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# Double Your Savings Rate: The Renter’s Guide to Better Budgeting

Chances are they require money.

Whether you want to travel the world, work less to spend more time with your children, buy a dream home, or further a cause you’re passionate about, it helps when you have more savings and more money coming in from your investments, rather than relying solely on a full-time job.

Where does that journey begin? With budgeting, of course. Here are eight steps to doubling your savings rate, so you can reach those dreams even faster (without having to live like a monk).

### 1. A Better Budget Starts with Savings Rate, Not Expenses

Later we’ll talk about cutting expenses. But for now, set a “reach” target that you think is just barely attainable. The more important your dreams are to you, the higher you should set your target savings rate. At a bare minimum, aim for 10%. If you are all-in for a life less ordinary, try aiming for 20%, 30%, even 50%. At this moment, don’t worry about “how” but instead focus on your “why” – what it is that drives you to save and invest more money? Open a spreadsheet, or just draw a few columns on a piece of paper. Write down your target savings rate (we’ll use an example of 25%).

### 2. Your Monthly Revenue: 4 Weeks’ Net Pay

In a given month, you can expect to receive paychecks for four weeks’ work, after taxes. That’s what your monthly budget needs to show in the “Income” column. If you’re paid biweekly, then occasionally you’ll get a bonus paycheck. Guess where that should go?

You got it – your savings.

In your spreadsheet, write in your after-tax, take-home pay for four weeks as your income. Immediately below it, subtract out your savings rate. We’ll use the median US income in our example: \$57,617. Let’s drop that by 20% for income taxes, to \$46,094. Weekly, that’s \$886, so four weeks’ pay would be \$3,546. Pull out another 25% for savings rate, and you’re left with around \$2,660. That’s what we’ll work with for monthly income.

### 3. Expenses – The Starting Point

• consistent monthly expenses
• variable monthly expenses
• irregular (but inevitable) expenses

The first column, consistent monthly expenses, includes bills like your rent that are the same every month. Write in every regular bill – Netflix, your cable bill, your phone bill, etc.

The second column is for expenses you incur every month, but which vary based on usage. Food is a classic example; others include entertainment and utility bills.

The final column is for expenses that don’t come every month, but which will cost you money every year. Gifts, such as holiday gifts, birthday gifts, wedding gifts, etc. fall into this category. If you pay your insurance annually or semi-annually, that would also fall into this category. Medical expenses are another one. If you own a car, car maintenance and repairs fall in this column as well. Go back over the last few years and look up exactly what you spent on these sorts of expenses, then average them for monthly estimates of each.

At this point, just list everything out. Your budget is almost certainly in the red by now. Don’t sweat it. Before you can fix a problem, you have to identify and understand it! If setting a target savings rate was all about “why” this part of the budget is all about “what”. Remember, this list of expenses is just where you are now, not where you’ll end up.

### 4. The “How” – Suspending Disbelief and a Wild Brainstorm

It’s around now that most people look at how far in the red their budget is and they despair. They throw their hands up in the air and say, “screw it.” Instead, remember your “why.” Visualize it and make it real, and then commit to finding the “how.” But first, you must shift your mindset from “This is just how much my life costs, I’m stuck with these expenses,” to “There’s a way to cut every single one of these, I just need to be creative enough to find it.”

We’re going to do an exercise. Pull out that pen and paper, and for every single expense, in each of the three columns on your budget, brainstorm ten ways you could reduce the expense. Your first few ideas for each will be pedestrian; for example, your first idea for reducing your housing expenses will probably be to move. But what about negotiating for lower rent before signing your next lease agreement? Or better yet, how about house hacking?

But as you force yourself to keep coming up with ideas, your brain will have no choice but to start churning out more novel approaches. Try to come at each expense from multiple angles. How could you find someone else to pay part of it? What could you do to reduce the bill itself? How could you negotiate lower rates? How could you eliminate it entirely? What alternatives are available?

Go until you run out of ideas, then come up with three more. For each expense! We won’t leave you to do this entirely on your own though. Here are a few ideas to get you started.

### 5. House Hacking

What’s the most expensive line item on your expense list? For most of us, it’s housing. That makes it a prime target for reducing or eliminating, to free up funds in your budget.

If you’ve heard the term “house hacking” before, it’s probably been in the context of buying a small multifamily property and renting out the other unit(s) so their rent covers your mortgage. (Here’s a house hacking case study on how a 28-year-old insurance worker house hacks to live for free, if you’re interested). The multifamily model works incredibly well… if you’re prepared to buy a new home and move.

But what if you’re a renter on a long-term lease agreement, or simply not ready to buy?

Fortunately, there are other options available to renters. One option is bringing in a housemate. My last housemate (before I got married) paid nearly 75% of my housing costs. As an added bonus, housemates also pay their portion of the utilities, cutting those bills as well. Use a sub-lease agreement (assuming your landlord and your own lease agreement allow it) to bring on a housemate, and get approval from your landlord if necessary.

Another option is bringing in a foreign exchange student. Many student placement services pay a generous stipend – my partner Denise does this, and not only has over half her housing covered by the stipend, but has fallen head over heels in love with her 15-year-old Chinese exchange student, Alex.

Lastly, consider renting out part or all of your home on Airbnb. It could be a single bedroom, or a separate section (e.g. a carriage house, finished basement with separate entrance, garage apartment, etc.). Or, rent out your entire home when you go spend weekends with friends, or your parents, or at your boyfriend’s, or simply traveling out of town.

### 6. The Non-Commercial Diet & Social Life

Food and entertainment eating a big hole in your budget? Here’s a quick way to cut costs to the bone: cut out all commercially-prepared foods and all commercial venues.

Yes, it’s a little more work to prepare your own meals. But one easy way to do this is to simply cook larger portions for dinner, and keep leftovers for lunch the next day. Lunches out are huge budget-busters! As an added bonus, you’ll end up eating far healthier, and will likely lose a few unwanted pounds in the bargain.

Similarly, look over your social life. Do you meet friends at bars? Restaurants? The average markup on alcohol at bars and restaurants is 3-4 times higher than retail. Not pretty. Instead, meet at people’s homes. Host dinner parties. Get a fire going in the backyard fire pit. Do beach cookouts.

### 7. Snowball Credit Card Debt

Familiar with the debt snowball technique?

It’s simple enough: you start by putting all your extra money (your would-be savings) toward your smallest credit card debt first. Once it’s paid off, you move all that money towards the next smallest debt, and so on. With each debt that you pay off, you’ll have more money to put toward the next debt, creating a snowball effect. Credit card debt tends to be extremely high-interest, so before you save and invest, focus on paying off your credit card debt first.

### 8. Commit! Create Automated Recurring Transfers

Whether you’re paying off credit card debt or saving and investing your money, automate the transfers. And not once/month, either. Set up these automatic transfers to take place on the same day you get paid every two weeks (or week). That ensures that it’s the first “expense” paid, and therefore remains your highest priority.

Your dream life isn’t free. It takes discipline, money, and yes, sometimes sacrifices to make. But in five years from now, would you rather say, “I’ve created my dream life,” or “Well, at least I was able to indulge myself with \$5 lattes and buying myself clothes whenever I felt like it”?

Commit to finding a way to reach your target savings rate. When you reach it, you’ll find that a funny thing happens: suddenly, more opportunities to save and invest money will start appearing for you. You’ll develop the mental habit of looking for creative ways to stop spending so much. As you enter a virtuous cycle of earning more and spending less, you accelerate your savings, your investments, your passive income, and reaching your goals ever faster.

But it starts with budgeting, so break out that pen and paper if you haven’t already, and start planning how you’ll reach your dream life!

Mihaela Buzec
Mihaela Buzec is a writer and online content developer for RentCafe. She covers topics about everything related to the renting lifestyle, from decorating and interior design to finding the right apartment, frugal living, money saving advice, and more. She dives deep into topics of interest, writing well-researched comprehensive guides on subjects such as renting with pets, saving on utilities, or avoiding rental scams to help renters stay informed and live smart. Mihaela is a versatile writer whose work was also published on many blogs and websites in a variety of industries: real estate, design, lifestyle, college life, and personal finance. Mihaela holds a BA in English and German Language and Literature, an MA in Current Linguistics, and she is currently pursuing a PhD in neurolinguistics. With a background in academic writing, she is a passionate reader, writer, and researcher, looking to always expand her knowledge. You can get in touch with Mihaela at mihaela.buzec@yardi.com.

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