How to budget for your first apartment
Cost of Renting A First Apartment
TDS Reader Contributors
Ready for First Apartment?
I wanted to know how I can determine how much money I would need to live on my own. How much are the costs of renting an apartment? And is it a good idea to set aside money for furniture now, while I'm living at home? Or buy furniture and put it in storage? Which is best?
Estimate Your Expenses
First, keep track of your current expenses. Write down everything you spend for the next month at least (*including* anything you put on a credit card). This will give you an idea of where your money goes now.
Next, take a walk through a supermarket. Pretend you're shopping for a week (maybe take a shopping list with you) and see what it will cost. Multiply by 4.3 for a month's food cost. (Do you eat a lot of meals out? Maybe you'd want to reconsider that.)
Look at the Apartments for Rent ads in the paper, so you can see what rental you will have to pay. Ask your friends who already have apartments of the type you will be renting what they pay for electricity, phone, and gas bills. (You may have to put down a security deposit, too, so be sure you have that saved up.)
Do you have a car? Add in car payments and insurance and license fees, as well as gasoline (if you didn't include these in the first step). Otherwise, be sure you get a place near public transportation, and add the cost of bus travel in.
Add it all up (and try not to faint!). Then add at least $50 to that.
Don't Buy Furniture Before Renting Your First Apartment
I have some experience with this one. NEVER repeat NEVER buy furniture and store it.
First off, you will have to pay for the storage. Either that, or impose upon whomever is storing for you.
Second, you will likely find your taste and requirements will change according to where you end up. For example, your place might have built in bookshelves or a built in dining table, eliminating the need to buy these.
Third, furniture is expensive to move and doesn't travel well. Either you'll spend money moving it, or fixing/replacing it when it breaks. Anyone who's moved can tell you horror stories about what broke. The less you move it, the better. Buying and moving it to and from storage is two moves too many.
Fourth, there's a major deflationary trend occurring in furniture. Stuff like bookshelves and desks have been steadily declining in price since I started pricing them 20 years ago. Also, new materials make things really cheap. An example are those molded stacking plastic chairs for 4 bucks --a fraction of the cost of a wooden dining chair, and very adequate around the dinner table. Unless you are buying antiques, it pays to procrastinate.
Fifth, free furniture is easy to come by, once you have a place. Just put the word out, and stuff will flow your way from friends, family, and strangers. If you live in an apartment complex, you'll find abandoned furniture. You can also put a note up on the notice board saying you're interested in very cheap or free furniture. People just can't be bothered to move it! I got three very respectable end tables, a like-new ironing board, drying rack, metal folding chair, Windsor chair, and two matched wooden chairs, and two table lamps that way.
Look for Alternatives First
My suggestion would be to start looking in local papers to get some idea what kinds of rents are being charged in your area. Decide if you will have a roommate (or two!) which can significantly help in reducing living expenses. One thing to keep in mind is that moving into an apartment costs not only the price of the monthly rent, but also the security deposit. This is often the same price as the rent, so I personally have had to come up with double the cost of a month's rent in order to move into a place! Some landlords may be flexible and let you distribute this throughout several months. Doesn't hurt to ask!
Also, remember that unless you have friends with trucks, you'll need to factor in the cost of moving your belongings. I have always found myself needing various items during the move and the few weeks after- such as cleaning supplies, curtain rods, etc.
Be open minded about alternative living arrangements. For example, I have a friend who got a really cheap rent on a large studio apartment in exchange for 10 hours of work each week. The landlord lived in the attached house and my friend would care for his elderly mother in exchange for the reduced rent.
Another option that I have seen is getting free or reduced rent by working as an apartment complex manager; duties may vary, but I think you would collect rent, etc. Something to think about.
Why Buy Furniture?
I moved out on my own a few years ago and did not have the money for furniture. I found the solution that worked best for me was to find a furnished apartment - that way I did not have to commit to the expense of owning furniture, and I have saved that money. My apartment is in a basement of a home, and is also much more reasonable than the area complex apartments are. The only things that I needed when I moved in were pots, pan, dishes, and linens. I have saved thousands over the years, and will be able to purchase nice furniture when the time is right. I think that situations like this are fairly common.
Apartment Costs More Than Just Rent
To determine how much money you will need to live on your own, first talk to some friends who live on their own and get averages for costs. The things you will need to consider are rent, utilities (electric, gas, phone, cable, water, sewer, garbage, etc), food, entertainment, car maintenance (including gas, oil and repairs), car insurance, renter's insurance, health insurance and clothing expenses. Also, any debts you may currently have - such as major credit cards, student loans or department store credit cards.
Rent averages can be determined by looking at the classifieds in your area and seeing what is available. Your rent should not take up more than 30% of your total after tax income. Estimate high for your food costs. Utility costs can vary. If all utilities are included in your rent payment, your rent could be upped to 40% of your after tax income.
As for furniture, start saving now to purchase these items. Then, when you are 30 days from moving out, start purchasing small items. Thrift stores and garage/yard sales are your best bet. Remember, you only need functionality to begin with, you can purchase better quality after you are settled and earning more money. (Wouldn't it be great to be on your own even if you only have one chair, a bed, a TV and a dining room table?)
In your planning, don't forget to factor in the start up costs of a kitchen. Not only silverware, plates, glasses and pots and pans, but those other items such as spices, flour, sugar, ketchup, mustard, mayonnaise, etc. These items can be quite spendy when you have to buy them all at once.
Do a Little Research Before Renting Your First Apartment
First things first. You can't create a budget for your first apartment without having a realistic picture of costs. Do some research on housing costs in your area. You can do some of that online; however, if you look only at sites like Rent Net, you'll have a slight inflation of prices over the average. Check the classifieds in newspapers for your area. Some of them will be online if you live in a metropolitan area. They should be more accurate. Then call some of the places. Ask about their policies about deposits, pets, waterbeds, whatever you feel you need to know.
Next, call utility companies to get an idea of the average costs for electric and gas service for a residence of the size you plan to rent. Ask if deposits are required. Find out which utilities you pay and which may be included in the rent. Many apartment complexes in my area included garbage disposal and water. If they are not included, you need to find how much they cost. If you want cable television, telephone service or internet service, you must put those costs into your budget, too.
Once you know how much housing and it's associated costs will average, you need to estimate how much you will need for food, transportation and entertainment. You will need money for doing laundry, buying miscellaneous supplies and pet food it you have pets. You should set aside a percentage of your wages for savings, no matter what! It is better to have a smaller residence or one in a less upscale neighborhood than to scrimp on your savings because they are what tide you over during periods of unemployment or after a major car breakdown or similar disaster. it can be very surprising to see all the costs associated with renting an apartment!
As for furniture, save for it. If you buy it now, you will also have to rent storage, thus increasing its actual cost. If you save for it, you'll earn interest on your money and be able to buy more items or better quality items when the time comes.
You might also consider buying some of your furniture second-hand for bigger savings. Check the classifieds in your area, plus second-hand stores, resellers, auctions, garage sales and thrift stores. Things like dressers, bookcases, desks, occasional chairs, miscellaneous tables, dining sets, lamps, and bedroom sets minus the mattresses are often found as good bargains. If you do find something you really want at a very low price, then it might be worth it to buy it ahead of time and put it in storage, after weighing the savings against the cost of the storage unit for the time you'll need it.
Don't forget about appliances, pots and pans, dishes, crystal, flatware, utensils and linens. (If you really have the urge to start buying now, as a symbolic gesture toward your eventual independence, concentrate on these things. They are relatively easy to store and surprisingly expensive when you try to buy them all at once.)
Having not so long ago moved out on my own, you would be well advised to save your money. Buying the furniture in advance has several drawbacks, including safe storage location. Finding a place that guarantees your property from damage, theft, etc. can cost more than that great deal you got on that new bedroom set.
Also, since it is your first apartment, you may have numerous other expenses that require cash (eg, electricity, telephone, gas, cable, and apartment deposits). You will probably also want to purchase accessories that coordinate well with the carpet and/or fixtures in your apartment.
However, the main disadvantage to purchasing furniture in advance is that it may be too big, or too small for your needs. I moved into my first apartment with a bed frame and mattress set, a card table, a desk, some folding chairs, and a microwave. I didn't buy any furniture for several weeks. The first thing I bought was a really good bedroom set, then 2 wing-back chairs and matching bookcases for the living room. A little while later, I got a dining room table set.
Buying after the move was the best thing I had done. I had time to get a feel for my new space, and I didn't have to move all of that furniture.
Now is the time to start saving for your future.
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Try This Formula
To know how much you will require to live on your own is hard. But here is a formula you can use.
- Call to see how much you will spend on average per month for the type of residence you desire (apartment, house, duplex, etc.)
- Determine how much you will require per month to drive from this residence to the places you frequent. Include work, church, friends, family, grocery store, etc.
- Ask the person who determines your current family budget how much is spent on groceries, lights, natural gas, and other utility bills. Realize that this number for you will not be 1/4 your family's budget even if there are four in your house. These bills have minimums that you are billed each month regardless of usage. Find out what these minimums are to avoid surprises in the future.
- Don't forget car payments, car insurance, renter's insurance, and other such necessary expenses.
- Have your family financial planner (most likely your mom) look at the list you have made, and contribute to the list. She (or he) will probably help you discover that you have forgotten almost as many things as you have remembered.
- Add at least 10% to your final total for times when the plumber is called, the car breaks down, etc., and put this in a savings account so you don't spend it.
- If you can afford to buy your furniture now and pay for storage, DON'T. Put all of that hard earned money in a savings account and let it earn money for you. Include the money you would pay for storage, and your total will grow much faster.
- Start by paying your family rent for your room, and when you get a good taste of what it is like to pay your own bills, you probably won't move out! Your family deserves to have you contribute to the family budget.
Start your emergency fund today. Here are 11 easy ways to find $1000 for an emergency fund.
Reviewed January 2018
Take the Next Step
- Estimate how much it would cost to get an apartment.
- Adjust your budget to see if you have enough income to cover the expense of an apartment before moving out.
- Consider getting a roommate. Here's 13 tips to successfully taking in a roommate.
- Pay off your student loans faster and for less interest. Use this simple, anonymous tool to compare student loan refinance rates and see how much you can save.
- Would you like to pay off your credit cards in less time for less money?