How can I raise my credit rating even further?
How to improve credit
Whether it’s for a new job, to build a nest, or upgrade your surroundings, moving home can be incredibly exciting. Unless you’re buying a property and getting a mortgage, rent will probably be your biggest monthly expense. To get a good idea of how much you can personally afford, it’s worth totting up all ongoing costs – including bills, food and fun – and adding them to a monthly budget.
Although there isn’t a one-size-fits-all number, you should make sure you never spend more on rent than you can afford. Once the rent has been paid every month make sure you have plenty left for other outgoings like utility bills and council tax.
It’s important to consider what you feel comfortable paying. Some renters don’t mind spending a higher percentage of their income on rent if there are enough benefits to the new home, such as a bigger garden or a better school nearby. There may be other little details to consider, like whether you’re saving up for a world cruise, or need to live in a pricier location to be close to your job. It’s therefore a good idea to drill a bit deeper into your budget to see what you’ll be able to afford.
When browsing listings online or gazing into an estate agent’s window, it can be hard to know what’s affordable. After all, you might only have two numbers to work with, your monthly wage and the rental costs shown in the adverts. How are you supposed to know in advance if paying a bit more for French doors, nicer cabinets or a south-facing garden is going to be manageable?
To get a good idea of what rent will work for you, try breaking down your budget into smaller chunks.
1. Putting the rent to one side for the moment, estimate what the total cost of your monthly outgoings will be when you move. This includes utilities, council tax, the cost of commuting and all general living expenses, such as food and drink, clothing, etc. It might also include topping up savings or an emergency fund.
2. Minus these outgoings from your monthly take-home pay (your income after tax).
3. The result is how much you have left for rent.
4. If paying rent would leave you with very little or nothing left over for expenses you can’t always budget for, like a broken boiler or a last-minute holiday, it could be worth eyeing up more affordable rental options. Having a buffer in your budget could help you avoid having to borrow money on credit cards or using an overdraft.
Another benefit of building in a healthy buffer is that there could be costs related to renting that you don’t see coming at the outset – having some extra leeway in your money means you can take these in your stride.
Here are some of the costs associated with renting that you might need to add to your outgoings total.
While it’s not everyone’s idea of a fun night, estimating what your monthly expenses might be after moving in will help you find a dream place you can afford.
Some expenses, such as food and nights out, might stay the same. For these, you can check online bank statements over the past few months to get an average. Barclays Online Banking includes Money Tools that could help you manage your money more effectively. Online servicing also makes it simple to regularly review your purchases. This can help you better understand your spending patterns and see where you might be able to save money.
Here are some standard costs you might need to include in your calculation:
Gas, electricity and water. Sometimes utility bills are included in your rent, but usually they’re paid in advance using a prepayment meter or charged at the end of the month based on how much you use. Water payments can also sometimes be charged at a set price regardless of how much you use. If you’re paying energy bills directly rather than through your landlord, you have the right to switch supplier to get the best price.
Council tax. If you’re in a shared property, council tax might be included in your rent, but it’s usually paid separately. Council tax bands differ by the type of property and you can check how much yours will be in England or Wales, Scotland, and Northern Ireland.
Service charges. These could include cleaning communal areas, gardening, or security. They might be included in your rent, but as with other costs, it’s a good idea to find out before moving in.
To find out the costs above, try using a property search site that has a running cost tool. This gives you an idea of what you could expect to spend on monthly bills in certain areas. Sometimes the landlord or letting agency may even help you out with this information.
Remember, with monthly outgoings like water, gas and electricity, and council tax, it’s a good idea to set up a direct debit, as this is the best way to ensure you never miss a payment – as long as you make sure you have enough money in your account to make the payments.
Once you know roughly how much utilities and other bills will cost each month, think about other costs that could also apply and include them in your monthly outgoings estimate as well. Some common expenses you might want to think about include:
TV licence. You can pay for your TV license in a number of different ways. If you’re living in shared accommodation, then you can split the cost between you, as you only need one TV license per household. Remember that even if you’re only streaming certain shows online and not watching them from your TV, you’ll still need to pay the fee.
Digital TV and streaming service subscriptions. A single streaming service might not cost much per month, but as an ongoing expense, it still belongs in your budget.
Broadband. Many broadband providers sign you up for at least twelve months so it’s worth planning the cost in advance, especially if you think you might move again before the contract is over. If that’s the case, ask your supplier about how to switch when you move, or early cancellation costs.
Landline phone bill. Unless it’s needed for your internet connection, you might be able to get by without a landline. If so, you’ll save money on the line rental. However, if you do pay for a landline each month, it could help build your credit rating.
Contents insurance. Covering your belongings when renting with contents insurance is an extra cost, but one that could save you a packet if there’s a break-in, flood or fire.
Commuting costs. If your commute to work will change after moving, try to work out how much more or less trips will cost on a monthly basis. You can find train ticket prices online, but if you’ll be travelling by car, you might need to search online for a fuel price calculator.
Parking. If your new pad doesn’t come with a parking space and there’s no safe on-street parking, you could try checking classified ads for nearby spaces for rent.
Adding up all these costs will let you see how much you can afford to spend on rent, as well as holidays, savings, student loans, special events and your emergency fund.
An emergency fund can be useful to help you get through an unexpected job loss or an illness that stops you from working.
Barclays Budget Planner can help you add up all your monthly expenses and find out how much you’ll have left over.
You’ve budgeted like a pro, calculated your take-home pay and expenses, and grilled the landlord for the costs of bills. You’ve almost got the whole picture, but there could also be a few one-off fees involved in moving into a new rented apartment or house.
Make sure you take all upfront fees into account so you know you have plenty of funds available to cover those one-off costs before you set your move in date.
Rental deposit. This could be the equivalent of 4-8 weeks’ rent. As long as there’s no damage or missed rental payments, you should get this back, but because it’s likely to be hundreds of pounds, it’s a good idea to budget for it in advance.
Some letting agents may let you pay the deposit using a credit card, but many private landlords won’t. If using a credit card, a 0% purchase card could let you pay without interest, as long as you can clear the balance on time and in full. Bear in mind that purchase cards may come with a fee.
Upfront rent. Alongside the deposit, some landlords will ask for one month’s rent to be paid upfront before you move in. Make sure you check with your landlord or letting agent if this is required.
Agency fees. If you use a lettings agency, there could be fees for credit reference checks and renewing tenancy agreements. Ask upfront what they’ll be and compare several agencies before choosing one.
Moving fees. Some ‘man with a van’ classified ads could work out cheaper than hiring a van yourself. Even better – make a day of it by roping in friends and family.
Furniture and decorating. If your new home is unfurnished, you can look for freebies online. Often people prefer to give items away for free than take them to a tip. Check out our article on paying for home improvements for tips on how to pay for decorating and furniture.
They say finding the perfect home is all about location, location, location. But making sure you can afford the rent? That’s preparation, preparation, preparation.
Using your household income and living expenses, Barclays’ Budget Planner will help you make sure you can afford those monthly financial commitments, whether that’s paying rent, clearing your credit card balance or making your final car payment.