How Much Rent Can I Afford? How to Calculate a Rent You Can Afford

The question “how much rent can I afford”  is inevitable for those who plan to spend wisely. Your income is expected to be 40 times your rent. Before deciding on what apartment to rent, it’s advisable you deduct the tax payable on the income you earn. The money left after the deduction of the tax is what the planning should be based on.

The most important thing is that other expenses such as clothing, feeding etc. are put into consideration while determining how much rent one can afford. It’s also necessary to consider the bills that would accrue from the use of the apartment. Such bills include: electricity bills, gas bills, water bills, satellite TV subscription bills etc. It is also important to consider all other relevant bills

Finding It Difficult To Calculate Your Monthly Rent? Here’s How.

Are you having issues calculating your rent?

Do you wanna know the best rent calculation technique?

Don’t worry! This discourse proffers the necessary solutions to your housing problems.

Calculating your rent might seem difficult while looking at it superficially. But it’s one of the simplest tasks that you can ever attempt. In this write-up, you’ll be taken through the most convenient rent calculating method available.

Calculating your monthly rent from your weekly rent.

Most Tenants make the mistake of calculating their monthly rent by multiplying their weekly rent by 4 and their annual rent by 12. This approach is absolutely wrong.

Maybe this is the reason your calculations have always been different from your landlord’s. In calculating your monthly rent, the right approach is to multiply the weekly rent by 52. The result is then divided by 12. You’ve successfully calculated your monthly rent. Some examples shall be made to illustrate the points above.

Incorrect: 
Weekly rent = $200
Monthly rent = $200 X 4
Monthly rent = $800

Correct:
Weekly rent = $200
Annual rent = $200 X 52
Annual rent = $10,400
Monthly rent = Annual rent / 12
Monthly rent = $10,400 / 12
Monthly rent = $866.67

You can see there’s a great disparity between the results of the first and second approach. There’s a difference of $66.67 in the two approaches.

In some cases, the year has 53 weeks. It then follows that the weekly rent would be multiplied by 53.

Monthly Rent Calculator

Determining your monthly rent, as already established above, depends on how much you can reasonably spend per month. You need to factor things like utilities, renter’s insurance and transportation cost while using a monthly rent calculator. Apply the rule of thumb, which states that no one should spend more than 1/3 of your after-tax salary on rent.

For example, if your annual salary is $50,000, that leaves you with $4,166/month. After taxes, you should have around $3,270. One third of 3270 is about $980, and that is what your monthly rent should be on $50,000 a year.

Going by this logic, the $980 should include extra-costs you’d incur for amenities your apartment does not possess.

Rent-to-Income-Ratio Calculator

How much of my income should I spend for rent? To answer this, you’ve got to figure out the rest of your monthly budgeting. Since the largest percent of your monthly income goes to rent, it’s easiest to figure out the rest of your budgeting once you determine how much rent you can afford by using our Rent-to-income-ratio calculator.

A common budgeting strategy follows the 50-30-20 rule. Applying this strategy to your finances is a great way to maintain a focus on controlling your monthly spending while also planning out your future’s finances.

The 50: The 50 of the 50-30-20 rule means that you should aim to pay no more than 50% of your income towards your monthly necessities. These necessities include expenses such as:

The cost of your groceries per month
Your utility bills like your phone bill, water, and electricity
The cost of renter’s insurance
Driver’s insurance
Health & dental insurance
And of course, how much you should spend on rent
As given above, figuring out the amount of money you should to pay for rent gets you off to a good start on budgeting for the rest of your monthly expenses and helps you lay the foundation for figuring out the rest of your finances. If you’re looking at two different apartments and one is 40% of your income and the other is 25%, you might want to calculate how that slight difference will affect the rest of your monthly budgeting for your necessary costs.

The 30: The 30 represents how much of your income should go to discretionary spending. Basically, you should allocate 30% of your monthly income to cover entertainment, dining, the gas needed for out of town trips, the costs of your hobbies, and anything else that you can live without if you had to.

The 20: The last, and often what feels like the most distant, is the 20. The last 20, according to the 50/30/20 rule, is the percentage of income that should to go towards your financial goals. Whether that is putting down money for your retirement, paying off a car loan or student loan, or saving money for a down payment for your home.

Final thoughts

With this knowledge, I hope you’ll be able to independently determine your rent and make proper housing decisions.

Thanks for reading.

source: usa.inquirer.net

Raising children with High FQ

QUESTION: Hi, I read your article on PhilStar.com. I have two questions: (1) At what age should I start teaching my child about money? (2) Do you have a program (excel file or whatever) on budgeting or monitoring income and expenses? Thank you. – from Aireen Canales via email

ANSWER:

1. When I throw back the first question to parents, I get answers ranging from three to seven to teenage. However, I treat Financial Literacy as a journey and I think it’s best to start this journey really early on because it is a way of life.

So I encourage all parents to start the Financial Literacy journey of their child as soon as he is born. Open a savings account for him. That’s where you deposit the cash gifts that he will receive from friends and relatives on his baptism, birthday, Christmas and other occasions. Anyway, these are his money and it’s best not to commingle his funds with yours from the very start. Since he is still a minor, open an account “In Trust For.”

Can you imagine how many Christmases and birthdays there are before your child starts asking about money? And when he starts asking wouldn’t it be nice for you to say, “Honey, do you know you that you already have something saved up and invested?” This will set the tone of abundance in your child’s financial life. Just make sure that you are able to impart the correct values as you teach him about money so that this feeling of abundance is not confused with the feeling of undue entitlement. Entitlement means he can just use his money just because he has it and didn’t even have to work for it. Feeling of abundance is knowing that when money is conserved, invested well and respected, there will always be enough. And of course, this cannot be done in any great lecture but only by example from his parents.

As soon as your child learns to communicate, you can tell him that he does not have to spend all the aguinaldo and the birthday gifts he receives in cash. Make it a habit for him to automatically save and invest these gifts. If your child has godparents who regularly give him cash, encourage your child to invest these gifts in higher yielding instruments like fixed income investments and stocks. You may not realize it but your child has a higher risk appetite compared to you. He is still a minor and hopefully, you are the one providing for his needs until he becomes an adult. He has a longer holding period when it comes to investments.

When he goes to school and starts receiving cash allowance, instill the habit of setting aside a certain percentage of his allowance, say 10% to 20%. Create a system that is regular and automatic, if possible. When my sons started receiving cash allowance, we gave them a “treasure box” where they put their savings complete with a small notebook that records the amounts. When their cash savings in the box reaches at least P500.00, they deposit it in their savings account. When their savings account balance reaches way beyond the minimum balance, they invest in either fixed income or stocks. In other words, there is no need for them to keep their savings in low interest earning savings accounts.

As your child grows older, expose him little by little to your actual household expenses. You may show your utility bills to make him more aware about conserving water and electricity. You can bring him along with you when you do your groceries. Make a guessing game out of your grocery bill, restaurant bill, etc. When making purchases, explain to him your choices.

Money is an abstract concept and a lot of families use transparent jars or cute piggy banks to illustrate the concept of saving to their children. Some label their jars with Saving, Sharing and Spending to make it easier to understand for their young children where their money goes.

Remember that time is on your side when you start them young, so the earlier the better. To show the magic of compound interest to your child – i.e. how much he can accumulate by regularly setting aside money for saving and investing, go to Chapter 6 Magic of Compound Interest of www.RaisingPinoyBoyc.com. This will give you a free excel file wherein you can plug in your own values using your child’s actual savings and which will give you the amounts he can accumulate at different age levels.

If you think you missed out on this “as soon as your child is born” timing, don’t worry because the next best time is NOW! So start now.

2. On the second question regarding a program or file that can help you monitor your income, expenses and budget, there are free apps to choose from. Check your phone, if it is a smartphone, chances are there are various apps you can download for free. I tried using iXpense Lite on my iPhone and it was good. Since you carry your phone with you all the time, you have the ease of recording each time you incur an expense. It gives you a visual indicator of monthly budget vs. expenses, an expense summary for the month, average per day, etc. It also allows you to store digital photo receipts, generates graphical reports, and a lot of more.

I used it for quite some time to test it but when I changed phones I didn’t bother to transfer the data and since I’m a creature of habit I kept using my old and reliable (but now quite complicated) excel file which I started way back during the early years of our marriage. It has evolved from a simple Income Statement into a massive file called Monthly Cashflow and Income Statement. In the beginning, Expenses came after Income, now Investments come right after Income and the last items are the Expenses – our way of practicing “Pay Yourself First.”

The idea is to use something that you’re comfortable with. As much as possible, try to make it fun, and not too heavy an ordeal to record your cashflows. What we also do is to prepare Balance Sheets so that we know where our investments go. This makes saving and investing fun because we see our assets grow and it somehow helps us in delaying gratification. But that’s a whole new topic on its own.

For the meantime, I wish you Aireen and all the readers an enjoyable, even if sometimes challenging, financial literacy journey with your children.

source: philstar.com

Personal Finances: How You Manage Your Finances

Do you find it difficult to meet all your commitments due to personal finances ? Are monthly bills a problem for you ? If 'yes' is the answer you need to check how you manage your finances. Which of these two categories best describe you : a) A careful manager of funds, keeping your monthly budget in control so that you can deal effectively with any unforeseen money issues, or b) A bad finance manager who tends to spend their monthly income without considering the possibility of getting into debt with monthly payments.

If you answer b ... you can learn to keep your personal finances under control.

You may need financial advice if you have never planned financially before. You need to find out exactly what your monetary situation is, by getting as much information about it as possible. This information will give you an idea of your net worth financially, you should include assets, savings and property - then you will see more clearly what is left over for future savings. A personal finance budget is invaluable, this budget should include all of your income and expenditure. Accuracy is important as this will help you to realize your goals and future plans. All monthly expenses such as credit card payments must be included and scrutinize your statements so that you understand exactly where your money is going. This will aid you in prioritizing your expenses so you can make any tough decisions that may be necessary.

Do you have savings ? many do not bother about this until later in life but thinking about savings sooner is a good way to regulate your personal finances .. but don't forget that you have to meet your monthly requirements first ! Once you can do that, start saving, remember that you can't do it the other way around.
Also, consider your job, do you have a steady job with a reliable income ? This is not always easy to determine, for example if you work in retail there is always the possibility of job loss. Having a steady income may mean getting into a more secure job or, if possible, become your own boss. Above all be concerned with your personal finances these have to take priority over everything else.