Yahoo Finance 7 Budgeting Tips To Follow When Your Rent Goes Up
According to Apartments.com, the average rent in America is $1,517 monthly — and a recent report from Harvard’s Joint Center for Housing Studies discovered that a record half of American renters were considered cost burdened. An all-time high of 22.4 million renters were spending over 30% of their income on rent and utility bills in 2022.
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Even though the rental market is finally slowing down, evictions are on the rise, and many are struggling to keep up with rent hikes. Here’s a look at how you can survive financially if you find out that your rent is increasing.
Review Your Budget
“Start by reviewing your current budget to understand your income, expenses and savings goal,” said Taylor Kovar, CFP and founder of 11 Financial. “Identify areas where you can make adjustments to accommodate the higher rent payment.”
Reviewing your budget will help you determine what next steps to take. Ensure you have the funds to cover this rent increase for the next few months, while you update your budget or look for a new place. You may also discover that you won’t be able to cover the new rent increase and that moving to a different location is the better option.
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Buy Yourself Some Time
“When your rent goes up, you must immediately focus on ways to give yourself time to reevaluate your budget,” said Hope Ware, a financial expert and CEO of Under the Median.
How can you buy yourself some time?
Ware said, “If you have an emergency fund, you might consider using a portion of it to cover the rent increase. If you do this, be absolutely certain you put a strict time limit on it. This should give you enough time to reassess, recalculate and rebalance your budget.”
The goal is to reassess your financial situation as you determine the next best step for your financial situation, not to deplete your emergency savings entirely. And if you don’t have a big enough emergency fund — or any emergency fund, at all — you may be able to cover the rent increase by limiting spending, like how much you spend on dining out, or picking up a side hustle.
Prioritize Expenses
You’ll need to prioritize your expenses based on necessity and importance. You can start by looking for obvious expenses that could be paused or eliminated temporarily.
“Start by covering essential expenses, such as housing, utilities, food and transportation,” Kovar said. “Then, allocate funds for discretionary expenses, like entertainment and dining out, based on what you can afford after covering your necessities.”
Since rent is a mandatory expense, it should be in your high-priority category. Make sure you have the funds to handle the increase so that you don’t have any issues with late payments.
Reduce Discretionary Spending
The next step is to look for opportunities to reduce discretionary spending, freeing up funds for your increased rent payment.
“Since you cannot control the monthly rent payment, the alternative is to focus on what you can control,” Ware said.
While it’s frustrating to cut out something enjoyable from your budget, like a gym membership or attending concerts, the reality is that you have to make short-term sacrifices as you figure out how you’ll proceed.
Kovar added, “Consider cutting back on non-essential expenses, such as dining out, entertainment subscriptions or impulse purchases. Look for more cost-effective alternatives or find ways to enjoy leisure activities without spending as much money.”
Try To Increase Your Income
“Consider exploring additional income opportunities to supplement your current earnings and offset the higher rent payment,” said Kovar.
Increasing your income could involve taking on a part-time job, freelancing or pursuing other side hustle ventures. You can then use the extra income to cover the rent increase and to increase your savings. This could also motivate you to apply for a new job or start the side business you’ve been thinking about.
Evaluate Your Long-Term Financial Goals
Take this opportunity to reevaluate your long-term financial goals and priorities. As you review your budget and look for ways to save money, consider your long-term goals.
“Consider whether your current living situation still aligns with your overall financial goals or if it may be time to explore alternative housing options,” Kovar said.
You may want to adjust your budget and lifestyle to ensure you can still reach your financial goals despite the higher rent. If you’re not on track with your goals, you may want to consider making more drastic changes, like switching jobs or relocating.
Look Into Housing Alternatives
Your last option is to consider other living arrangements and locations where rent could be cheaper. Ware pointed out that you may have to widen your search radius when looking for a new place. If you’re willing to move a little farther from town, you could find more reasonable rent.
Ware said, “Check your lease and with your landlord so that you know how long you have left on your lease and what the penalty is for breaking it.”
You can also try to take in a roommate, if you have space, so that you can reduce how much you’re spending on rent. Either way, you’ll want to explore alternative living arrangements to see how you can save money going forward.
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