Wondering how to know what your rent budget should be? We’ve got you covered with this step-by-step guide.
For those of us renting in Canada, it’s important to know how much rent we can afford. After all, no one wants to end up in a financial bind because they’re shelling out too much money for their monthly rental agreement. So, how do you calculate how much you should spend on rent? Keep reading to find out.
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Step 1: Determine Your Monthly Income
When it comes to budgeting for rent, the first step is determining your monthly income. Everyone’s financial situation is different and individual factors like freelance earnings or other variable income can make this tricky. If you have a steady job, consider looking at your pay stubs from the last several months to get an accurate figure on what you typically bring in every month. On the other hand, if you have a part time job or are self-employed, think about including all of your average sources of income and deduct any expenses associated with making that money so that you can make a realistic assessment of what your actual take home pay is each month. No matter what your circumstances, having an honest approach to assessing how much money you regularly earn will help you determine how much rent you can afford in Canada.
Step 2: Calculate Your Monthly Expenses
With rent prices on the rise, it’s important to make sure you factor in all of your monthly expenses when calculating how much rent you can afford. To make sure you know what you’re getting into, try creating an outline of every single monthly expense including bills, transportation costs, grocery shopping and more. Creating a big picture understanding of what your regular costs are as well as potential unexpected extras will help ensure that you don’t overcommit yourself financially. Laying out each item individually by writing it down or entering it onto a computer calculator can really clarify your overall financial picture — then you’ll be able to calculate just how much rent you can commit to spending each month.
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Step 3: Find an Apartment or House That You Can Afford
Renting a place doesn’t need to be overwhelming — with a bit of research and preparation, you can find a great home in your budget. The first step is to determine exactly how much you can afford for rent. It’s best to compare that amount to the areas you’re interested in, so you can get an accurate idea of where you should be shopping for apartments and condos. Decide on prices that align with your income by aiming for rent payments at or below 30% of your income. What’s more, don’t forget ‘hidden’ costs such as security deposits, parking fees, application fees and utilities. Once you have your finances ironed out, it’s time to start the exciting part: scanning listings and visiting properties.
Step 4: Make Sure to Factor in Additional Costs Like Utilities and Furniture
When you’re looking for a place to rent, it can be tempting to try to secure the lowest monthly payment possible. However, it is important to also factor in any additional costs that may come up. In Canada, these costs could include things like utilities, internet/cable bills, and even furniture — all of which can quickly add up. Make sure to always ask questions about what costs are included in the total rent price so you get an accurate idea of how much you’ll need each month. That way you won’t be caught off guard with unexpected expenses.
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Step 5: Get the Proper Tenant Insurance Coverage
Finally, don’t forget to factor in your tenant insurance coverage as well when you’re calculating how much rent you can afford. It’s important to make sure that you get the right amount of coverage to protect yourself from any potential damages or losses that may occur during your tenancy. Aside from quite often being a requirement of the lease, having the right amount of coverage in place can ultimately save you a lot of money and worry in the long run.
Step 6: Move In and Enjoy Your New Home
Once you’ve figured out how much rent you can afford and narrowed down your search, it’s time to take the plunge. Once all of the paperwork is signed and secured, you can move into your new home with confidence knowing that you have taken steps to find an apartment or house that fits within your budget.
Related read: The Ultimate Apartment Moving Checklist
Renting can be a great option for those who don’t want to commit to a mortgage or are looking for a more flexible living situation. But it’s important to make sure that you can afford your rent each month without breaking the bank. By following the steps we outlined above, you can calculate how much rent you can afford in Canada and then start your search for the perfect place to call home. Moving into a new rental is an exciting time – make sure you enjoy it by being prepared and knowing what you can afford ahead of time.
APOLLO Insurance can help save you time and money on your tenant insurance policy, so you can focus on your big move. It takes just five minutes to get your free quote, and less than fifteen minutes for it to get sent directly to your inbox.
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