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Apartment Expenses: How Much Rent Can You Afford?

The true cost of renting a place So you�re thinking about renting your own
place. There are lots of decisions to make, like how close do you want to be to work or
to your friends, or to your family? How much space do you need? Are you going to live alone
or with roommates? Once you have a sense of where you want to
live and how you want to live, it�s time to start thinking about what renting a place
will actually cost you and what you can afford. Now, the two biggest costs you�ll have are
going to be your monthly expenses and your move-in costs. To start, you�ll want to figure out your
monthly expenses, which will help you determine what you can afford to rent. Then we�ll
take a look at what your move-in expenses might be in another video. So first you need to decide what your budget
will be. A decent guideline for figuring out what you can afford is something called the
�thirty percent rule.� Basically, you take thirty percent of your gross income � that
is, your entire income, before taxes – and allocate that to your general housing expenses
� that�s not just the rent, it�s also your utilities, insurance and other costs
associated with your home. It is set at thirty percent so you can still have some money left
over to cover your other expenses and hopefully even save something while you�re at it. Now, everyone�s situation is different.
For instance, if you have student loans or credit card debt to pay off, you might want
to spend less on your housing. Or, if you live in a city where rents are higher, you
might be able to afford more because you can use public transportation and won�t have
the typical costs that come with a car. But for this example, let�s stick to thirty
percent. So, say we�re looking at an annual salary of forty thousand dollars, in this
case, your budget will be forty thousand times point three, divided by twelve is one thousand
per month. Now, this doesn�t mean you are going to
go right out and look at rentals listed at a thousand a month�or that really nice place
you see for ten fifty. First, let�s think about some other monthly expenses you�ll
have in addition to your rent. The biggest monthly expenses you�re probably
going to have are utilities. That�s your electric, gas, oil, or other fuels, water,
and sewer bills. In some cases the landlord pays for some utilities,
but not others. What you�re responsible for and what the landlord is responsible for
should be spelled out in the lease. Electric bills can vary dramatically. The
price of electricity fluctuates throughout the year, or even the time of day. But, for
this exercise, let�s say this averages out to ninety dollars a month over the course
of a year. Your fuel bill (typically your gas or oil)
can also vary dramatically throughout the year� but for now, we�ll estimate it to
be about ninety dollars a month as well. And if you have to pay for water, that bill
might be around thirty dollars a month. You might also want to think about getting
renter�s insurance. If there�s a fire, a bad leak, or a burglary, rental insurance
can cover the cost of your belongings, and it can be as little as fifteen dollars a month. Keep in mind, these are all general estimates�your
local utility or insurance companies are usually the most accurate source for this information
if you want to figure it out yourself. And, these are just a few of the basic monthly
costs you might encounter with a rental. You might run into extra charges for other amenities
as well. And again, depending on the lease agreement,
you could even be responsible for additional things – like home repairs. In any case, adding this up gives us a total
of two twenty five for general housing expenses. So, we want to take this and subtract it from
the original budget of one thousand, which leaves seven hundred seventy five dollars
for rent, which may or may not be enough. If it�s too low, one possibility would be
splitting your housing expenses with roommates, leaving you more to spend on rent. So, you can see there are a variety of expenses
you may want to think about in addition to the rent. Including the cost of just getting
a new place which we�ll cover in another video. 2

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