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The Money Guide for Renters - Part 3

Tiffany Vitti

Tiffany Vitti

2 months ago - 3 minute read

At Fronted, we’re helping renters move and bringing decades of financial experience to renters. Money can be an uncomfortable topic, but it doesn’t have to be.

Here we’ll cover average rent costs but click any of the links to go to:

Part 1: How much money renters need to move? (Click the link to jump to this section)

Part 2: What are the alternatives to rental deposits? (Click the link to jump to this section)

Part 3: How much should you spend on rent? (Keep reading)

Let’s get into it.

How much should you spend on rent?

Have you ever wondered what’s the right amount to spend on rent? Or how estate agents judge whether you can afford to live somewhere?

Whether you’ve just started renting or you’re now earning more and want to size up, we break down a monthly budget that works for renters, including a downloadable rental budget planner at the bottom of the article.

What costs are unique to a renter’s budget?

Managing a budget as a renter is hard - life is expensive. Though renter budgets will have less fluctuating home-related costs like maintenance costs or repair bills, renters spend more of their income on house costs than homeowners. That means unexpected costs have more of a significant impact on the bank balance.

These costs include:

  • Rent increases.
  • If you are coming up to the end of your contract, your rent could rise by an average of 10%. If you want to stay longer than a year, build in the 10% increase into your budget after 12 months.
  • Cost of moving.
  • If you are forced to move And you do not have access to the average rental deposit in the UK of £1,054, you may want to consider rent deposit alternatives that suit your budget.
  • Increase costs of a mortgage deposit.
  • You may have been saving up to buy a place, but due to the pandemic, you’ve had to put your plans on hold.
  • Mortgage deposits are now around 15% (in London, that’s £70k) for first-time buyers.
  • You might need to save more per month to keep the dream alive.

How much are people spending on rent?

Rent price really depends on where you live in the UK. While London rent averages out at £1,556 British pounds, those in the North East pay an average of £539 a month.

It is worth noting that people who live and work in major cities like London are likely to earn more. It is more useful to compare your rent spend as a percentage of income across the UK. Lucky for you, we made a handy table so you can compare:

Area

Rent as % of wages (Source: DPS Rent Index, 2019)

UK

30.64%

London

40.97%

SouthEast

32.83%

SouthWest

31.10%

East

32.40%

East Midlands

25.09%

West Midlands

26.27%

Yorkshire

23.24%

North West

25.49%

North East

23.13%

Scotland

24.67%

Wales

25.68%

N. Ireland

23.45%

What budget works best for renters?

Now you have a clear idea of the main things that could increase your outgoings and how to compare your rent spend, it’s time to relook at your overall budget.

Many renters have experienced changes in lockdown including a reduction in transport costs, or needing more space due to an increase in working from home. You need a budget that allows you to put necessary funds behind aspects that will improve your life.

The 50/30/20 monthly budget may work best for you. Rather than just looking at rent costs, assign 50% of your take-home pay for housing, utilities, groceries and transportation, 30% on non-essentials, like clothing, take out, and entertainment, and 20% goes toward your monthly savings.

This will be a better way of looking at your ongoing costs than just focusing on rent amount. You can also adjust the umbrella percentages, creating a budget that you feel most comfortable with.

If you want to quickly work out your current expenses, use the second tab on this Renter’s budget spreadsheets. Simply ‘Save As’ or download the sheet, navigating to the ‘Renter Budget’ sheet.

That’s it for our renter money guide

Missed the first section on  ‘How much money do renters need to move?’, click here.

Want to know how you could spread the cost of your rental deposit? Click here.

Tiffany Vitti

Tiffany Vitti

2 months ago - 3 minute read

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