 percent of your income available for entertainment needs.
Remember, your first apartment can feel like a ticket to freedom, but you still need to plan. Use these tips to create a plan that works for you, and