Moving out for the first time is a liberating experience. You’ll be stepping out from under your parents’ roof and have the freedom to make your own choices. That said, getting a rental unit can be expensive, even if you have a roommate. There will be expenses that you need to start paying for that were never a concern before. But with a budget in mind, you can keep your cash flow in check.

Understand your budget

The decision to move out comes down to your finances. Can you afford all of your monthly expenses and potentially save money when you’re out on your own? Before you start dreaming of your new place, take a look at rental apartment listings to get an idea of what it will cost you. You’ll then want to factor in all your regular expenses, such as groceries, transportation, internet, etc.

You’ll obviously want to ensure your income exceeds expenses, but you must also factor in inflation and savings. Giving yourself a buffer can protect you if anything unexpected happens. 

The 50/30/20 rule

The 50/30/20 rule is one of personal finance's most commonly recommended budgets. In this budget, 50% covers housing, food, utilities, and transportation needs. The 30% is allocated to wants such as vacations, eating out, and entertainment. Finally, the 20% should be dedicated to savings and debt repayment.

While there’s no denying that this budget rule is great in theory, it doesn’t always apply to real-life situations. Rent costs in many major cities in Canada have increased significantly, which means that many people spend over 50% of their budget on needs. Don’t feel too bad if this applies to you - it’s more common than you think. That said, you’ll want to try to cut your expenses or increase your income to be in a better spot in the long run.

Setting aside an emergency fund

Before moving out, you should consider building an emergency fund. As the name implies, this fund is meant to cover emergencies - if you lose your job, for example, or if there are unexpected repairs needed for your vehicle. Setting aside three to six months' worth of expenses is ideal for your emergency fund, but if you can’t manage that, try to set aside just $25 a month until you build up your fund. Having an emergency fund in place is essential since it’ll also give you some money to work with in case you need to move again.

Moving and initial costs 

When budgeting for a rental apartment, moving and initial costs can add up. Moving can be relatively inexpensive if you ask friends to help you, but you might still need to rent a van or moving truck. In addition, there’s a possibility that you may need to buy things such as furniture, cookware, plates, utensils and more. These things can quickly add on to your budget, so be thoughtful about your purchases. Buying high-end items is unnecessary if this is your first home. 

It’s also worth mentioning that many hydro and gas companies will charge a one-time activation fee to set up any services, so you’ll need to factor those costs into your budget as well.

Monthly rental expenses

For those moving out on their own for the first time, there will be a few things you need to budget for with many rental units. Almost every landlord will require you to have tenant insurance. This type of insurance is sometimes referred to as renter’s insurance and covers things such as the cost of repairs for a covered reason, replacing your contents, and liability. The good thing about tenant insurance is that it’s relatively inexpensive yet it covers you in many scenarios, such as an accidental flood or burglary.

Another significant potential rental expense is hydro. While some rentals include hydro in the monthly rent, some are individually metered, and the tenant is responsible. The amount you’ll pay depends on various factors, such as how much heat and air conditioning you’re using, how big your unit is, and more.

Final thoughts

Budgeting for a rental apartment may appear to be straightforward, but there are many expenses that you may need to factor in. A solid plan and budget will help ensure that your expenses don’t get out of hand. The last thing you want is to stretch yourself thin.

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. As a completely self-taught, do-it-yourself investor with no formal training, he makes money easy to understand for all Canadians. His specialties include personal finance, budget travel, millennial money, credit cards, and trending destinations.

Barry Choi is a paid spokesperson of Sonnet Insurance.