Saturday, May 11, 2013


Shelter comes 3rd among the basic human needs. Whether you are in the village or town, poor or rich; shelter is one thing you have to factor into your budget.
For those living in the villages, probably on their ancestral land, rent may not be a headache. For urban dwellers, if you made it to the list of the lucky few who have bought their own residence you have your gods to thank. However, for those of us who have to put up with the visit from the landlord every month, rent tops your monthly to do list.
Studies have shown that urban dwellers spend an average 36 pc of their gross income on rent every month. This is just the average, meaning others may spend even more than half  their income on rent.

So, what percentage of your income should you spend on rent?
There are three methods of determining how much you should put aside for rent  or, realistically speaking, which estate or ghetto side you should live in.
1. The first  method is to base your percentage on the national figures from the consumer federation. A research has shown that the world over, people spend between 25 and 40 pc of their gross monthly income on rent. With this percentage you can decide on which bracket you want to belong. Spending 30 pc of your gross income on rent will be considered average.
3. The second method is to do your own survey by asking how much your collegues on the same salary bracket are spending on rent. This will ensure that you live within your class. However, such data may be sometimes misleading given that it may not be realistically possible to determine the gross income of your collegues. You may not know what their other sources of income are or what their expenditure looks like. Which brings me to method number 3.
3. The third method is to determine your rent as the difference between your gross income and your total expenditure. This method requires that you list down all your monthly income, and your monthly expenditure on food, school fees, clothes, tax, saving and other must pay bills.
Simply put, you are suppose to make a budget of all the necessary expenses you must fulfill, subtract the sum from your gross income and then, from the remainder, decide on how much you can set aside for rent.
When making such a budget, it is mandatory that you include your saving for retirement within your budget or else you will be living a lie.
The worst thing is to live beyond your means, so make sure you factor in all the expenditure including: transport, food, loan repayment, school fees, house bills, savings, clothing etc. You need to have your priority right, so that incase your expenses outweigh your income you will know where to make the cut.
When all this is done, you may find that you still got alot of cash lying idle in your account. You definitely don't want to spend the whole of this cash on a lavish town house. Instead, you can increase the amount you save for your retirement and invest the rest.
Always make sure that you are living within your means. So when your income is low you may want to reside in a small house in a not so prestigious neighborhood and when you get that pay rise move to a bigger house later.
Rent is a recurring expense, so whatever the method you use to determine what you pay for rent, make sure your rent is affordable. Infact, if you can raise some cash for deposit, i would advice you to take a mortgage and think of owning your own house. It is true that rent paid for whatever apartment for 10 years, is enough to fully pay its mortgage plus the interest.

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