Moving out on your own for the first time is an exciting milestone, but it can also be overwhelming—and expensive! One of the most crucial aspects of this transition is figuring out how to budget when you first move out. Proper budgeting for an apartment not only helps you manage your finances effectively but also ensures that you’re prepared for any unexpected expenses that might come your way.
In this article, we'll walk you through everything you need to know about budgeting for your first apartment, including an apartment bills list, steps to creating a budget, and tips to save money.
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Understanding the basics of apartment budgeting
Budgeting for an apartment involves more than just calculating your monthly rent; it requires a thorough understanding of your overall financial situation and how it will be impacted by your new living arrangement.
There are a few basic actions you can take to manage your finances and make informed decisions as you nail down your first apartment budget.
- Assess your financial situation: This includes knowing your income, evaluating your savings, and recognizing any existing debts. “Start with understanding your budget and cash flow,” says Ashley Gawley, real estate coach and consultant. “Determine how much you can set aside each month for housing costs before you start looking at specific places. Most experts recommend spending no more than 30% of your take-home pay on rent.”
- Prioritize your expenses: Make sure to identify which costs are essential and which are discretionary. Essential expenses for an apartment typically include things like rent and utilities, while discretionary spending might involve dining out or entertainment. Prioritizing helps ensure that your essential expenses are covered first.
- Plan for variable costs: Unlike fixed costs such as rent, some expenses can vary month to month. These include utilities, groceries, and occasional maintenance. It’s important to allocate a buffer in your budget for these variable costs to avoid any surprises.
- Build an emergency fund: Aim to save at least three months’ worth of living expenses before moving into your new apartment. This fund will provide a financial cushion in case of unexpected costs or emergencies.
- Set realistic goals: This can help you stay motivated and on track with your budget. Whether it’s saving for a security deposit or planning for future expenses, having clear goals will guide your budgeting process and help you manage your money more effectively.
“Once you know your budget, visit apartments in person—photos often don't show noise issues, pest problems, or needed repairs,” Gawley says. “Check what's included in the rent like utilities, parking, storage, and amenities.”
Apartment expenses list
“How much should I budget for my first apartment?” Beyond just the rent, there are several additional expenses that can add up quickly. By being aware of these costs and planning accordingly, you can avoid financial stress and enjoy your new home with peace of mind.
- Rent: Monthly payment agreed upon in the lease. The primary expense and often the largest. It’s crucial to choose a rent amount that fits within your budget, taking into account other expenses.
- Utilities: Including electricity, water, gas, trash removal, internet, and cable TV (if applicable). These can vary depending on usage and the size of the apartment.
- Security deposit: Typically, this is one month's rent paid upfront and is refundable when you move out if the apartment is left in good condition.
- Renter’s insurance: Protects your belongings and covers any potential damage to the apartment. Costs vary, typically around $10-$30 per month.
- Moving costs: It might include professional movers, moving truck rental, and packing supplies, such as boxes and tape.
- Furniture and home decor: Everything you need to make your new place feel like home.
- Groceries: Monthly food budget.
- Miscellaneous: For example, cleaning supplies, laundry detergent, and pet expenses (if applicable).
7 steps on how to budget for your first apartment
Budgeting for your first apartment can seem daunting, but breaking it down into manageable steps can make the process smoother. Here’s a detailed step-by-step guide to know how to decide the budget for an apartment.
1. Calculate your monthly income
This includes your salary (your net income after taxes and other deductions) and any additional income, such as freelance work, part-time jobs, or rental income.
“Begin by calculating your earnings from employment, whether full-time, part-time, or freelance work,” says Keith Sant, real estate professional, investment advisor, and Founder & CEO of Kind House Buyers. “Be sure to include income from side hustles, such as gig work or selling handmade items. Additionally, consider any financial support from family or friends that could significantly boost your monthly total.”
Ensure you’re realistic about your income. If you have variable income, base your budget on your average monthly earnings. This provides a buffer for fluctuations.
2. List all possible expenses
Ask yourself: What are the most common bills for an apartment? Identify all potential expenses related to living in your new apartment. This includes rent, utilities, insurance, moving costs, furniture and home decor.
“Research the average rent prices where you want to live,” Sant says. “While location greatly affects rent costs, other factors can impact price as well, such as proximity to public transportation or amenities like a gym or pool.”
Use past bills or average costs to estimate these expenses as accurately as possible.
3. Determine your rent budget
Calculate how much you can afford to spend on rent. A general rule is to spend no more than 30% of your gross monthly income on rent. So, to determine your rent budget, multiply your gross monthly income by 0.30 to get your maximum allowable rent.
This might also help: How Much Should I Spend on Rent? Tips to Help You To Calculate
4. Allocate funds for utilities and other costs
Estimate your monthly utility costs based on the size of the apartment and your usage. Ask current tenants or your landlord for average utility costs and allocate funds each month based on your estimates and actual usage.
Include other recurring costs in this allocation, such as groceries and transportation, to get a complete view of your monthly financial commitments.
“It's also important to allot a portion of your budget for savings and discretionary spending, like eating out or entertainment,” Sant says. “Be sure to leave some flexibility in your budget in case unexpected expenses arise.”
5. Create a savings plan
Prepare for initial expenses and unforeseen costs: Save at least one month’s rent for the security deposit and budget for expenses related to the move, including professional movers or truck rentals. Also, allocate funds for essential furnishings and initial home improvements.
Aim to save three months’ worth of living expenses to cover unexpected costs. Open a separate savings account if needed, to manage these funds more effectively.
6. Track your spending
Regularly monitor your spending to ensure you’re staying within your budget. Utilize spreadsheets or apps to track your income and expenses, such as Quicken Simplifi—great for managing household finances—or PocketGuard—ideal for tracking spending.
Regularly check your bank statements and credit card bills to monitor your spending. If you notice overspending in any category, adjust your budget or spending habits to stay on track.
7. Review and adjust your budget
Continually review and adjust your budget to accommodate changes in income, expenses, or financial goals:
- Assess your budget at the end of each month to see if you’re meeting your financial goals.
- Modify it if there are significant changes in your income or expenses.
- As you become more comfortable with your budget, set new financial goals or savings targets.
“Creating a budget is only the first step; it's crucial to stick to it,” Sants says. “This means being mindful of your spending and making adjustments if necessary.”
How to save money when moving into a new apartment?
Moving into a new apartment doesn’t have to break the bank. Here are some tips to help you save money:
- Shop for deals: Look for discounts on furniture and home decor. Consider buying second-hand items or using online marketplaces. “Furnish your new place gradually; buy essentials upfront but add furnishings over time as you can afford them,” Gawley says. “Paying for an entire apartment's worth of furniture at once often leads to debt.”
- DIY moving: If possible, handle the move yourself with the help of friends and family to save on moving company costs.
- Negotiate your rent: Sometimes, landlords are open to negotiating the rent or offering incentives like a free month of rent.
- Reduce utility costs: Be energy-efficient by using LED bulbs, unplugging devices when not in use, and managing your thermostat settings.
- Create a grocery budget: Plan meals and stick to a grocery list to avoid impulse purchases.
Bonus tip: “When you find an apartment you like, set up automated payments for rent and utilities right away—paying on time avoids late fees and protects your credit,” Gawley says. “Buy renter's insurance too which covers belongings in emergencies like fire or theft for a small monthly cost.”