Americans are more likely to rent their homes than at any time in the past 50 years. Nearly half of these individuals and families are spending a third or more of their incomes on rent (and more than one in four of those spend more than half—meaning they are “severely cost-burdened”). Combined, those facts mean a lot of people are worried about paying their rent on time and the trauma of eviction.
If you or someone you know is in this situation, it is imperative to create and enforce a budget, understand how to cut non-essential expenses and save for emergencies before a crisis occurs, and—if necessary—know how to seek urgent aid.
Here are a few tips to get started:
Know what you are spending and on what: Tracking everything you spend for a short period of time will show you how spending even small amounts of money adds up over time. It also will reveal types of spending that typically are almost unconscious. Ideally, track spending for a full month, but even a week can provide valuable information about your spending patterns. Mint is an example of one of several free, online tools to use to track your expenses. Mint connects to your checking account, savings account, and credit cards and categorizes your expenses.
Create a budget: Once you know your average total expenses, you can compare them to your income and determine the gap between the two. Once you know how much you need to cut on an average monthly basis, separate your needs from your wants. Needs typically include expenses such as shelter (mortgage or rent), food (not eating out, however!), utilities, insurance, transportation costs for work or school and debt repayment. This might seem overwhelming at first, so one easy way to approach it is by identifying three types of discretionary expenses that contribute the most to your spending and focus on them. Note that while you sometimes can bring costs down for essential spending (such as by working with a financial counselor to restructure your debt or choosing another type of phone plan), it’s easiest to start with the “wants.”
Pay attention to cash flow: Sometimes it’s not your total income or expenses that are the problem, but a mismatch between when your pay comes in and bills are due. Mindfully monitoring the timing of your income and expenses will identify any predictable gaps for which you can plan ahead.
Create an emergency savings fund: Conventional wisdom says you need three to six months’ worth of living expenses saved up for a rainy day. When you live on a low income, every day is a rainy day; so saving that kind of money might seem unrealistic. But unexpected expenses come up in everyone’s lives—regardless of income level—and having a few hundred dollars in an emergency fund can meet those needs without forcing you into traumatic choices. Yet, a 2018 NeighborWorks America survey found that 38 percent of adults with incomes below $75,000 have no emergency savings.
One of best ways to do this is to save first. Rather than saving what is left over at the end of the month, save first and spend the rest. By getting money out of your checking account and into savings first, you’re less likely to spend it. If you have a job with an employer willing to make direct deposits into a savings account for you, that is an ideal option. You might also want to check to see if there is a lending circle in your area.
Speak up and seek help when an emergency seems imminent: If despite your best efforts, you are unable to pay your rent, immediately alert your landlord. In many cases, your landlord will work with you on a payment plan or refer you to local resources for emergency assistance. You also can call 211 or your local United Way for a referral. Keep your landlord informed of your progress to prevent the initiation of an eviction process.
Finally, if you simply cannot afford to pay for the apartment you are in, move out voluntarily to maintain your positive rental record. Leaving under negative circumstances could result in a bad reference that will prevent you from finding a new home to rent.