Behind the taxes you hand over to the government every time you’re paid, rent is your next biggest expense. We’ve all seen how property prices have rocketed in the last 20 years and rent has followed the same trend.
As a result, the rent that people pay every month is now at an all-time high, rising faster than inflation for most of the last decade. And it’s not just rent – there’s a mountain of other bills to pay every month or every quarter.
With the high cost of living, what’s the best way to budget for your rent?
Living in your home or apartment, you’ll have more than just rent to think about. You will also need to find the money each month for:
When looking at potential properties to rent, make sure you check whether you can pay your utility bills monthly by direct debit or whether the property has a prepayment meter. Direct debits are much easier to factor into your budget as you can pretty much rely on paying over the same amount of money at the same point of every month.
There are also additional optional costs you will need to work into your budget. The area your property is in will affect how much services like broadband, phone line, and home insurance cost so it is important that you factor this in.
Many of these bills can be paid monthly as well as quarterly. Make sure that you tell your provider when setting up your account that you want a monthly payment plan. This will make budgeting much easier as you won’t have any large bills to find the money for every three months.
Organising your budget to ensure you can meet both your rent and other bills is absolutely essential. Not only could missing these payments mean you potentially lose your property but failing to pay certain bills could mean your vital services such as heating or phone lines are cut off.
Missing a council tax or TV license payment could also lead to a court summons. If you don’t pay your bills on time, it could also have a huge impact on your credit rating – making it difficult for you to borrow money in the future.
If you’re renting a shared property, your responsibilities to pay bills are just as important. You may not know this, but when your name is on any bill, it makes you legally responsible for ensuring it is paid in full – whether you were the one driving up the costs or not.
As you can see, the amount of rent you can actually afford will depend on a variety of other expenses. The first thing you will need to do is add them all up and compare them against your income.
If you have a particular rental property in your sights, you can use a budget plan to find out if you can realistically afford to live there. Try to gather estimates for all of your other bills and expenses you would have to pay if you lived in that property and use this to draw up a budget of all your expected costs – along with, of course, your monthly rent and council tax.
You could even ask the landlord, letting agent or previous tenant to give you estimates of these bills when you view the property to make your budget a little more accurate.
If you have the actual address to hand, you can go online to find out how much your council tax will be. You can use the links below to find out council tax rates for specific properties depending on where you are in the UK:
You’ll also want to include a realistic estimate of the amount of money you’ll need left over for other day-to-day expenses including:
It is always safer to overestimate rather than underestimate the amount you need. Even if your overestimates suggest you cannot afford the place of your dreams, it is always better to err on the side of caution than get into debt a few months down the line because you didn’t guess the bill amounts correctly.
Using your estimates for bills and other costs of living, you can draw up a full budget to show how much you can realistically afford to pay for rent. Simply take away these figures from your monthly income and whatever is left you can spare in rental payments.
This will also give you the peace of mind because you’ll know how much money you’ll have left at the end of the month after you’ve paid your rent and bills. You can use this money to put away in savings or use it to treat yourself.
If you think you may be able to afford to move in but that money will be tight, it may be worth trying to cut down on your expenses by renegotiating bills or switching your suppliers. It may also be worth asking your would-be landlord for a reduction by promising to sign up for longer than six months.
And remember, before you sign any tenancy agreement, make sure you can afford to pay all of the various costs of moving.
Even if you have found the home of your dreams, you have budgeted properly and you have found that you can afford to live there comfortably, moving home is not cheap.
You’ll also need to budget for the upfront costs associated with moving; including your rental deposit, removal costs and agency fees.
Rental deposit – The rental deposit for a property will typically be around four to six weeks’ worth of rent. This will likely be a few hundred pounds at least so it is essential that you make sure you have these funds available before you commit to renting the property.
The upside is that, at the end of your tenancy, you should get this deposit back (provided there are no damages to the property).
If you don’t have the money to hand, it may be worth asking your local council about any rent deposit, bond or guarantee schemes they may have available. However, not all landlords or agents accept these kinds of deposits, so you’ll need to ask beforehand.
Removal costs – You’ll need to ask around for local estimates to find out how much a removal service would cost in your area. The prices will vary depending on the size and type of the property and whether there are any stairs involved in the move.
It may be cheaper, if possible, for you to hire a van and move your possessions yourself.
Agency fees – Those looking to move often forget about agency fees until the last minute, forgetting to take them into account in their budget. It might be a good idea to compare agency fees very early on in your search for your new home.
Ask around to see what local agents will charge you for getting references, drawing up your tenancy agreement, and for renewing an agreement.
Letting agencies can charge a range of different fees. Some landlords also choose to let directly which could save you money if you choose to go through this route.