Minimizing Costs for Your First Apartment
Getting ready to move into your first apartment after graduation? While it can be tempting to start searching for the best spot downtown, you should consider long-term finances. A post-grad apartment is a great step toward independence, but you may want to hold off on spending too much right away on rent or your new belongings.
Low Rent Costs and Utilities
While the rental market in major cities has been notoriously tight in recent years, you should think about what you can reasonably afford on a monthly basis. Choose an apartment based on your income and financial goals.
A commonly cited rule of thumb is to only spend 30 percent of your annual income on rent. The national average for renting an apartment is $1,420 per month, and in 93 percent of the largest cities in the country, that number continues to grow year over year.
Utilities and other ongoing monthly expenses can be a surprise when moving into your first place. Research which utility costs (electricity, water, internet, etc.) you will be responsible for, how much utilities tend to cost in that area, and any other fees you need to work into your budget.
The Difference Between Wants and Needs
Avoid buying a lot of new items to make your apartment feel like home. It takes time to learn what you really need, what you can live without, and which apartment needs are different than you expected. Start by buying cheap, getting free supplies from family, and perusing garage sales. Only buy what's necessary, and stay patient when searching for the kind of items you really want. Over time, you can replace the most important things with higher-end versions, and add items that you know you'll like or use. Even essential apartment furnishings can cost up to $5,000 or more, so saving where possible is important.
Save Money to Deal with Debts More Effectively
There's another reason to save money when renting and furnishing an apartment. If you have other debts to pay, your income is better off paying those debts down to reduce your overall interest payments and improve your credit. Two common examples are credit card debt, which benefits from the fastest payoff possible and student loans, which can benefit from extra payments.
Want to Own a House? Start Saving Up Now
Every dollar you save on rent is savings for your future — including a down payment on a house. If you see owning a house in your future, it's worthwhile to save money now so that you'll have enough cash to make the transition. When applying for a mortgage it also helps to have good credit, savings for your home loan fees, and a good idea of what you're looking for in a home. Saving on an apartment now will help you prepare for these things later. It can even give you a better understanding of where you'd like to live in a more permanent capacity.