Renting an apartment can be an exciting step towards independence, but it also comes with financial responsibilities that shouldn’t be taken lightly. Effective budgeting is a crucial skill for millennials looking to maintain financial stability while enjoying a comfortable living situation.
When you create a budget for your apartment, you gain control over your finances. This ensures you can comfortably cover your living expenses without sacrificing your financial goals.
In this guide, we’ll walk you through the steps to create a budget for your apartment. We’ll also touch on the average costs of apartments in today’s market to give you a clear picture of what to expect.
How to Budget for an Apartment
- Understand the Average Rent for Apartments in Your Location
- Calculate Your Monthly Income and Deduct Fixed Expenses
- Factor in Variable Expenses
- Allocate for Savings and Financial Goals
- Understand the 50/30/20 Budget Rule
- Search for an Apartment Within Your Budget
Already have a good understanding of your budget? Request a tour today at Doud Apartment Homes!
Understand the Average Rent for Apartments in Your Location
Before diving into budgeting specifics, it’s essential to understand the landscape. In today’s market, apartment costs can vary widely depending on your location, the size of the apartment, and the amenities offered. On average, you can expect to spend about $1,343 for an 800 sq. ft. apartment in Rochester, NY, including basic utilities.
While studio apartments are the least expensive options, it’s important to note that multiple bedroom apartments are actually the most cost effective.
For example, a luxury one-bedroom apartment may cost upwards of $1,545 per month. Whereas a two-bedroom can cost between $2,050–$2,120, and a three-bedroom apartment can cost about $2,360 depending on the size and bathrooms.
That breaks down to:
- $1,545 per person in a one-bedroom apartment
- $1,060 per person in a two-bedroom apartment
- $787 per person in a three-bedroom apartment
Living with a partner or having a roommate can significantly reduce your monthly rent while increasing the quality of living accessible to you.
At the end of the day, your living habits and financial goals will determine what kind of apartment you should prioritize.
Calculate Your Monthly Income and Deduct Fixed Expenses
The first step in budgeting for an apartment is to determine your monthly income after taxes. Consider all sources of income, including full-time and part-time jobs, freelance work, or any side gigs you regularly earn from. Once you have your monthly income, you’ll need to subtract your fixed expenses.
Fixed expenses are recurring costs that remain relatively constant each month. These include your rent, utilities, insurance premiums, and loan payments. You need to accurately estimate these costs as they form the foundation of your budget.
Factor in Variable Expenses
Variable expenses are those that can fluctuate from month to month. These encompass a wide range of items, from groceries and dining out to hobbies, entertainment, gas, subscriptions, and personal care.
While it’s challenging to predict these expenses with pinpoint accuracy, using free financial apps like Mint from Intuit can help you automatically track your spending and organize them into clear categories.
After deducting your fixed expenses from your monthly income, you should have a good idea of how much you can allocate to variable expenses each month. Minimize your variable expenses by setting spending limits and prioritizing which expenses you can easily cut without affecting your quality of life
Allocate for Savings and Goals
Emergencies can strike at any time, and it’s essential to be prepared. Consider starting an emergency fund in a high-yield savings account to ensure you have a financial safety net in place. While there’s no specific amount that everyone should save, it’s generally recommended to set aside at least three to six months’ worth of living expenses.
Understand the 50/30/20 Budget Rule
The 50/30/20 budget rule is a popular guideline for managing your finances. It takes aspects of your fixed expenses and variable expenses into account by prioritizing them into needs, wants, and savings.
- 50% of your monthly income should go toward necessities (including rent, groceries, and minimum debt payments).
- 30% can be allocated to discretionary spending (variable expenses including hobbies, shopping, and eating out).
- 20% should be saved or used to pay off additional debt.
It’s important to ensure that your budget aligns with this rule to maintain financial balance. Tools like NerdWallet’s budget calculator can help you see how your expenses compare to this guideline.
Search for an Apartment Within Your Budget
Now that you have a clear idea of your budget, it’s time to start your apartment search. Finding the right apartment within your budget is key to a harmonious and financially sustainable living situation.
Budgeting for an apartment might seem daunting, but it’s a skill that can set you on the path to financial success and independence. By following these steps and being diligent with your finances, you’ll be well-prepared to enjoy your new apartment without unnecessary financial stress.
At Doud Apartment Homes, we recommend a maximum of three times your monthly combined income for rent. Contact us today for information on our rental units!