Let’s face it: Someone who just out of college is going to have a different experience looking for a place to live compared to someone who’s nicely settled in a job.
For those who are receiving their first couple of real paychecks, budgeting may be one of the tougher parts of securing housing. Kimberly Palmer, author of “Generation Earn: The Young Professional’s Guide to Spending, Investing and Giving Back” (Ten Speed Press, 2010), says one of the bigger mistakes new grads makes is overspending on rent.
“You should aim to spend between one-quarter and one-third of your take-home pay on housing, at the most,” Palmer says. Traditionally, it’s been a third of a person’s income, but with student loans burdening some, Palmer says spending less is ideal.
Compared to workforce veterans, recent grads are less likely to be concerned about saving for a down payment on a house or having children.
“If you’ve been working for several years, then you should be moving beyond the paycheck-to-paycheck phase and be ready to ramp up your savings,” she says. Regardless, Palmer suggests that young professionals should make sure to save for emergencies and unexpected costs.
Nicky Snarski, manager of operations at Madison Property Management Inc. in Madison, Wis., says figuring out a location also goes hand-in-hand with budgeting.
“Figure out a location where you want to live, do a list of must-haves and then consider all the extras you’re hoping to afford,” Snarski says.
Fred Bledsoe, a licensed leasing agent with Chicago Apartment Finders, works with many young people who say location is their number-one priority when it comes to finding a place to live.
Bledsoe’s biggest piece of advice for new apartment seekers is to be realistic about what they can afford. “A lot of times, we educate our clients on what it’s really going to cost to live in Chicago. People think, ‘I’m living with three people and it’s $1,500 a month so I need $500.’ There’s always utilities and groceries, and all of that adds up,” he says.
Another big chunk of money could be needed for parking, Snarski points out. In urban areas, parking spaces come at a premium. However, Snarski says that young professionals in her town seem to be moving away from downtown Madison and settling in quieter, calmer places.
Another trend that could be detrimental to budgeting is that recent graduates prefer to live on their own, either in a studio or one-bedroom apartment.
Instead, living with roommates can cut down on costs, says Palmer, also a personal finance columnist at US News & World Report. Living in a studio or one bedroom could easily eat up half of your monthly salary or more, she warns.
In terms of timing, Bledsoe typically recommends a person start the search for an apartment 30 to 45 days prior to the target move-in date. Any earlier, and landlords might not know about vacancies yet.
It might be a brave new world of renting for newly minted graduates, but sound budgeting can make a first apartment into a dream home.