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Flat broke: How to manage money when you're renting

With the cost of rent continuing to rise across Australia, it’s never been more important for renters to develop smart money habits.

Whether you’re renting for the first time and you feel like you’re living paycheque-to-paycheque, or you’re at the point where you want to get out of the rent race altogether and put down a deposit on a place of your own, it’s important to build up your savings.

We know it’s easier said than done, as setting aside money while you’re also trying to pay the rent and the bills on time can be a serious challenge.

Here’s some of our tips to get your house – or flat – in order.

Know the cost of moving in

If you’re moving out of home and renting for the first time, the first thing you need to know is that your rental costs don’t begin and end with, well, your rent. (If you’ve been renting for a while, then you’ve already learned this the hard way, and you can skip to the next tip.)

There are few costs, both upfront and ongoing, that you’ll need to consider when renting, including:

  • Rental bond: A security deposit paid at the start of your tenancy. This is usually equivalent to up to four weeks’ rent. The good news is that if you haven’t caused any damage to the property by the end of your lease, you should get this bond back – but that’s cold comfort when you’re trying to make ends meet now.
  • Utility connection fees and bills: You might have to pay a one-off fee to have utilities like electricity, gas, and internet connected, and, if utilities aren’t included in your rent, then you’ll have to pay these ongoing bills, too.
  • Furniture and appliances: Unless the property you’re renting comes fully furnished, you’ll need to bring your own furniture and appliances with you – and if you’re renting for the first time, that means you’ll either need to buy them, or take advantage of hand-me-downs you can score from family and friends.
  • Moving costs: Whether that means paying a removalist or hiring a truck or van to load up yourself.

Don’t forget to factor in these costs when you’re weighing up whether you can afford to rent a particular property, or you could find yourself living beyond your means from the get-go.

Find a roommate

At a time when the chances of negotiating cheaper rent with your landlord are looking less and less likely, the most obvious way to save money on rent is to find a roommate to split it with.

Leverage your social circle, both off and online, and see if your friends know anyone they trust who might be on the lookout for a place to live. Friends you’ve enjoyed travelling with before make particularly good roommate candidates, because you already know you can share a confined space for extended periods of time without driving each other up the wall.

If you don’t know your potential roommate already, set up an in-person meeting (and do some light social media stalking) to see if they seem like someone you could live with.

And whether you know the person well or not, have a thorough conversation about how you plan to handle shared responsibilities (i.e. rent, bills, chores, and living arrangements). Draw up everything you decide in a roommate agreement – it won’t be legally binding, but at least it’s a single source of truth you can both refer back to.

Keep in mind that anyone who moves into the property with you will need to be listed on your lease, either as a leaseholder or an approved occupant, so you’ll need to get permission from your landlord before you start handing out rooms.

Make a budget (and stick to it)

Budgets aren’t just for politicians, corporations, and penny-pinching pensioners – they’re actually essential for anyone who wants to save money. After all, you can’t manage your money if you don’t know where it’s going in the first place.

Create a comprehensive budget that includes your income and all your monthly expenses, including rent, utilities, groceries, transport and entertainment. Factor in as much as you possibly can, from the coffee you buy in the morning to the streaming services you sit down in front of at night. (If you need help, you can use our handy budget calculator.)

Is your budget sustainable, or is it loaded with unnecessary expenses? A good rule of thumb for budgeting is the 50/30/20 method – you can spend 50 per cent of your income on essentials (i.e. rent, utilities, groceries and so on), 30 per cent on ‘wants’ (i.e. nice-to-haves that you could live without), and save the final 20 per cent. 

You can download the mymo by BCU app to stay on top of your spending, bills, and more by categorising your spending across all of your financial institutions in the palm of your hand.

There are probably any number of expenses you can cut out or reduce, whether it’s a gym membership you never use (you can always work out at home or at the park instead); a streaming service you never watch (just resubscribe when the next season of that show you like finally drops); or name-brand items at the grocery store (the generic version can often be just as good).

At the same time, it’s important that your budget is realistic and honest. If there’s a particular luxury that you know you won’t be able to deny yourself, like barista-made coffee, then don’t lie to yourself and say you’ll make all your coffee at home – just factor your trips to the cafe into your budget. (That said, you really can save a lot of money by making your coffee at home.)

Open a separate savings account

Now that you know how much you can realistically set aside, let’s start supercharging those savings. If this means opening an account across multiple financial institutions, don’t sweat it, mymo by BCU can help you stay on track by displaying all your accounts in one place.

You can build up your savings sooner by stashing them in a separate, higher-interest savings account. The higher the interest rate, the faster your savings will grow, and because you’ve got them tucked away in a separate account, you won’t be tempted to dip into them for everyday transactions.

BCU Bank’s Bonus Saver account can kickstart your savings with bonus interest for the first four months from the date you open it, while our iSaver Account can pay a higher rate of interest the more you save. Win-win!

If you’re really on a roll with your savings, or you’re working towards a particularly ambitious goal (like a house deposit), you could consider a term deposit. With a term deposit, you commit to keeping money deposited for a fixed period of your choosing, from a few months to several years. In return for making this commitment to your savings, you’re rewarded with a higher interest rate.

There’s no use having a dedicated saving account if you don’t add to it,  so make sure you pay yourself first. When you get paid, transfer the amount you’ve determined you can save from each pay directly into your separate savings account, as opposed to using your ‘savings’ to cover everyday expenses through the month and pocketing whatever’s left over.

It’s also important to build an emergency fund to cover you when unexpected circumstances arise, whether it’s car trouble, an unforeseen medical expense, or sudden job loss. Aim to set aside at least three to six months’ worth of living expenses to provide you with a cushion when these costs come up. These emergency funds can also sit in your high-interest savings account (or in a high-interest savings account of their own), to ensure they’re working for you in the meantime. 

Automate your payments

If you make a habit of paying your rent late, it won’t be long until your landlord gives you the boot – but that’s not the only reason it’s important to make your payments on time.

Whether it’s your rent or other bills, late payment puts you at risk of having to pay late fees. More importantly, it could also lead to a black mark on your credit score, which could make applying for a home loan (or a credit card, or any other type of loan) difficult in the future.

That said, we all get busy, and it can be difficult to keep track of who and what needs to be paid when. That’s why it’s important to lighten your mental load and simplify your finances by setting up automatic payments.

You can use tools like mymo to track your bills and set up alerts so you’ll always know you’re covered, or use BCU iBank and the BCU Bank App to schedule automatic payments. This way, you can set and forget.

Use your energy wisely

Automating payments isn’t the only way to conserve your energy – there are more literal ways that will also help you to save on your power bills and set aside more money each month. As a renter, you may not be in a position to make major changes to the energy efficiency of your property, but there are simple things you can do to lower your expenses.

For instance, did you know that TVs, game consoles, microwaves, computers, and pretty much any other appliance you can think of are all soaking up electrical power whenever they’re plugged in and switched on at the wall – even if you’re not using them? Get in the habit of switching off appliances at the wall, rather than leaving them on standby, so you’re not paying for them to do nothing.

If you brought a lot of older appliances with you to your current property, then there’s a good chance they’re not the most energy-efficient models. You don’t need to rush out and replace them all at once, but as they reach the end of their lifespans, gradually look for replacements with high energy star ratings. Remember, appliances with lower energy ratings will usually have a lower sticker price, but they’ll use more power and cost you more money in the long run.

Use cold water for your day-to-day laundry, and if you can hang clothes outside to dry in the open air, do that instead of switching on the dryer.

In winter, set your heater to between 18°C and 20°C, and in summer, set your air conditioner between 25°C and 27°C. Every degree above and below these ranges can add between 5 and 10% to your running costs.

And remember, the harder an appliance has to work, the more power it will use. Let hot food cool down before you put it in the fridge, and when you’ve got the air conditioner on, close windows, curtains, and doors so you’re only cooling the rooms you’re using.

The savings you make from these energy-conscious adjustments won’t transform your budget overnight, but it all adds up over time.

If you follow all these tips, you’re well on your way to saving enough to put down a deposit for a place of your own; take that holiday you’ve been dreaming of; or just enjoy the feeling of knowing you have money in the bank and you’re in control of your finances.