Moving into a new home can be one of the most exciting times, but with it inevitably comes a lot of paperwork, responsibility and financial commitments.
Rent will likely be your most costly expense each month, but there are several others that are worth considering before choosing your new property. Budgeting can seem daunting, but once you start keeping on top of your income and outgoings, it soon reaps its rewards. Whether it’s your first time renting or your tenth, we hope you gain some useful information from this guide to budgeting for a new home.
A simple spreadsheet will be perfectly adequate for starting your own budgeting record. Use one column for your income (whether that’s just yours, or shared with any other people), and another column for any outgoings. The final column can then act as a balance column by calculating the sum of your income and outgoings, showing you how much you’re left with after your expenses. You may find colour coding helps you to identify different patterns in your outgoings too – highlight your impromptu shopping trips in red and you’ll soon see whether they are a rare or regular treat!
Upfront Tenancy Costs
Before moving into a new home, you will likely need to pay a holding deposit, damage deposit and your first month’s rent. In total, this will usually equal just over two months’ worth of rent: so, if you’re looking at a flat that’s £1,000 PCM, you’ll probably need to budget for up to £2,200 for these outgoings.
If you don’t meet affordability requirements and can’t provide a suitable guarantor, you may also need to pay some additional advance rent, for example the final 3-6 months’ rent, before your move-in.
If you’re taking furniture and other sizeable belongings with you to your new home, it may be worth hiring a van to reduce the number of car trips needed, or even a removal company to take a lot of stress out of your moving day. If your current tenancy ends before your new tenancy starts, you may need to look into a storage unit to temporarily store your belongings – these range widely in price, so do your research beforehand to avoid a shock closer to the time.
If you’re lucky enough to be moving to an area with off-street parking/free on-street parking, or if you don’t drive, you can gleefully skip this step!
In many areas there will be a waiting list for a parking permit, so as soon as you’ve signed for your property you should join the list and budget for the cost. There are different length permits available, so if you can’t justify a whole year’s cost upfront it’s worth looking into a shorter term initially. However, like many bills, paying a year in one hit can reduce the overall cost, so judge your best option accordingly. Low-emission vehicles usually get a discount, so check your car category before committing your finances – you might be in for a pleasant surprise.
If you’re moving within the same council district, chances are your council tax bill won’t change greatly, but the number of people you share it between can quickly change a £30 monthly contribution in a shared house into a £130 bill solely down to you. There are discounts and exemptions available (which vary from council to council), for example students, single occupiers, carers, single parents may all be eligible for a reduced council tax bill.
There are several key utilities that you will definitely need to account for, and a few other take-it-or-leave-it utilities that can then be judged once you’ve assessed your budget. Power and water are essential for every property, but you’ll need to check whether there is gas as well as electricity, and whether your water is on a meter or a standing charge. For these basic utilities, we recommend budgeting up to £20 per person per week, but this can vary hugely dependent on many factors (number of housemates, usage levels, working from home, how long you spend in the shower!). To be safe, budget high and aim to spend low.
Additional utilities such as internet and TV packages can cost as little or as much as you desire. If you have a good package with your current provider, ask if you can port it to your new property and stay on the same deal. Often new customers are offered better deals than existing customers, so do shop around even if it means considering a different provider. If you’re moving close to one of the big sale dates, such as Black Friday, you can really cash in on some good deals. Don’t forget to take installation fees, delivery fees etc. into consideration when adding this to your budget – some packages may seem like a great deal until you add these on.
Furniture and Appliances
If you’re moving into an unfurnished property and you’re not taking a lot of furniture with you, it may be worth starting to look into costs of any necessary items before your tenancy start date. Start with the absolute essentials (a bed, sofa, fridge/freezer, table and chairs) and then work your way up to extras – it’s far too easy to spend a hundreds on cushions, rugs and lamps before you’ve even got anywhere to store your clothes. Search for second-hand items if you’re looking to keep costs down, although bear in mind that appliances may not have a valid warrantee if you’re not purchasing direct from the manufacturer or a supplier.
Essentials and Other Regular Outgoings
As obvious as it may seem, try to get a realistic idea of your regular essential outgoings, which can be anything from grocery shopping to gym membership, transport to childcare costs and everything in between. These will differ hugely from person to person, so your best bet is always to look back through the past few months of your spending history to get a true view of your committed costs.
Don’t forget to include costs such as Christmas, birthdays and even holidays if you’re committed to going away occasionally – although these aren’t regular costs, they can be considerable and certainly pile up before we realise how much we’ve spent. Estimate a monthly average that all of these costs equal out at, and add this to your budget. If these push you close to the line of being able to afford the property you want, have a closer look at where you get your money’s worth and where you may just be throwing money away (we all know how much we millennials apparently spend on avocado toast and takeaway coffee every day!).
One of the more overlooked expenses, especially for rented properties, is contents insurance. Whilst your landlord will have the necessary buildings and landlord insurance to cover the property itself, you should obtain contents insurance for any personal belongings in the property. If you’re moving away from your parents for the first time, you may find that their home insurance can be stretched to include some of your belongings in a rented property. Cover will vary with each provider, so commit an evening to comparing the best deals for your circumstances, and don’t delay – it’s still an essential expense.
Although nobody likes to think about emergencies, the sooner you are able to put a little aside each month as a safety net, the more financially secure you will start to feel. Whether it’s for a car break-down, an unforeseen trip, an unplanned vet expense, or even a global pandemic throwing the whole world on its head – it pays to be a little prepared, and any additions you can make to this fund after your committed expenses will be a benefit.
Once you’ve addressed all of the above that are relevant to you and your property, then you should have an idea of how your finances will look each month and whether you can afford the property you’re looking at. If you’re close to the line, it’s worth looking at something less expensive to relieve a little of the financial pressure to wholeheartedly stick to your budget every day. We all need a little breathing space!
Much like keeping your CV up to date, we recommend keeping on top of your budgeting even once you’ve become familiar with your monthly outgoings, as things can always change and it’s so valuable to have an up-to-date record of where you have wriggle room and where you don’t.