If you’re a young adult ready to flee the coop, you may be wondering how much to save to rent an apartment. However, the excitement can turn sour when you notice how much money you lose to rent every week.
The Australian Bureau of Statistics (ABS) recognises that many Aussies are undergoing rental fears. For this reason, they defined the term ‘rental stress’ as a situation where a renter spends over 30% of their income to pay rent.
Fortunately, there is a way to afford your rent without having your gross income drained out of your account. When you have a savings account with high interest, it can help you to save up for your rent.
Also, this interest continues with or without withdrawing from the account. With your savings bank account, you can get your apartment when you know how much to save.
Calculating your rent
It is pretty straightforward to calculate your monthly rent from your income. Know how much rent money you need, by putting into consideration all the fees payable. Like the rent itself, security deposits, rental insurance, and other expenses.
Note the total amount of money from your pay as the net income. After taking note of your monthly income, you should look for apartments for rent you can easily afford. To know how much to spend on rent, you should use the 30% rule.
The 30% rule
While several apartment renters depend on the 30% rule to know how much of their income should go to rent, the ideal % should be 20 or 25. However, due to the average rent per low-income worker, we would stick with 30%. This is because the 20% and 25% rule might not be feasible. The 30% rule means that nothing more than 30% of your gross income will be used for rent.
Calculating the amount to save for rent weekly
If you are using the 30% method to calculate your rent, you should note how much your weekly income is. The multiplication of your weekly pay with 0.3 will equal the maximum amount you can spend on your rent.
For instance, if you earn about $1,500 per week, you should spend a maximum of $500 on weekly rent. However, before working on the weekly principle, you should check the property’s rent cycle. Rent payments can be made on a monthly, biweekly, or weekly schedule.
To know how much you will pay for rent monthly or yearly, you can use a simple method. The annual payment is calculated by multiplying the property’s weekly rent by the number of weeks in a year.
Then, you divide the total amount by the number of months in a year which is 12 to get the monthly payment. We recommend that you know the exact amount you will pay per the property’s rent cycle before you commit to the lease.
A popular approach to organising a rental budget
The barefoot investor’s strategy is a popular way to organise your rental budget. This approach is known as the bucket approach and involves the splitting of your gross income into buckets. Fortunately, this method helps users to save money.
Blow bucket
Blow bucket caters to monthly expenses and other living expenses like food, utility bills, rent, car payments, and debt payments. While organising your blow bucket budget, you should schedule 60% for daily expenses.
Then, 20% should go to debt clearance and miscellaneous items. Finally, you should budget 10% for savings and the other 10% for splurges. If you have any leftovers, it goes to the Mojo bucket.
Mojo bucket
The mojo bucket is like your safety net. Then when you have saved up living expenses of about 5 or 6 months, you should transfer the excess amount to the grow bucket.
Grow bucket
The last of the barefoot investor’s strategies is the grow bucket. This bucket aids in investment and solidifying financial security.
When you put this strategy into place, it will be easy for you to save up the required amount for your rent. Then again, you won’t have to go into debt before you get an apartment of your choice.
Ways to avoid rental stress
Rental stress occurs when we spend above 30% of our income on rent. Markedly, rental stress has been the issue of the majority of Australians that are renting apartments.
However, there are ways to avoid this issue. First, you should learn how to save money on rent, or you can negotiate the price.
Additionally, you should check if the apartment you are going for has specific upfront costs like the first month’s rent and whether you’ll need to furnish this first apartment. . If your landlord requires the first month’s rent you will have to pay for the first month of your lease.
Hence, ensure that you clarify before committing to the lease. Then again, go for an apartment that has renter’s insurance.
FAQs on how much to save to rent an apartment
1. How much do I need to save before moving out?
Before moving out of your home to an apartment, you need to verify the amount you can spend on rent and compare it to apartment prices. However, the cost of rent will vary based on factors such as the apartment’s proximity to amenities and the quality of the unit.
So, you should ensure you know the price of your chosen apartment to know how much you will save.
2. How much should I save per month?
If you want to save for your apartment, list all the expenses of your new apartment including the security deposit and insurance. Then, you can use the 30% rule.
The rule explains that you can only spend a maximum of 30% of your gross income on rent. So, you should save about one-third of your income.
