Rent Is Going Up: 3 Ways to Keep Your Finances on Track
There's no doubt about it: Rent is going up across much of the country.
According to the Consumer Price Index, costs for shelter rose 8% over the past year, outpacing overall consumer prices and accounting for a major reason inflation persists, since shelter makes up roughly a third of consumer spending.
Median rents in Manhattan, the most expensive rental market in the country, just touched another record high at $4,241 in April, and Zillow said that rents increased 0.6% nationally from April to May.
Several factors are driving higher rents, including higher home prices, a booming job market, and a national housing shortage that has supported elevated home prices even as mortgage rates have soared.
Even trends like remote work have driven higher rents as Americans seek larger living spaces to accommodate home offices, and landlords, especially in big cities, are making up for rent freezes and discounts during the pandemic.
If you're stressing about your increasing rent, here are three tips to manage your finances.
1. Time your move correctly
The rental market is seasonal. Rents tend to peak in the summer months, as families and students usually try to move in between school years. As a result of that higher demand in the warmer months, landlords are able to command higher prices.
In the winter, the opposite is true. Demand slows as people avoid moving during that time of year. As a result, asking rents fall.
If you're looking for a new apartment or just trying to negotiate with your current landlord, one of your best moves to save money is to move or sign a new lease in the winter.
If you choose this strategy, you should be aware that supply tends to decline in the winter as well, but if you're budget-conscious, that's probably a worthwhile trade-off to make.
2. Negotiate your rent
If you're wary of having your rent go up, one of the best tactics to control your housing expenses is to negotiate with your landlord.
If you want to lock in your current rent, you can try to negotiate a longer-term lease. A two-year lease, for example, can help you save money over the long term by avoiding a rent increase next year.
Another way to control your rent is to offer to barter labor or other services to avoid a rent increase. You may even be able to lower your rent if you're willing to clean, handle maintenance tasks, or do some office work. Consider asking your property manager what he or she needs assistance with. There may be some kind of light work that's right up your alley that can help you save on your rent.
3. Work on your budget
If rent increases are squeezing your finances, the best first step you can take is to make a budget and stick with it.
Identify your monthly costs, and differentiate between discretionary spending like clothes and travel and essentials like rent, groceries, and transportation.
One rule of thumb in budgeting is known as the 50/30/20 rule, which advises spending 50% of your income on needs and 30% on wants, while setting aside 20% to save or invest.
Depending on your expenses and income, that may be difficult to achieve. If you're having trouble keeping up with your rent, identifying wants you can cut back on and ways to moderate the cost of your needs can help.
If that's a challenge, consider strategies like avoiding credit cards and online shopping, and spending only cash when you go out, which makes it easier to see how fast you're spending money. Tracking your spending with apps like Mint or You Need a Budget can also help take control of your finances and bring your spending to within your means.
Rent is likely to take up a substantial percentage of your budget no matter what, but there are more ways to control it than you may think.
Ready to review your budget? Connect with an Old National banker for a free financial review.