And just like that, it’s over. Four years summed up on a single sheet of paper. Now it’s time to start thinking about the next steps moving forward. Are you going to backpack through Europe? Renovate a Volkswagen van and travel across the country? Move out for the first time? Well, we’ve got you covered for the last option, but best of luck if you decide on one of the first two options!
Here’s the process we recommend taking when moving out for the first time:
1. Decide if you are moving out with roommates
Having a roommate is really a hit-or-miss situation – you either love them or you can’t wait for the day the lease is over. However, you’ll have to tolerate them (to some extent).
Pros: Saving money on rent, utilities, furniture, etc.
Cons: Lack of privacy and internal conflicts
2. Establish a rent budget
It is recommended that no individual should spend more than 30% of their monthly income on rent. Meaning, if you make $3000 a month, no more than $900 should go towards rent. However, a lot of these assumptions are based on before-tax income, making that $900 out-of-scope for some. To be conservative, estimate your monthly taxes at 30%. Assume you are making $3000 per month; this leaves you with an estimated after-tax income of $2100 per month. Using the 30% rent rule, you should be spending no more than $630 per month on rent.
Putting these numbers into perspective is when people begin considering a roommate. Assume you are both making $3000 per month, no more than $1260 ($630 + $630) should be allotted to rent. Now, $1260 opens up more options – especially in Saskatoon!
Check out this blog by Aaron Broverman on Greedy Rates detailing how much an individual should spend on rent:
3. Establish a budget
If you’re considering renting a condo, look at all the amenities that are included. For example, if the rent includes gym access, this saves you an extra $50+ per month you would be spending at another gym. Does the rental price include parking? Parking could cost an additional $70+ per month. Does the rent include utilities? Utilities are variable, but it is safe to budget for $100+ per month. Before you realize it, these costs start adding up quickly!
Now, how should budgeting be broken up?
In her book, “All Your Worth: The Ultimate Lifetime Money Plan,” US Senator Elizabeth Warren established a great concept known as the 50/20/30 Budget Rule. What does this mean? 50% of your after-tax income should go towards spending (necessities), 20% should go towards saving, and 30% should go towards rent and housing.
Let’s take this back to our example…
Assume you make $3000 per month. Conservatively estimating taxes at 30%, this leaves you with $2100 per month. Using the 50/20/30 rule, $1050 is allocated to spending, $420 goes towards savings, and the remaining $630 is spent on housing costs.
Savings? Where should I put those?
*Now, these are all recommendations. It is up to you to conduct your own research and determine what you do with your money. *
A good option is to open up a TFSA (tax-free savings account). Each year the Canadian government sets a contribution limit on the TFSA – this year, 2021, it is $6000. Think about that as only $500 per month ($6000/12). If you max out your TFSA and contribute more than your limit, you are subject to a capital gains tax. Assume you are 22 and have never contributed to a TFSA. You are eligible to contribute up to $29,000 tax-free because it dates back to the year you turned 18. Here are the previous contribution limits:
- $5500 (2017)
- $5500 (2018)
- $6000 (2019)
- $6000 (2020)
- $6000 (2021)
Other options to consider are:
- Guaranteed Investment Certificates (GICs)
- High-Interest Savings Account
- Registered Retirement Savings Plan (RRSP)
- Bonds or Treasury Bills (T-bills)
- Registered Education Savings Plan (RESP – for parents)
Maybe we should do a whole blog on budgeting and investments? Stay tuned!
4. Start saving up for a security deposit
When moving out, don’t forget to take into account the security deposit! Security deposits are used to cover unaccounted-for losses caused by a tenant during the residency.
Security deposits are equal to one month’s rent – 50% of the damage deposit is due when the tenant signs the lease and the remaining 50% is due two months after the move-in date.
5. Establish good credit
Establishing a good credit score early on is an overlooked detail that can help a person substantially! You might be surprised to find out that having a good credit score is used during the rental process, not only the home buying process. Having a good credit score signals to landlords and property management companies that you are a low-risk individual whose probability of defaulting on rent is low. If you choose one of the Real Property Management offices across Canada, your rent will be reported to the Landlord Credit Bureau which will help to increase your credit score!
Want to check your credit score for free? Visit www.transunion.ca
6. Sort Through Your Belongings
Turnaround time can be very unpredictable. One day you’re searching for your dream rental, and the next thing you know you’re signing the lease to secure a spot. Get ahead of the game by sorting through your items in advance. Take the Marie Kondo philosophy. Does it spark joy? No. Time to part ways with that item.
7. Start Packing!
Assuming you have secured a lease, it is time to start packing! Put on the song “This Will Be (An Everlasting Love) by Natalie Cole and pack/dance around like you’re in an early 2000s coming-of-age movie.
8. Buy Furniture and Home Essential Items
Don’t worry, we’ve got you covered on this topic. Check out the blog we wrote about all the home essentials you need when moving out for the first time:
9. Change your Address
Changing your address is something we all forget to do from time-to-time. Eliminate the chances of your Amazon order being stolen or redirected because you forgot to change your mailing address – who knows, maybe you ordered some useful items from our home essentials list!
When you finally move into your new place, don’t forget to change your address here:
- Driver’s license and vehicle registration
- Car insurance
- Health insurance
- Your bank and credit card company
- Voter registration
- The post office
- Work
Conclusion:
Seems like a lot of work? It is. Those tiresome group projects in University now seem insignificant compared to this battle you’re about to tackle. If you have any questions along the way, please don’t hesitate to reach out to us. We love answering your questions!
Call us @ (306) 244-7276
Text us @ (306) 994-7288
Email us @ professionals@realpropertymgt.ca