Renting is the optimal solution for many people when it comes to housing, especially younger folks looking for flexibility and freedom. That’s because renting an apartment is easy and affordable, especially when you’re moving to a big city for work, school, or any other reason.
However, renting does involve considerable costs and proper financial planning. To help you find the right balance between how much you should spend on what, here are some frugal living tips for those renting in a big city.
Monitor Your Spending
The first step in becoming financially aware is to start keeping track of where your money goes. Find a template for a basic budget or use a budgeting app to get started. After you see what you buy and how frequently, group your expenses into categories to help you understand your spending habits.
Then, determine which of those areas can be reduced or eliminated. This step is crucial; you’ll have to prioritize needs over wants and sacrifice a little bit of your daily comfort to save some money each month.
Housing is one area where you can make financial adjustments. When you’re looking for an apartment, many aspects contribute to the cost of rent, the first of which is location. Consider sacrificing location and choosing a place a little farther out—and then relying on public transportation for your commute. Just be sure to balance out the expenses to verify that the commuting costs won’t add up over time to make up for the difference in rent. If that’s the case, it’s not worth trading your time for a little bit of extra money.
Other areas where you can save some money include food and entertainment. While having a social life is important, be aware of how frequently you go out and don’t let it turn into a habit. For instance, offset nights out with some money-saving tactics—such as cooking at home instead of going to a restaurant or buying in bulk and rationing items for a longer shelf life and more economical solutions.
Also, be aware of how much electricity, water, and gas you’re using in order to reduce your utilities—especially during the hot and cold months. Be efficient in your consumption habits and notice how much money it costs you to live a certain way.
Divide Your Income
After you’ve created a budget, divide your income to discover whether it’s necessary to find an extra revenue source. Typically, you should spend about 30% on housing; so, if you know your income, use a rent affordability calculator to find your range. If you stay below this threshold, you can divide the rest of your income to cover your other expenses.
The golden rule is that 50% of your money should pay for your needs, 30% for your wants, and 20% should be deposited directly into your savings account. After paying your rent, you’re left with 20% of your income to pay for utilities, food, transportation, and any other needs. This is where your prioritized spending tracker comes in handy. Then, 30% can go toward categories such as entertainment, subscriptions, or whatever else makes you happy and yet prevents you from going on a spending spree. Remember, frugality is not a punishment; it’s a choice to live in such a way that you won’t feel the need to accumulate too many possessions.
In the end, if you can manage it, use less than 30% on wants and just start saving more. Especially if you’re a first-time renter or moving to a big city to start your career, a savings account can become a safety net. However, be sure to make this account a little more inaccessible—so it doesn’t turn into a pile of money you’ll spend the first time you get the urge.
Although this may seem like a lot, eventually, budgeting becomes a habit. Once you get started, you’ll be surprised at how easy it is to incorporate certain habits into your life and control those impulse purchases. With every month that passes, you’ll be one step closer to becoming financially savvy and independent.
About the author: Mihaela Buzec is a passionate reader and writer with an affinity for language and linguistics, as well as the latest technological developments. She discovered her passion for real estate at RENTCafé, and you can read more of her articles on their blog.