This post is aimed at all you new grads starting to plan for your first apartment. Watch out for these three money traps that can foil your plans for getting your dream apartment or bust your budget once you get one.
Trap #1. Your Car
Your car? What does your car have to do with your apartment? Let’s see…
You just got your dream job and you are bringing home $2,000 a month after taxes and deductions. It’s more money that you have ever made. You are so tired of driving that hand-me-down minivan that you can’t wait to go car shopping. You plan is to get a cheap $150 lease on a Honda Civic, but when the salesperson shows you that you qualify for your dream car, at only $350 a month, you take it. The insurance will be higher at $150 a month, instead of $100 on that Honda Civic, but you can handle it. It also needs premium gas, but what’s a little extra each time you fill up. Using your car is now costing about $600 a month, or 30% of your take-home pay, instead of $300 or 15%.
Everything is great until you go to look for an apartment and then its hits you – you have used part of your rent budget on your car. Without giving it a second thought, you have just signed up for living with roommates for the next 3 years.
Do yourself a favor, keep your total car expenses within 15% of your take-home pay. Before you go car shopping, check out this site to figure out what kind of a car you should look for, in order to stay within this monthly expense target.
Our readers ask often us how much rent they could afford (check out the comments to this post) and when their car and related expenses take much more than 15% of their take-home income, that excess realistically has to come off their rent budget. On the other hand, the availability of public transportation is often a huge money saver, so use it if you can and skip having a car – your rent budget will get a nice boost! Use this budgeting worksheet to see for yourself.
Trap 2. Food
The average grocery/food bill for a single person in the US is $300 a month or $10 a day. This budget is so easy to blow, you won’t even notice it. Add your morning latte, a take-out salad at lunch and an afternoon pick-me-up beverage and you are already building up your credit card balance before dinner time rolls around at a nearby restaurant with co-workers!
Bonus tip to guys: The ladies love it when their guy knows his way in the kitchen!
Bonus tip to ladies: Buy your guy a piece of fancy cooking equipment (new skillet, great chef’s knife, whatever.) They cannot resist learning to use it to prepare a few special dishes.
Trap 3. Utilities and Streaming Services
You may waste a little on such basic utilities as electric and water by not watching your usage closely, but your big money trap is signing up to various cable and streaming services. If you sign up to a premium cable plan, add sports channels, gaming, Spotify, iTunes and other streaming services, it’s easy to add $200+ to your monthly bills. Worse yet, these services are usually paid directly from your bank account and it’s easy to forget about them.
Learn to review your entire bank statement each month, and pay attention to all automatic deductions. Are you still using the service? Can you find a cheaper or free alternative? Be as fast to cut services off as you are adding them up.
Please share in the comments what’s you worst money trap!