Can I Afford That Rent? The Canadian Perspective
Have you been wondering how much rent you can afford or thinking of renting an apartment or a place? This is a sensitive issue and needs to be handled with care. We will outline various ways of knowing how much rent you can afford along with a couple of factors you should put into consideration for you to have a positive experience.
Get to know the amount of rent you can afford
According to experts, it’d be unwise to spend more than 30 percent of your total monthly income on rent. Assuming you earn $40,000 annually, you shouldn’t spent more than $1000 on rent monthly. But you shouldn’t forget that keeping your rent under this limit may be impossible in some places especially ones with low vacancy rate.
Get to know the amount of rent you can afford
- Will you be driving to your workplace and pay for the parking or will you reside close to your workplace such that you can take advantage of the public transport?
- What other costs will require your attention besides rent?
- Do you intend to share the amount of rent with someone else or you intend to stay alone?
- While paying rent, are there other financial obligations such as credit card debt, car loan, or student loan that require your financial attention?
- Can you save for other crucial goals such as saving for your retirement or owning a home?
Best solution: A realistic budget
Apart from providing genuine answers to the questions listed above, it’s wise to determine the total costs you are supposed to take care of before you rent a place. In most cases, first time tenants get shocked at the total cost of living. The best way around the shock is to draw a realistic budget that outlines your expected monthly or weekly expenses, the rent you’re likely to be paying, and the money you need to save for debt settlement.
Is your rent and other expenses higher than your income?
After drawing the budget, you will get a clear image of the level of rent and expenses you’re supposed to take care of. If you realize that this level of monthly rent and other expenses exceed your monthly income, then, you aren’t ready to rent a place. It’s time to revisit your budget and see what you can change to make sure that you can finance your expenses before you rent a place. You can also consider debt consolidation as a way of minimizing your debts especially if you have heavy debts.
Don’t forget about these “hidden” costs
In addition to taking care of the rent expense and other expenses, you will need money to set up your new apartment. For instance, you need furniture, utensils, bedding, cookware, and more. Though you may not need the most expensive stuff, you can’t do without the basics.
It’s important to save for emergencies
Having insufficient savings for emergencies is another challenge to most first time tenants. Before you move to the apartment you intend to rent, make sure you have at least three times your monthly expenses as savings for emergencies.
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