Authored by Sarika Shetty, CEO and Co-founder of RentenPe: With rising property prices, a lot of people are choosing renting over buying a property. Renting also allows corporate workers the flexibility
to stay close to their workspaces or move cities for job opportunities if need be. Nevertheless, financial freedom doesn’t automatically come with a rental lease. Whether an individual is stepping into a rented space for the first time or navigating the rental market as a seasoned tenant, smart habits can greatly increase long-term financial stability. While renting seems easier than buying, it has its own set of financial obligations. By planning thoroughly, renters can avoid being caught off guard by hidden costs, emergencies, or lost opportunities to accumulate wealth.
The following are five key personal finance tips that will help renters maintain stability and prepare for the future:
Set a Realistic Budget
For renters, budgeting is considered non-negotiable. Housing costs are a major monthly expense and can easily spiral out of control without clear boundaries. Financial experts generally recommend keeping a tab of total housing costs. This may include rent and utilities – ideally these should be below 30 per cent of net income. While it is not always possible to do that in metro cities, it remains a valuable benchmark.
For making a sustainable budget, make a note of regular monthly expenses such as EMI, subscriptions, monthly spends on essentials, fuel, groceries, transport, savings, etc. Keep a budget for recreation or other discretionary expenses. Use digital tools to keep track of daily spends. Rounding up estimates for variable expenses also aids prevent shortfalls — offering a useful cushion when unplanned costs arise.
Explore Rent-saving strategies
If you are living in a high-rent area, try to explore ways to save on rent. You can get a co-tenant and get into a flatsharing agreement. This will split the rent and reduce your rent-related expense considerably. Before you sign the rent agreement, negotiate as much as possible. Research and find out what are the rentals in the area for furnished and unfurnished properties, in new buildings and old, so that you can negotiate and secure a better deal.
Create an Emergency Fund
Unexpected events can have an impact on financial security. These events can include medical costs, job loss or needed house repairs. Renters must therefore build emergency reserves for these. Financial institutions often advocate saving three to six months’ worth of critical costs to take care of sudden, emergency expenses.
To build this fund, tenants should start small. Every month, contribute to an emergency fund, even if it’s a modest amount. Keep this in a separate savings account. Over time, this emergency fund can grow into a meaningful safety net. This helps renters avoid reliance on high-interest loans or credit cards in times of distress and builds resilience in the face of economic uncertainty.
Become Aware of What You’re Signing
Leases are legal documents that define the rental relationship — but many tenants rush to sign the lease without fully understanding the details. Each lease should be reviewed carefully, paying special attention to clauses related to maintenance, penalties, renewal, rent hikes, and early termination. Any verbal agreements must be reflected in writing.
Additionally, it is crucial to assess the landlord or property manager. A brief online search, conversations with current tenants or reviews can provide valuable information that can include their responsiveness and dependability. Also, a thorough walk-through should be conducted before signing the contract. This will help in identifying any pre-existing issues. Document it through photos or video recordings. This not only prevents future disputes but also bolsters the argument for reclaiming the security deposit at a later date.
Maintain a Healthy Rent Credit Score
Now you can build credit scores by paying rent as well. Earlier, credit score building was limited to paying off loans or credit card bills. However, apps have come up which are creating a tech-enabled disruption in the residential market by using rent as a metric to create an alternate credit score which is then shared with banks and financial institutions to build the Rent Credit Score. The Rent Credit Score is reflective of the tenant’s reliability and can play a key role in rental applications. Furthermore, it can also help them secure loans, including home loans.
All in all, renting is not similar to personal finance. Rather, it pertains to the formulation of strategic and well-informed decisions – regardless of one’s housing status. For renters, this means developing financial boundaries, preparing for emergencies, protecting assets plus planning for the future. The rental journey, while often transitional, is an opportunity to build strong money habits that pay off for years to come. Financial planning doesn’t begin when buying a house—it starts the moment income is earned and expenses are tracked. Being a smart renter is simply being a smart money manager.
Authored by Sarika Shetty, CEO and Co-founder of RentenPe
The views expressed in this article are those of the author and do not represent the stand of this publication.
