Monthly budgeting: best practices

Before you move into a rented home, it’s essential you calculate your monthly budget to work out whether you can afford it or not. Paying the rent on time – as well as covering other household bills – is essential for maintaining a good relationship with your landlord. Plus, if you’re free from financial pressures, you’ll enjoy your time in your rental home much more. Here’s how you can budget to ensure that you can afford to move into a rental property and how you can always make sure you have enough money to pay the rent during your tenancy.

Covering initial rental costs

If you’re looking for your first rental property, then you’ll need to save for up-front costs before you move in. These can include fees for:

  • A deposit 
  • An agent’s fees 
  • A credit check 

These costs can be quite large, and a deposit can include up to three months of rent. Speak to your landlord or letting agent you’re negotiating with to find out exact fees before you commit to properties.

If you’re looking online at sites such as Rightmove, then they’re usually displayed.

In addition, if you’re looking for an unfurnished property, remember you could have a large outlay on furniture and other essentials such as plates and cutlery, bedding, a television and a number of other items (unless you’re lucky enough to have items that have been given to you by friends and family). Discuss with the landlord or agent about exactly what the property comes with, and then you can draw up a spreadsheet with everything you’ll need to buy or source and approximate costs.

Know your outgoings

In order to calculate whether you can afford a property, you need to work out your outgoings. To do this, you’ll have to make a list of your expenses, including how much it will costs you to rent a property.

These generally include, but aren't necessarily limited to: 

  • Rent 
  • Fuel bills (gas, electricity and water) 
  • Telephone costs, line rental charges and internet 
  • Council tax (unless you’re exempt) 

These are all essential costs that you’ll have to pay every month while you’re renting the property. In order to maintain a good relationship with your landlord, the local council and energy suppliers, it’s vital that you pay these bills on time.

If, for example, you don’t pay your rent on time, you’ll not only damage your relationship with your landlord, but you may also harm your credit rating. Not paying council tax can also result in a court summons, and not paying your energy bills can result in vital services being cut off. If you’re sharing the property with others and you’re worried about sharing costs, the Money Advice Service can help.

If you’re currently in a property and you’re worried about being able to meet any of your bills, it’s important to contact your landlord, the local council or your suppliers immediately. This may result in a difficult conversation, but they may be sympathetic to your situation, and alternative payment plans may be arranged.

In addition to the above, there will also be other items you pay for monthly or buy regularly, such as:

  • Contents insurance 
  • TV licence (if you watch television or live television on a smartphone or laptop) 
  • Satellite subscriptions (such as Sky TV) 
  • Mobile phone costs 
  • Gym membership 
  • Dentist and optician costs 
  • Food and household items 
  • Clothes 
  • Credit card or loan repayments 
  • Entertainment costs
  • Gifts 
  • Transport costs (petrol for a car or train and bus tickets) 

By writing all of these costs down, and noting how much you spend on each, you’ll soon see where your money goes. In addition, you may be alarmed by some of the costs such as food and clothing, and it may highlight areas where you can slim down on regular indulgences, such as takeaways. By limiting the amount of money you spend on these outgoings, you’ll be able to make sure you can afford the essentials such as rent and council tax.

Calculating your income

Once you’ve calculated what you’re spending, you’ll be able to work out how much you should have left based on your incomings. Your incomings include all the money you have coming in, including:

  • Your wages 
  • Your benefits (if applicable) 
  • Loans and contributions from family members
  • Any money you make from other activities or second jobs

Once you’ve calculated this, you simply need to subtract your outgoings from your incomings.

If you end up with a minus number, or nothing, you can’t afford the property you’re currently looking at and will have to cut down on your outgoings or find a cheaper property. If you still have money left over, then there’s a good chance you can afford the property. But you should always ensure there’s a good amount left over, in case your financial situation changes during the duration of your tenancy.

Getting help with costs

If you’re struggling with the costs of renting, then there may be a chance you can get help. If you’re either unemployed or on low income, then you may be eligible for housing benefits, jobseeker’s allowance or employment and support allowance if you have a disability, so it’s well worth considering these options before you rent.

Use a budget calculator

Finally, if you’re struggling to work out the maths involved, or just need a structured calculator to work out your finances for you, then it’s well worth using Shelter’s budget calculator to help you calculate costs and whether you can afford the property.