Follow the “30% rule” when renting for 5 years
It’s been more than 5 years since Krystal (character name has been changed) went looking for her first apartment in New York after graduating from college. She has had unexpected financial achievements.
In one of the most expensive cities in the world, rent can be a big problem for young people. However, Krystal did not want to ask for help from her parents, even though her income was still low at that time because she was a trainee.
When she graduated, she received a decent amount of congratulatory gifts from relatives. Krystal has decided to use that money to pay the rent deposit and the rest will be set up as an emergency fund.
That meant she had run out of savings. From now on, her monthly rent and bills to be paid will depend entirely on her income. During the time when she was in university, she only lived in a dormitory, indeed the rent at that time was quite cheap. She couldn’t imagine how much she would have to spend when she had to live on her own.
Realizing that she was confused, Krystal decided to find out about the story of renting a house. She feels the rule of not spending more than 30% of her gross income on housing fits her financial goals. Do some math and realize that when she pays exactly 30% of her income on rent, she still has enough to cover other expenses. Such as eating, commuting and some recreational activities plus having a small savings fund.
How Krystal abides by the 30% rent rule in expensive cities
For those “unfurnished mats”, apartment hunting sounds interesting. In fact, it can be incredibly tedious and frustrating, especially when you’re on a tight budget. A beautiful and modern apartment may not be on the list of young people who have just graduated from school and want to be completely independent.
After about a year and a half living in New York, Krystal moved to Los Angeles – a city with an equally high standard of living. To follow the 30% rule, she had to make a few concessions. In both places, she lived with at least 2 friends and always chose the room with the cheapest rent.
In New York City, that means a windowless bedroom in a suburban apartment. In the first apartment in Los Angeles, Krystal chose the place with the most inconvenient parking space and the bedroom without a private bathroom.
However, rent is not the only housing cost. Internet usually costs 1 million per month. However, the problem is that water and electricity are unpredictable, bills change from month to month. What’s more, it can be difficult to control these costs when you live with other people. Because you can’t check their energy usage or shower time. In practice, we will usually divide the money by the number of people in this case.
When bills get too high, Krystal often has to use emergency funds to cover shortages.
Keeping rental costs low has opened up many opportunities to increase savings
Every time Krystal has moved apartments – three times in total since her first apartment in New York – she has had a higher income. On such occasions, she will fine-tune her rental budget to fit her financial goals and personal needs.
By controlling housing costs, she can be more flexible with the rest of her budget. It is worth noting that she has no consumer debt. Part of that is that Krystal has been extremely mindful of the amount of money she spends on rent. From there, understand the importance of personal finance.
As her income grew, she pooled the money for savings, investment and retirement goals. Besides, Krystal wants to make sure that she is prepared for unexpected expenses.
So instead of moving to a nicer apartment in a busy neighborhood every time her salary increases – she keeps her rent below 30% and lets the rest of the money invest.
The 30% rule doesn’t work for everyone
Like any personal finance strategy, the 30% rule is more of a mandate than a must-have. You may have fewer choices about exactly where you live, work and study. Or you may not be used to living with so many people.
For Krystal, the 30% rule is a good foundation for budget planning. Keeping your fixed costs to a minimum means that there will be money available for other goals – more important to yourself.
Photo: Synthesis
Law and readers
at Blogtuan.info – Source: cafebiz.vn – Read the original article here
