How to Budget for Your First Flat

Creating a careful budget will help you avoid every renter’s worst nightmare: breaking the lease agreement. It’s a costly and inconvenient mistake. How do you stay on top of all your new financial obligations? The answer is one word: budgeting.

If you want to gain independence and keep it, you’ll need a smart budget that accounts for all the unexpected costs of living solo.

Most people understand budgeting as adding up income versus expenses, but there’s more depth to it than that.

Here are some tips that can help you prepare for your first flat, and stay financially healthy in the process: 

Calculate the cost of recurring expenses.

With a flat, there’s more to pay than your monthly rent. You won’t have parents around to stock the pantry anymore, so factor in the cost of groceries. There are also transportation costs to think about, whether you take the bus, train, or drive a car.

How about utilities? These include electricity, internet, cable, phone bill, and heating. Your landlord might pay for some utilities, but it’s up to you to check the lease agreement and find out.

Do you use streaming services like Netflix or Disney Plus UK? Factor in these monthly fees, too. You’ll also want to opt for renter’s insurance to protect yourself in the event of a disaster.

Consider unexpected costs.

Before you arrive at your flat, you’ll need to pay a few fees upfront just to get there. You might need the help of a moving company to transport your furniture. You’ll also need a security deposit, which can vary depending on your landlord; some want one that’s equivalent to one month of rent, or two.

You’ll probably be thankful that a number of letting agent fees were banned following the tenants fee ban in 2019

If you’re bringing a furry friend with you, then you might have to pay a pet deposit, as well.

Once you’re settled in, you should create a rainy day fund to prepare for any emergencies, setting aside enough money to cover several months of bills.

Be proactive with debt management.

How much debt is too much debt? The answer is subjective. It’s affected by where you live, how much your income is, and what your monthly expenses are. Is your debt an amount that you can feasibly pay off? Or does it seem to be expanding with each passing year?

When you’re constructing your budget, factor in the cost of paying off what you already owe. If you don’t, it can quickly spiral out of control. To meet your budget and manage your debt, you may need to make some lifestyle changes. 

Do the math.

Many people recommend following the 50-30-20 rule, where 50% of your income goes toward rent, utilities, food, and other bills; 30% for non-essentials and entertainment; and 20% into your savings.

If you calculate what you can afford to spend on rent, then you’ll be able to set aside money for your future financial dreams, like owning a property or a vehicle. Try to put at least 20% of your income each month toward savings; this can vary depending on any outstanding expenses you might have, like student loans and credit card debt.

Pay off the money that you owe ASAP so that you can start saving for your next home. 

Figure out if you need a flatmate.

Is your budget looking a little too tight for your liking? Having someone to share the expenses with can lighten your financial load. While having a place all to yourself may have been your dream, it can soon become a nightmare if you find yourself unable to make your payments.

Plus, having flatmates can be a fun experience and help alleviate feelings of loneliness. As long as you are all respectful regarding personal space, sharing a flat can be financially and socially rewarding. 

Keep an eye on your credit.

Most landlords will check your latest credit report before leasing a flat to you. If you’ve got a poor credit score, the flat you want might be out of reach. In the future, your score can affect your prospects for a new house, too, and that’s another reason why you need to use your credit wisely.

Your credit score will be imperative when it’s time to leave your first flat and invest in a home. If you’ve got an outstanding balance on your credit card, try to pay more than the minimum requirements. Allocate some of your income to manage your credit card debt. 

Buy second-hand furniture.

Not every item in your flat has to be brand new. You’ll save a sizable lump of cash if you shop for used items. You can browse websites where locals post their used merchandise for sale – usually, you can haggle them down to an even better price.

Or, you can browse a store that specializes in selling used items. When it comes time to furnish your sitting room or stock your kitchen with tools, consider buying second-hand to save a decent chunk of change.

You don’t need to furnish your new place all at once; pick up a few items here and there whenever you have the cash to spare. 

Set aside money for monthly savings.

It’s incredibly liberating to move into your first flat – but maybe you don’t want to be bound by a lease forever. Most landlords forbid tenants from painting or hanging decorations on the walls. The way to achieve ultimate freedom? Owning a house.

This massive financial purchase might seem unattainable, but the way to get there is through diligent savings and careful budgeting. If you decide to save a chunk of your pay each time it comes in, you’ll slowly but surely work toward amassing enough money for a down payment. 

Use a spreadsheet.

Keeping track of all these moving parts can induce a headache. Financial stress can overshadow your excitement of having your very own place for the first time. Even with the best budget, you’ll have a hard time sticking to it if you have trouble remembering the details.

Set up an organized spreadsheet to keep things straight. It’ll help you keep track of exactly how much money goes in and out of your account. Plus, you’ll be able to narrow down which areas you’re overspending on, and how to cut them down so that you don’t go over your budget.