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Understanding Your Finances

What You'll Learn

  • Experts recommend that your rent should be between 20 and 30% or less of your take-home pay
  • You’ll need to have some savings in order to rent a home
  • It’s important to have a financial cushion for life’s unexpected events

It’s important to have a solid understanding of your financial situation and what you can afford before you start looking for that perfect rental home. Take the time to write out all of your current and anticipated expenses and compare it to your income.

Start by asking yourself the following questions and gather all supporting documentation: 

  • What is your monthly take-home pay?  Experts generally suggest that your total cost for housing should be between 20 and 30% or less of your take-home income. For example, if you take home $3,000 a month, you may be able to afford a monthly rent of between $600 and $900 per month, including utilities.
  • How much have you saved for upfront costs like a security deposit and pet fee?  In addition to your first month’s rent, most landlords will require a security deposit of about one month’s rent upfront. If you’ll be moving with a pet, be prepared to pay a pet deposit or a monthly fee.
  • How much do you spend each month? You’ll need to account for your current living expenses and all anticipated expenses. Be aware of other potential costs that may come with renting, such as utilities and parking, if applicable.
  • What is your financial cushion and savings plan?  You’ve got the money for the security deposit and first month’s rent, but you’ll also need financial reserves for life’s unexpected emergencies such as an illness or temporary job loss.  You should also consider any future major expenses such as a down payment on a home, a wedding, or college tuition. 

 Key TakeAways

  1. Be aware of all the potential costs associated with renting beyond just the rent

  2. Be prepared to give your landlord a security deposit and first month’s rent upon signing a lease

  3. Start or continue to save for an emergency and to reach your future goals

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