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Between buying a home and renting an apartment, renting is typically considered the more flexible option in terms of both lifestyle and money. That’s because, when you buy a house, you have to put a considerable amount of money toward the down payment and, even then, costs continue to pile up over time.
However, because renters don’t have to worry about maintenance costs or the mortgage, they can redirect money directly into savings.
Yet, for many people, this is easier said than done. Even as a renter, there are a lot of costs that can sneak up on you and prevent you from saving. This is true especially for younger renters, who may be so overwhelmed by the many opportunities to spend their money that they lose track of where their money goes and why.
Fortunately, if you get into the right mindset, it will be much easier to put some money aside each month and not even think twice about it. To help you get started, here are some of the basics of frugal renting and how you can implement them in your life.
Divide Your Income
One of the most important aspects of saving money as a renter is to keep the cost of rent to less than 30% of your income. By doing so, the sum of your monthly costs will total about 50% of your income. This is the 50/30/20 rule of dividing your budget. According to this rule, 50% of your income should go to rent and utilities, 30% should go toward your wants — such as entertainment, clothing, etc. — and 20% of your funds should be put in savings.
To achieve this goal, be acutely aware of what you need in an apartment and what you can live without.
For instance, if you work remotely, it doesn’t matter if you rent a San Antonio apartment in the heart of downtown or live in a larger rental in a Chicago suburb. Similarly, if you live by yourself, you probably don’t need as much space and can likely make do with a smaller apartment.
Deciding where you want to rent is a significant commitment. So, before you make your decision, prioritize your needs over your wants. Specifically, ask yourself questions related to space and location. But, keep in mind that costs vary by city and even from one neighborhood to another, so research the area where you want to move to understand the implied costs. You can also use a rent calculator to help you find the perfect balance.
Monitor Your Spending
In order to create a budget you can stick to, you need to be aware of where your money goes each month. So, for two or three months, keep track of every purchase you make — from the coffee you purchase each morning to how much you spend on subscriptions, take out, and more.
Then, at the end of each month, group these expenses together and create categories, such as groceries, entertainment, etc. Next, after you understand where your money goes, create a budget and include all of your other costs — such as credit cards, student debt, or any other bills you have to pay each month.
Sometimes, when you put it all together, you might realize that not only do you not have enough money to start saving, but you also might not even be able to cover all of the costs. If that’s the case, move on to the next stage, which is cutting costs.
Cut Extra Costs
There are many ways to cut costs to save money every month. Begin by decluttering and readjusting your mindset toward owning things.
- Wardrobe & Clothes
You probably have a wardrobe full of clothes that you don’t necessarily wear or don’t actually like. So, take a good, hard look at them and realize what you need and what you don’t. Then, donate or sell the clothes you don’t wear.
Next, when you do feel the need to shop for clothes, try visiting a thrift store instead of your usual fashion stores. At the mall, everything is on display and looks good, but you might not need or want those items, so resist the urge to impulse buy. In this way, a thrift store forces you to search through a variety of items to find the ones you want or need — without tricking you into buying en masse.
People spend a lot of money on food each month. In addition to groceries, you probably spend money on take-out, coffee, and other items, like a sandwich for lunch or a pastry for breakfast.
During the pandemic, eating out has been reduced, which is great news for your pocketbook. Consequently, now is the perfect time to adjust your habits. For instance, try buying in bulk to minimize the number of times you have to go to the store, therefore preventing impulse purchases. Buying in bulk can also help you save money — provided that you take the time to cook at home.
To that end, cooking your own food is not difficult. It just requires patience and discipline. Take this opportunity to find a few recipes that you like and you may actually enjoy the time you spend in your kitchen. Then, turn on some music or a show and you won’t even notice how quickly you can prepare a meal.
Alternatively, if you just don’t like cooking, experiment with meal prepping instead. In this option, you set aside one day a week to cook larger quantities of food that you’ll have available for each day of the week. These are usually simple recipes that don’t require much time, and you may find it easier to keep a meal schedule with this technique.
Subscriptions are great, but too many of them can be detrimental to your budget. So, to get started, review your credit or debit card statement and circle all of the payments that represent subscriptions. Then, get honest about what you use and what you don’t use. For instance, a gym membership can be expensive. If you feel like you’re not getting your money’s worth, perhaps it’s time to cancel and give working out at home a shot. The same goes for less-expensive subscriptions, like magazines, apps, and other services. If it’s not something you use regularly, cancel the subscription.
To cut down on utility costs, be aware of your consumption. Specifically, turn off lights when you leave a room, turn off the faucet when brushing your teeth, switch your regular light bulbs to LED bulbs, lower your thermostat in the winter, and don’t keep the A/C too cool during the summer. These are all small tips to help you reduce the cost of utilities, which can make a difference at the end of the month.
- Split the Costs
Another way to reduce costs is to split the bills with one or more roommates. Even if you have to rent a larger apartment that costs more, splitting the rent and utilities will result in a lower total bill at the end of the month. Plus, you can also share the costs of groceries, cleaning, and maintenance, as well as take, turns cooking and cleaning.
When you embark on the journey toward saving money, every little bit counts. While it may be difficult at first, don’t get discouraged. It takes time to adjust. Also, don’t be too radical about your frugal living. If you feel the need to make a purchase that you know will benefit you, don’t hold back just because you’re on this journey. Otherwise, it might backfire and send you into a spending spiral out of frustration. Instead, balance things out and cater to your needs. In time, you’ll create a safety net that will be beneficial in the future.