Managing various expenses on a tight income and that too in an urban center can be quite the challenge. The constant tussle between one’s needs and wants plays a huge role in setting the course of an individual’s financial management.
When wants are given greater priority, people are often left without enough to go by, even when it comes to their essentials. On the other hand, the list of lucrative leisure activities in a city makes spending money on them hard to resist.
However, with rising costs, otherwise referred to in economic terms as inflation, it’s becoming ever so important for one to manage their finances better, such that they’re able to maintain an ideal balance between leisure and their savings. A constant expenditure that makes this balance hard to achieve is the rent on your house.
With prices soaring across the country, people now find it harder to rent a decent place to live at an affordable price. Add to this the fact that the COVID-19 pandemic has hit people financially, making the need to prioritize your expenses ever so necessary.
If you’re worried about managing your rent on a tight income, this article will serve as a guide on how you can do so.
How Should You Ideally Segregate Your Income?
Consider the 50/30/20 budget rule for a moment. It stipulates an ideal formula for you to segregate your income. Let’s dive into its specifics.
50% – Needs or Essential Expenses
The first 50% of your income must ideally be spent on all your essentials. These include all your monthly bills such as those for your internet, electricity, and water, along with your grocery and food-related expenses.
The elephant in the room, which will inevitably take up the largest part of this 50%, is your rent. Try your best to ensure that this 50% entirely covers your rent. While this might not be possible in some cases, keep this as a marker for when you think you might have gone over the top with your spending.
If you feel like these expenses will need more than this suggested amount, you might need to make a list of what you’re spending this money on and only prioritize what you need.
30% – Wants
Once you’ve budgeted your income to cater to your necessary expenditures, you’re left with the remaining half of your paycheck. Of this, this formula recommends using 30% for all your wants and leisure activities.
These could include your take-outs, dining, movies, parties, or any other products that you think would be “nice to have”. However, remember not to go overboard as any unnecessary expenses could eat into your much-needed savings.
20% – Savings
This is probably the most important segment in your monthly income. Millennials and post-millennials today have often been seen as “living their lives to the fullest.” This approach to life comes at the obvious cost of a decreasing percentage of money going into their savings.
Momentary feel-good moments could cost you in the event of an emergency. They could also be the final leg of a downward spiral of recurring debt. As a result, you must deal with this part of your income most strictly.
Whether you invest this amount or put it into your emergency fund will depend on your needs and commitments, but ensure that either one happens without fail. This is the money that’s going to be by your side on a rainy day, keeping you from having to take a loan or overpay with your credit card.
While this can serve as a base for you to get started, especially if you’re wondering how you can prioritize your income based on your needs, wants, and savings, you must always strive to save as much as possible. A higher percentage of your income being saved will never do you any harm.
5 Ways to Manage Your Rent on a Tight Income
On a tight income, or in a situation where your income has been reduced, making your monthly rental payment can be quite painful. However, it is a necessity and needs to be done.
What you can do, however, is to try your best to ensure that this expense doesn’t put you in a financial jam for the rest of the month. Here are a few ways in which you can manage your rent on a tighter income.
1. Make a Budget
The foundation of any financial planning lies in creating a budget for yourself. This budget must include all your standard monthly expenses, apart from other wants that you spend more of your money on.
Listing these down on a piece of paper or an Excel sheet on your computer will give you an idea of how much you spend on things you don’t really need.
Once you’ve picked out these avoidable expenses, commit to leaving them aside until you have the means of being able to splurge on them again.
2. Prioritize Your Expenses
Once you’ve made yourself a budget and have figured out your essential expenses from the more leisurely ones, it’s time to prioritize.
Ask yourself: do you really need that meal at a fancy restaurant in the city center? Or how about that expensive interest connection for your binge sessions?
Give these expenses a great deal of thought. If you decide that you can compromise with a cheaper internet connection or could even try making your favorite recipe at home, you could save yourself more money than you’d have imagined.
This monetary relief can go a long way in making your life more comfortable, without you worrying as much about being able to provide for your necessities through the month.
3. Find a Roommate to Share Your Space
If you’re the type of person who prefers staying alone, you’d understand that this comes with a significant increase in the amount you spend on rent every month.
In a situation where you’re tight for money due to a reduced monthly income, you might want to consider finding yourself a roommate. Doing so can reduce your expenditure on rent by at least half.
Finding a roommate isn’t difficult, either. Various websites and apps help you narrow down your search for the ideal flatmate. All it takes is listing the basic specifications of your house and the rent being charged, and you should have people getting in touch with you in no time.
4. Cut Down on Your Electricity and Water Consumption
While leaving a few extra lights on around the house or keeping the tap running when you’re brushing your teeth might initially seem harmless, you’d be surprised to know much much a little bit of control can help you bring down your bills.
Saving even a few hundred rupees can come in handy when you genuinely need it. Additionally, you’ll have the satisfaction of doing your bit to slow down the damaging effects of global warming.
5. Use Your Credit Card, But Wisely
With India hitting 47 million credit cardholders in 2019, most of us have been pushed to make use of our credit card, especially when rising expenses start to get the better of us.
While this option comes with a fair bit of risk, you can still manage it if you’re conservative with its usage.
The key to using your credit card when you need to make purchases you can’t immediately afford is to make sure you can pay for them when your next salary comes in. If you can’t do so due to budgetary constraints, don’t purchase it. The last thing you need when money is tight is to be saddled with credit card debt.
Apart from having to pay the borrowed amount back with interest, there are chances that this could harm your credit score as well.
Is there a Way to Pay Your Rent Online?
We live busy lives and more often than once, we forget to meet our deadlines. The whole process of doing bank transfer or worse, physically paying the rent to our owner is a hassle we don’t need to take.
But what is the solution?
In today’s digital world, paying rent can be a piece of cake and one such way is by using CRED RentPay. Through this feature, you can pay your rent via the CRED app in a seamless 3 step process and what’s the best part? You can get rewarded for it.
Premium credit cards can win you a reward of 2-3%, apart from which you can also win CRED coins!
Although the biggest advantage from this type of transaction would be that you can improve your credit card score.
Renting an apartment is certainly a viable option for those who cant afford to make such an investment yet. However, there can be times when this rent also becomes hard to take care of.
The current economic scenario as a result of the COVID-19 pandemic has negatively affected finances all across the world. However, the key to managing all your expenses while still being able to save a little every month is to limit your leisurely expenses.
This, as mentioned above, can go a long way in providing you a pool of money that can then either be used for essential purchases or even be saved if you’re lucky.