Let’s talk about budgeting

Are you still reading? Good. Budgeting isn’t the most inspiring topic but get it wrong and you’re in a whole world of trouble.

Let’s imagine you’re about to take on your first tenancy. You’ve viewed a property. You like it. It ticks every box, but the rent could be a bit of a stretch. This is the time to sit down and have a realistic look at your finances and the cost of renting. You might be in love with the property right now, but if it becomes a burden, that love affair isn’t going to last.

Adding up the costs of renting

Any home move, whether it’s your first or not, comes with some upfront costs. If you’re looking to rent, you’ll have to find funds to cover the security deposit (normally up to 5 week’s rent) and your first month’s rent, which is almost always paid in advance. An agent may also charge a holding deposit, but often that can be transferred into your security deposit.

The next costs you’ll have to factor in are the actual costs of moving and setting up your new home. Whether you hire a van to move your stuff or chose to pay professionals to do the job, budget for it. If you’ve got friends lending a hand, you’ll probably want to keep them fuelled. Sending out for a takeaway makes sense, but don’t forget, it’ll be going on your credit card.

If the property is furnished, be sure to check what’s included. Is there a fridge, a freezer and a washing machine? If not, you’ll be having to find the funds to purchase your own pretty quickly. If you haven’t got the small electricals – such as a kettle or microwave – you’ll miss them, so add them to the shopping list. What about bed linen, towels, pots and pans, cutlery? People can be very generous when you’re starting out, but you’ll be very lucky if you don’t have to dip into your own pocket for some of the basics.

Once you’ve drafted up an estimate of the upfront costs, you’ll want to check the ongoing monthly costs and compare them to your income or benefits. Typically, you’ll be paying monthly for:

  • Rent
  • Utilities – gas, electricity and water
  • Council tax

Unless specifically included in the tenancy agreement, your utility and council tax bills are unavoidable expenses. You may be able to check comparison sites to get a better deal on energy but there isn’t much room to manoeuvre.

Other monthly costs are to some extent optional but check that you’d be happy to do without things that are, to most people, essentials:

  • TV and streaming services
  • Internet connection
  • Mobile phone
  • Costs of travelling to work
  • Insurance

Finally, add up your other outgoings.  You need to have room within your budget to eat, to have some fun, to take care of your health and even to ensure you stay on top of your credit card or store card payments. The list could include:

  • Food
  • Any healthcare plans
  • Club or gym memberships
  • Car loans and running costs
  • Existing subscriptions
  • Your social life

When you’ve done the sums, you’ll have a better idea of whether that property really is suitable for you. If it isn’t, keep looking or see whether you can negotiate a deal that works for you.

If you find yourself struggling financially once a tenancy has started, don’t bury your head in the sand. Talk to your landlord, do the budgeting exercise, work out what you can afford. Check whether you can get help by talking to the government’s Money Advice Service, which is free and impartial.

We’d be the last people to suggest that budgeting is fun, but if you haven’t got a grip on your finances, life isn’t fun.  So, pop the kettle on, do a few sums and enjoy living.