Hi everyone,

I am freaking out about what I should do. A little backstory: I have been working full-time since I graduated and living at home, so I have been lucky enough to save most of the money I've been making. I recently got a new job about an hour away from my home, and the commute is unbearable, so I have finally decided that I need to move.

I have had a very hard time finding an apartment since the apartments closer to my work are a "hot"/trendy area. I have finally found one, and I need to submit the paperwork by tomorrow if I want it, but I am very unsure if I am saving too little with this budget. My boyfriend thinks it would be a mistake to sign on this place because it would be such a huge chunk of my finances.

If I did sign on it, my plan would be to live here for a year before possibly moving somewhere cheaper where I can save more.

Here is my breakdown:

SAVINGS
$16k in a CD, $10k in a savings account, $3k in my checking account, $3k in a separate account. I am going to make the max contribution to my IRA this year for my retirement fund.

My parents pay for my phone. I do not have any student or car loans.


Here is the budget I would forsee if I signed on this apartment:

Takehome pay per month: 2400/month
Rent and utilities (including internet): 950/month
Food: 500/month
Renters insurance: 35/month
Gas: 250/month
Misc: 320/month
Savings: 345/month

My question: does this seem sustainable? Are there any huge expenses I am missing in the budget? Would I be better off just trying to find something cheaper? I know the rent is a little higher than the 30% of take-home pay that is usually recommended.

Any advice would be MUCH appreciated!

Sounds like you have a nice start on your savings. It would be a shame to hinder that just to live near work. I'd probably shop around a little more for something cheaper. Did you consider a roommate? Is the BF gonna live there too?

Spending 40% of your after-tax income on shelter is definitely a lot. However, I've also lived in an expensive city and I know it might be very hard to find a studio for less than $950/month. The solution is roommates. You could probably cut your cost in half by sharing a three-bedroom place with two or three other people.

Looking over the rest of your budget, $250/month for gas seems high if you'll be living in a city (with sidewalks and public transit) close to work. On the other hand, I don't see car insurance. Does $250/month cover both gas and insurance? $500/month sounds like you are planning to eat out a lot. I've done that too, so I understand, but you could save a lot here by cooking in your apartment. Nothing big seems to be missing.

Tim

Ditto what Tim said....pretty much.

I'm not sure I'd consider $950 high for rent with utilities and internet. You might be able to find something better but if you like the place, take it, but only if your job is secure. I'd be more concerned if you did not have a good amount allocated for savings. I'd also suggest you cut that food budget down by half. It's time to mostly cook for yourself and become a savvy shopper.

Good luck!

I also agree with everything Tim said, gas seems high, groceries definitely seem high (my family of three spends about $350/mo for comparison, and we buy a lot of organic so we aren't exactly scrimping).

What city are we talking here, big city like DC, Chicago, NYC or LA? Seattle perhaps? Or is it a smaller city? That is the deciding factor on if I say the apartment is a good deal or not. I second the room mate proposal, or try to find a place that does month to month leases so you can look for something more affordable while in town. A lot of good deals are found by word of mouth, have you asked around at work?

I live in a major city and you can sustain yourself on your budget. However...

1. I'd see if I could knock the gas bill down a bit. If you are now living closer to work, will your gas budget decrease significantly?

2. Your food bill is too high. My husband and I have a lot more take home pay than you combined and our food budget is $550/month for two people and two cats. That is $300 for groceries/cat food and $250 for anything related to "eating out." That is our maximum budget so many times we are under that amount. This is an area where we splurge a bit because he is on a low carbohydrate diet (so that means buying a lot of meat) and visiting different restaurants is my hobby.

When I was not working for a few months, we never ate out period and our food budget for two people and two cats was still $300 or less per month.

3. I would call around and see if I could get cheaper renter's insurance. My friend pays $15 or less per month in our city.

4. I'm not sure that people factor in utilities and internet as part of their "30%." I know that I do not.

Unless you have something that is truly insurable, I would skip the renter's insurance.

I had a claim on renter's insurance many many years ago, and it was recouped multiple folds over the years in the form of increased premiums, even on home owner's insurance. We would get a quote, then when we got into the nitty gritty, they would raise the premium due to a claim made on renter's insurance. Not all insurers will do this, but many do.

I would think long and hard about what the worse thing that could happen. The place burns to the ground or a robber comes in and cleans you out? In which case, would that be a devastating event which you could never overcome? Most people could slowly work their way back up and out of that.

And for the record, I've never been totally wiped out in a robbery and/or had a place burn to the ground. And I don't know anyone who has either. The worse case events are very very low probability events.

Don't tell the boyfriend how much money you have.

I'd say wait. Unless either a. your parents want you out of the house or b. if you don't mind being stuck with this apartment for a year.



I agree.

I would never, ever skip the renter's insurance. I'd consider being unable to afford insurance a giant warning that I was totally over my head. I have paid renter's insurance since I left home almost 10 years ago, never made a claim, until last month when a burst pipe in the ceiling while I was at work left my apartment flooded. In that one incident I've gotten back at least as much as I've spent altogether: hotel while apartment was unliveable for two weeks, destroyed laptop replaced, professionals came in and cleaned all the soft furnishings that would probably otherwise have molded apart, destroyed furniture replaced - even just having someone else handling everything for me was amazing, I consider myself pretty relaxed and unattached to my stuff and this was crazy stressful and I had no idea where to start. The biggest thing I've learned is that if the apartment did burn down, it would cost me more than I'm currently covered for to replace stuff.

That said, I'm paying $12/month for fire/flood/theft/earthquake coverage in Seattle: you should check if you can get that payment reduced. If you pay it as an annual chunk it should be reduced a little, at least.

For the overall question: that is a huge chunk of your income. I'd suggest you go for the roommate option, you should be able to get the housing down to about 2/3 the cost of a solo apartment easily and that would be an important buffer for you. It's much easier to move into a solo apartment from a shared place than to go back to sharing, in my opinion.

The food budget doesn't look ridiculous to me. It depends a lot where you are, and I know I spend a lot more than average on food because of laziness, but if you aren't used to shopping for yourself or cooking, you will have more trouble than people who have their own staple of recipes for leftovers and cheaper ingredients. When you first move in you'll also have to spend an initial lump on stuff like cooking oil, spices, ketchup, vinegar, that will quickly blow out your budget for the first month if you're not prepared for it. I'd plan to add 50% to the food budget the first two months.

Yes but...that should have been covered by your landlord! The owner is responsible for mechanical failures and any consequent damage. It's great that your renter's insurance paid you but I strongly suspect they are going after your landlord's insurance behind the scenes.

I think renter's insurance in general is not a bad idea IF you have things to secure. But take a high deductible and try to protect yourself. I also think $35 a month is very high for renter's coverage. We pay much less than that for very good homeowner's coverage that goes way beyond renter's coverage.

Whether you skip that coverage is a personal decision. But you should talk to your agent and tell him or her that you need it to be about $12-$15 a month or you'll get it elsewhere. If you have your car insurance with the same company and are willing to accept a higher deductible then that should be doable.

I'm definitely on the side of getting renter's insurance. It is typically very cheap. (The last time I rented, a few years ago, it was just $10 per month, so you may want to see if you can get your estimate lower.) Most importantly, most leases require that the renter purchase and maintain the insurance. If you do not get it and something goes wrong, then you are in breach of your contract and your landlord could sue you for all the resulting damages.

I agree with a lot of what timwalsh300 said. If you move to live in city, cost of gas should be much lower. I have a fairly standard car and live in a big city, and my gas runs around $50 per month (though I recognize regional variances in gas prices). Also, while your food budget is not altogether crazy, you should be able to lower it probably to around half. Finally, make sure your health insurance is included somewhere (whether that's pre-take-home from work or elsewhere).

With those adjustments, I think your plan is doable, though on the tightest side of the scale that I think is reasonable. If getting a roommate is an option, then that is probably better, but I can also understand there are circumstances where having your own place is really the best fit for your life.

Oh, and if boyfriend is spending a lot of time there, then you need to make sure he's contributing in some way, whether that's buying the food some time or reciprocating with the same accommodations at his place. Actually, that gives me another thought: If you are going to be at his place a lot, then you should compromise more on your own place. I have made the mistake of renting a great, expensive place only to stay at my boyfriend's place half the time -- what a waste of money that was!

For what it's worth, we are paying $10/month to USAA for renter's insurance. That covers $25k worth of property with a $1k deductible. It also has some liability coverage. I got a quote from Liberty Mutual and it was double the price, even with an alumni association discount.

Tim

If the Misc category is your contingency amount (for unplanned problems) then you're not in bad shape. If it's not a contingency amount, then I think the budget is a little aggressive.

The suggestions for roommates are very good and I think you should look into that opportunity. You'll not only save $ but having roommates makes for a safer home. I'd strive to keep costs low and continue to bank as much as possible - you've done a fine job so far. You'll be very happy later in life that you did.

If you go the roommate route, get help - there are different considerations depending on whose name the lease is in, etc.

Just b/c something is "cheap", doesn't mean you should buy it. I've never signed a lease stipulating renter's insurance. It is only for the contents, so I have no idea why an owner would want you to have it.

You can breach a contract anytime you wish, and yes you can be sued. But, that doesn't mean you will. Please tell me the damages an owner would have b/c their tenant does not carry renter's insurance?

Perhaps there is a good reason, like their brother in law sells it. But since renter's insurance is good for the tenants' contents only, I'm having a hard time coming up with a reason.

Two of the three places I've rented since 2008 required me to have insurance. I already had it (because I wanted the coverage), so no big deal. I guess I never stopped to wonder why it would be required. It must reduce the landlord's own insurance/litigation costs somehow. I suspect it has more to do with the liability aspect than the protection of my furniture, clothes, etc.

Tim