Owning a home is an integral part of the classic American dream — a little haven that no one can take away from you, as long as you can make your mortgage payments. Renting, on the other hand, generally carries a negative connotation. In truth, though, renting your home offers a great deal of flexibility and convenience, and depending on your situation may make a lot more financial sense than buying.
But whether you dream of homeownership or are content to be a renter long-term, there are contingencies that you’ll want to save for. GOBankingRates asked financial advisor Joseph Catanzaro of Oak & Stone Capital Advisors for his perspective on the most important things renters should be saving for.
“I strongly advise renters to prioritize building an emergency savings fund. Having three to six months’ worth of living expenses set aside can provide a much-needed safety net during unexpected financial setbacks.”
This is one of the first things most financial advisors would recommend for anyone, not just renters, and that’s because it’s simply great advice. Life comes at you fast — layoffs, injuries, a broken-down car — so being prepared for the unexpected is incredibly valuable.
“Renters should save for future homeownership by setting aside funds for a down payment. Aiming for at least 20% of the property’s value can help secure better mortgage terms and reduce monthly payments.”
If you don’t care about owning a home, you might be inclined to ignore this one, but you never know — the things you aren’t concerned with today might become more important over time. Worst case scenario, you’ll have a bigger cushion for emergency expenses.
“Don’t forget about moving expenses! Renters should budget for costs associated with hiring movers, purchasing packing supplies and any deposits required for their new rental or utility services.”
Whether you buy a home or move into a new rental, this one is critical. If you’re young and have a lot of friends, you might be able to move for the cost of pizza and beer. For everyone else, having enough saved to cover these costs can be a life — and back — saver.
“Renters should be proactive in preparing for potential rent increases or lease renewals. Saving for possible rent hikes can help mitigate the impact on their monthly budget.”
One of the obvious downsides of renting is that your landlord can decide to charge you more. If you’re lucky enough to live somewhere with rent control, this might not be a huge issue, but rent control isn’t that common outside of the biggest cities — so be prepared.
“Invest in your personal and professional growth by setting aside money for educational courses, certifications or career development. Expanding your skills can lead to better job opportunities and higher earning potential.”
This one can also go in the “great advice for everyone” bucket — the easiest way to save more is to earn more, and if you are in a position to go back to school or get a professional certification, it can be a great way to boost your earning power. Don’t forget to ask your boss — many employers offer tuition assistance or other development incentives.
“Setting money aside for home maintenance is essential, even for renters. Unexpected repairs or maintenance requests from landlords can be more manageable with a dedicated fund.”
Generally, if you rent, the property owner should be on the hook for repairs, but depending on the terms of your lease — or how much of a deadbeat your landlord is — you may need to take some things into your own hands. If you’ve noticed that a recurring theme here is to be prepared for the unexpected, good work. Remember, life comes at you fast.
“Financial protection is crucial. Renters should consider obtaining renter’s insurance to safeguard their belongings in case of theft, damage or natural disasters.”
Do your homework for this one — do you live in a flood zone or on a fault line? Maybe you live in a neighborhood where property crime isn’t uncommon. Getting the right insurance coverage can make sure you’re safe and secure no matter what happens.
“Safeguard your financial future by allocating funds for retirement savings. Even as a renter, contributing to retirement accounts like IRAs or 401(k)s early on can have a significant impact on long-term wealth building.”
Everyone dreams of retiring one day. Maybe it’s in a home you own, or maybe you want to enjoy your golden years in a rental and not worry about making repairs. Either way, it’s not going to happen if you don’t save enough to secure your future.
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