By Winston Wong

4 tips to help you budget for a move

There’s more to moving out than just paying rent. Living on your own creates a lot of new expenses that people don’t know to factor in when moving out for the first time, such as rental insurance, commuting expenses and furnishing your new place. Here are a number of things to consider as you plan for your big move:

1. Build a budget for moving out

A budget is the only way to understand what you can afford, and it will help you make sense of all the expenses that come with your new independence.

When looking at your total housing costs, here are a few items to take into consideration that are beyond your rent payment:

  • One-time expenses: First and last month’s rent, packing materials, moving expenses, starter furniture
  • Ongoing expenses: Electricity, utilities, cable, telephone, Internet, renter’s insurance, security monitoring, parking, household items.

If you’re just starting out, a spending ratio like the one below can help you evaluate your spending habits and understand what you can and can’t afford.

The Vancity cash flow calculator is another tool that can help you see how much you make and spend.

Moving out - Spending ratio example

2. Figure out how much rent can you afford

You can easily calculate your housing spending ratio to see what’s in your price range when moving out:

  1. Add up your monthly housing costs.
  2. Divide the result by your monthly net income.

Ideally, your housing expenses should be about 30% or less of your net monthly income. The Canada Mortgage Housing Corporation recommends that your monthly housing costs shouldn’t be more than 32% of your gross monthly income.

If your spending ratio is a few percentage points above 30 for housing, you’re OK. But when it starts climbing over 45%, you should probably re-evaluate where you live, consider living with a roommate or look at saving in other areas, such as transportation. For instance, you may be able to do without owning a car in a dense urban area.

Moving out - Household spending ratio

3. Do a first apartment reality check

What happens when you find an apartment you love, but it’s way outside your spending ratio? Here are few things you can do.

  • Increase your income. Is the apartment you found worth taking on a second job or working longer hours?
  • Reconsider your “must-haves.” Be realistic about your expectations, especially if it’s your first time living on your own; compare many different apartments to understand how much more that extra square footage or that view will cost you.
  • Reduce other spending areas. In some cases, you can justify a higher housing spending ratio if it reduces (or eliminates) another spending category; for example, an apartment near work or school can reduce your monthly transportation costs.
  • Share the space. Having a roommate can give you access to that dream apartment for less money.
  • Look in a different location. Rental rates vary widely across the country; check out the pricing in nearby suburbs and cities to see if a move would make sense in the long run.

4. Ask the right questions

When moving out, don’t sign anything until you’ve read through the lease or rental agreement line by line. As you read, make note of anything you find disagreeable, ask questions about what you don’t understand and look for the answers to these starter questions for renters.

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