Ways to find out how much rent you can afford

At the time of looking for a rented accommodation, it is vital to figure out your affordability. Rent depends on the location you choose. Some are more expensive than others. When people are on a tight budget or are laid off, it is rent that takes a toll on their finances. A significant portion of their income goes towards rent, which means they are left with little money to spend on other essential expenses.

Consider a 30% rule

One of the best ways to ensure your rent affordability is sticking to a 30% rule. It means you will be spending about 30% of your gross income, which is earnings before tax, on rent. For instance, if you have been earning £5,000 per month, you should try not to spend more than £1,500. This is the best starting point if you are struggling with your budget, but remember that this is not a one-size-fits-all approach.

There are some places in the UK where rent is extremely high. In fact, a small apartment could cost you more than £3,000 in rent. Of course, here, a 30% rule does not work.

Consider a 50/30/20 budgeting approach

You should consider a 50/30/20 budget. This budget will help you analyse how much money you can spend on rent. According to this method, you will be spending half of the net income, which is after-tax income, on essential expenses, 30% on discretionary expenses, and 20% on savings. Since rent is an essential expense, this should be included in the 50% share of your income.

For instance, if you are earning £5,000 every month, you will be spending

• £2,500 on essential expenses such as utilities, rent, insurance, and debt payments.
• £1,500 on discretionary expenses such as dining out, night out, shopping, and the like.
• £1,000 in savings, which includes an emergency cushion and retirement savings.

However, it is not mandatory to stick to this rule. A golden rule of thumb says that you should carefully analyse your repayment capacity. It is likely that you will have to reduce spending on discretionary expenses so as to fit rent into your budget. Some people completely avoid spending on discretionary expenses in order to ensure that they do not struggle with rent payments.

What other costs should you consider?

The location also decides how much you will be paying in rent. For instance, if you are living in the centre of the town, you will have to pay higher rent. Living further from the city will certainly help you save some money. Accommodation at the outskirts is highly affordable, but you will have to spend a lot more money on commuting. However, you will still find it affordable, as you can purchase a pass to travel on public transport from one place to another.

Utility costs also play a very important role. Some rentals include utilities such as gas and water. However, if you have an on-site gym and dryer facility, the cost of the rent will be even higher. It might not always be an expensive deal because you are actually saving on a gym membership. Compare prices. You might be saving more money with inclusive memberships.

Ways to make rent more affordable

It is not always possible that you are earning enough money to be able to easily afford rent. Even though you decide not to spend on discretionary expenses more than 30% you may still have to cut back on your living costs. Some people take out a loan to fund their rent, but this is not an effective solution because rent is a one-off cost.

You should try to cut back on inessential expenses to have some wiggle room in your budget.

Negotiate your bills

There are various bills that badly affect your budget. They include electricity and water bills. In order to reduce them, you should consider the following steps:

• You should negotiate with a service provider.
• If possible, switch to another provider that charges lower tariffs.
• Save money on energy bills during the winter by putting on extra layers.
• Make sure that your house is properly insulated.
• Talk to your internet and phone service providers and seek some cheaper plans.

There is no guarantee that service providers will negotiate prices for you. The ultimate option left is to reduce consumption wherever you can.

Cut down on unnecessary subscriptions

You should cut back on unnecessary subscriptions. You might not realise it, but they quickly add up. Do not pay for OTT platforms that you do not watch. If you are an OTT user, not a TV viewer, you should disconnect the cable connection.

Be careful about newspaper and magazine subscriptions. You can know what is happening in the world through your phone. You do not need to buy a printed newspaper. Likewise, there is no point in purchasing unnecessary magazines.

Spend less on groceries

You should create a habit of making a list of groceries. Make sure that you do not buy things that you do not need at all. A bulk purchase is not recommended when it is perishable. Choose a supermarket that lets you access additional discounts and offers. Compare prices of online stores and then decide whether to place an order online or visit the store.

Carefully manage your debt

You should stop relying on debt to meet unexpected expenses. A golden rule of thumb says you should have set aside money for emergencies. Although bad credit loans for 12 months from a direct lender seem to be affordable, they are very expensive. You will likely fall into an abyss of debt. You should purchase things using cash.

If you use a credit card, make sure that you do not max it out and pay off the balance in full on the due date.

The final word

You should look over your expenses to ensure that you will not struggle to pay rent. Try to reduce your living expenses, especially if you are on a tight budget. A 30% rule can work for you, but if not, figure out how you can minimise your expenses.

Emma Parker

Emma Parker is a financial counsellor at LondonLoansBank and has been serving for over 5 years. She is a psychology graduate from the University of Glasgow. Since she has keen interest in the finance field, she pursued a diploma course in banking and finance that led her to opt for her current career. She assists people choose the best loan based on their current financial situation and credit score. As Emma understands how people react to money problems, she gives them a helping hand to solve their financial complications.