Joining the group of first-time renters and stepping out on your own can be both an exciting and stressful moment in your life. It’s usually a major milestone and one of the first steps toward adulthood, a period that comes with both freedom and responsibilities.
As you get ready to find the perfect rental apartment, there are many aspects to consider, especially the financial aspect of renting.
Money is important, obviously, but it’s even more important when it comes to renting because your home makes up a major part of your budget. As you get ready to be a first-time renter, it can be helpful to track where your money goes, create a budget, and monitor your spending habits.
There is no better time to start taking control of your personal finances and budgeting than now. Let’s first start with finding the right apartment for first-time renters on a budget.
How First-Time Renters Can Save on Apartment Basics
Real estate is all about location, and that doesn’t change for first-time renters when searching for apartments. Think about your needs and what is important to you:
- Do you have to be close to campus or work?
- Can you live with a longer commute?
- Do you want to be close to downtown or farther away in the suburbs?
- Is being walking distance to a grocery store and restaurants important?
- And so on…
If you need to free up some room in your budget, location is one area you can do so. The premium you will pay for having a good property location is real. If you can deal with a slightly longer commute or being farther away from the action, it can be one area to save some money.
Plus, if you are a student, chances are that you can get discounts on public transportation fares. So you won’t feel the financial cost of commute as much.
Space and Square Footage
Hopefully, the amount of space that first-time renters require is low. Usually, that is the case.
Since the square footage of an apartment is tied directly to the price, this can be a great way save money in your first few years of renting. Some things to consider when searching for an apartment are:
- How many bedrooms do you need?
- How many bathrooms do you need?
- Do you need a big living area?
- Can you deal with a small kitchen?
- Could you bring down your square footage cost by adding a roommate (or two)?
- And so on…
Chances are you will be gone a large part of the day, so be honest about how you’re going to use the space and how often you will be there. The more you realize what your needs are, the easier it is to prioritize different pieces of your future place.
The other thing to consider here is how new you expect the apartment that you are considering moving into will be. You will pay a premium for newer appliances and finishings, and this may be an area to save in as well.
Renting usually provides a lot of flexibility, which is great for first-time renters. Since you typically only sign a 1-year lease, you have the option to move without a lot of hassle.
However, there is another option you could look for: a long-term lease.
Long-term leases usually come at a lower price per month. It can be a great way to save money if you know you will be in a certain area for a long time (as best as you can know these things). Some questions to ask yourself when considering a long-term lease are:
- Are you going to stay in the same city after college?
- Do you plan to move around in search of job opportunities?
- Are you planning to travel abroad for a semester or for work?
The answers to these questions will help you determine whether a long-term lease is a good idea. The risk associated with the lower monthly costs is that if you’re going to move at some point, there will likely be fines associated with breaking the lease early.
Last but not least for tips on optimizing apartment basics: be sure to get renters insurance to protect all of your possessions.
Yes, it is an extra cost, but it’s likely worth it to be prepared in case anything goes wrong. Lemonade is an easy-to-use and affordable option, great for first-time renters to cover any accidents or mistakes that might happen in the future.
How First-Time Renters Can Save on Utilities
After you’ve found an apartment and you know the price of rent, it’s time to consider the other major housing cost: utilities.
One big piece of advice: before signing the lease for the apartment, find out whether utilities are included in the rent.
If they are, ask about consumption averages to figure out how much you are getting for your money. If utilities are not included, ask the landlord about typical costs so you know how to budget.
The cost of utilities will depend on the state you live in and your daily habits – such as how cold and hot you like to keep the apartment.
Do your research beforehand, ask other renters in the community about the prices, and learn to control your habits to consume less energy and water. These habits will follow you everywhere you go, so even if you’re financially stable, cutting down your consumption is healthy for both your wallet and the planet.
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Budgeting Outside of Rent
Rent and utilities can take up a huge portion of your budget. Sometimes, for young renters, even as high as 50% (depending on where you live and your income).
The rest of your budget needs to adapt around these costs. While budgeting is not for everyone, if you find yourself struggling to save money or even pay the monthly bills, it’s a great exercise to go through.
The first two steps of the budgeting process are to calculate your after tax income and tally up all of your expenses. Going through your expenses will be the most helpful task as it will show where all of your money goes every month.
You can check out steps 3-5 of our guide to building a budget that works for you here.
Overall, the biggest benefit of budgeting is being able to monitor every expense and keep track of your money. From there, you’ll be able to identify and cut down on what you don’t need or doesn’t add value to your life.
The second biggest benefit of budgeting is having a clear savings goal (step 3 of building a budget). Saving is a crucial part of personal finances, and should be something you proactively do each month if you can!
How First-Time Renters Can Plan for the Future
The biggest key to planning for your future is to build and maintain a strong credit score.
A credit score is an evaluation of you as a financial client and consumer. If you have a good credit score, you will be perceived as a responsible and reliable customer. This will benefit you in the long run as the institutions that offer loans will provide you with more favorable interest rates.
One thing to do to keep your credit score high is to make sure you always pay your rent and your bills on time. If you have a credit card, don’t forget to pay it in full every month as well.
One way to ensure you always pay on time is to set up an automatic monthly payment for your rent and fixed expenses. Alternatively, you could simply set reminders in your calendar for the due dates of major payments. As you actively remind yourself about these bills, in time, they will become second nature.
Building a strong budget and paying your rent (and other bills) on time every month is a great way for first-time renters to plan for the future. Hopefully, in no time, you’ll be upgrading to your second apartment with ease because of all the great experience and learnings you got from your first time around!