Have you considered how much of your paycheck is spent on items such as rent, utilities, transportation, and other mandatory living expenses? Getting ahead financially is dependent on your ability to make good choices, and making effective decisions starts with obtaining good information. Read on to learn more about how you can control costs and save money!

Housing Expenses

Housing expenses are usually a BIG "need" item in your Personal Financial Plan. Be sure to consider all your options:

Can you live with family?

• Would you still pay rent/ utilities?
• What will you need to contribute for other expenses like food?

Living with roommate(s)?

• From the beginning, communicate clearly how you will split expenses including rent, utilities, food, etc.
• Determine if all roommates will sign the lease (see below)
• Communicate about other issues such as having guests, cleaning the bathroom, etc.
• Be careful about putting a lease or utilities in your name alone if you live with roommates
• When multiple people are listed on leases/accounts, be sure your name is removed as a responsible party when you move out

Living alone?

• Consider renting an efficiency apartment/loft vs. a one-bedroom unit
• Needs vs. wants (remember this from your personal financial planning?)

Do you really need a jacuzzi/ stainless steel appliances/ marble fireplace?

Things to Consider in Your Housing Search

Once you've made a decision to live on your own (or with a roommate), there are many things to consider including:

Location, location, location!
This is always the most important decision to make when choosing a place to live. Ask yourself these questions:

• Is the neighborhood safe?

Check with the local police department if you have concerns about neighborhood crime

• What is the proximity to transportation, work, family, etc.?
• What will be your commuting expenses?

Affordability: Can you afford this apartment/ house?

• This is where your Personal Financial Plan comes in handy
• Don't forget initial costs including security deposits and initial utility hook-up charges
• Are any utility costs included? Some substantial costs that may not be included in rent are:
  • Heating / Air conditioning: Ask what the typical monthly/ quarterly/ yearly costs are
  • Electricity
  • Cable TV/ Phone/ Internet
  • Water/ Hot water
  • Gas for stove (obviously not a consideration for electric stoves)

Don’t forget to obtain your own renter’s/ homeowner's insurance! This insurance provides money if items in your home are stolen or damaged (e.g., due to fire). This insurance may also provide protection if someone gets injured in your home or on your property. Insurance protects yourself, your property, and your financial future.

The Lease

A lease is a legally-binding contract between the owner of a rental property (AKA Landlord) and you, the renter. Be sure to carefully read and understand a lease before you sign it.

Parts of a lease include:

Due dates for rent payments

• You may need to pay fees if you pay late
• Very late/ missing payments may result in your eviction from the apartment!

What is/ is not included in rent (i.e., which utilities may be included in your monthly cost)

• Many renters pay utility costs separately

Renter vs. landlord responsibilities for upkeep

Deposit amount: This is money you must give the landlord upfront to secure the apartment. The deposit may include:

• First month's rent
• Last month's rent
• Security Deposit: The landlord will pay you interest on this amount on a yearly basis. You will be able to get your security deposit back after you move out IF:

...you do not "break the lease" (move out early)

...you leave the apartment in clean condition

...there is no damage to the unit besides normal "wear and tear"

Term/ length of the lease

• Shorter leases may be more expensive because of earlier/ more frequent opportunities for landlords to raise rents

Options for breaking the lease (if any) or for transferring the lease into someone else's name

Housing Tips for Living on a PFP

Instead of...	Try this...
Living by yourself	Split expenses with a roommate
Keeping the apartment toasty warm in winter (or refreshingly cool in summer)	Adjust the thermostat to save money Turning down the heat when you are out or sleeping can save 5-10% of your heating bill!
Paying for cable/ internet services you don't use	Buy the "basic" packages If you really don't watch 1500 channels, why pay for them?
Buying all new furniture and appliances for your swanky new digs	Consider “hand-me-downs” and explore used furniture stores
Buying renter's insurance from a company because it's the one with the cool ad on TV	Shop around for insurance to get the best deal - Get a few quotes before you decide You may be able to get a discount if you buy renter's insurance from the same company as your auto insurance

Transportation Expenses

Purchasing or leasing a vehicle can be expensive. Make sure that you include transportation costs in your Personal Financial Plan, and be sure to consider all your options before you make any decisions:

Needs vs. Wants: Just as you did when you developed your PFP, make a list separating the "nice-to-have" features from what you really must have.

Avoid additional costs you may not need (e.g., extended warranty, moonroofs, leather and mink floor mats, etc.)

Don’t forget insurance! You should consider insurance expenses before you make the commitment to buy or lease.

• Many states, including Connecticut, have minimum coverage requirements
• Shop around for the best rates from reputable companies
• Higher deductibles (what you pay when it breaks) usually equal lower premiums (routine billed insurance payment)
• Lower deductibles usually equal higher premiums

Buying versus Leasing

Before you go shopping, you need to decide if you will buy or lease. There are pros and cons to each, and the best decision will depend on your personal financial situation. As you begin this process, you should make sure that you have developed a Personal Financial Plan so you will really know what you can afford.

Considerations when buying/ owning a car:

• Saving ahead for a larger down payment can reduce your monthly payments if you need to finance
• Use online resources to research dealers’ costs and shop around
  • The famous Kelley Blue Book site
  • edmunds.com access articles about negotiating a good deal and compare new and used vehicle prices
• Don't forget registration and other fees
• Plan for property taxes (payable to your city 1-2x’s/year)
• Better MPG (miles per gallon) = lower costs at the gas pump!
• Plan for routine car maintenance (costs vary by the vehicle) including:
  • Oil/ filter changes
  • Tire rotations/ purchases
  • Brake service, transmission service, lubes, etc.

Considerations when leasing a car:

• See pros and cons at http://www.leaseguide.com
• You may have lower monthly payments, but:
  • You always have a payment. You never own the vehicle.
  • You may still need a significant down payment
  • Mileage restrictions and penalties for exceeding these are common
• Better MPG (miles per gallon) = lower costs at the gas pump!
• Plan for routine car maintenance (costs vary by the vehicle) that may not be included in the lease:
  • Oil/ filter changes
  • Tire rotations/ purchases
  • Brake service, transmission service, lubes, etc.

Financing a Vehicle

Most people, particularly when they first start out, cannot pay for a car in cash. Should you decide to buy, you may need to borrow to pay for a car. Be sure to consider the following if you make the decision to finance:

Know the total cost of borrowing: Your total purchase costs will depend on how much you need to borrow and the interest rate you receive on the loan.

Consider your "Debt-to-Income" ratio

• No more than 20-30% debt (all sources) is recommended
• Find your ratio and auto loan calculators on sites such as http://www.creditsoup.com

Shop around for best loan interest rates: Consider lining up your financing through your bank or credit union before going to the dealership. It's often cheaper and may give you some leverage when negotiating price.

Repayment options that will lower your total cost:Fewer years = less interest = lower total cost!

• Borrowing over a shorter time period (higher monthly costs)
• Trying to pay off the loan early by applying extra funds to your monthly payments

Transportation Tips for Living on a PFP

Instead of...	Try this...
Driving to work every day	Consider public transit options, carpooling, or biking Save money and reduce your carbon footprint!
Zipping down the highway (a la Speed Racer)	Drive safely Staying under the speed limit saves money on gas A better driving record = lower insurance costs
Buying that brand-new Porsche you've wanted since you were 10	Don’t buy the fanciest car More expensive cars = higher maintenance and insurance costs Consider purchasing a used vehicle A new car can depreciate (drop in value) 20% as soon as you drive it off the dealer's lot!
Skipping oil changes to save money in the short-term	Don’t ignore routine maintenance Oil changes are VERY important Replacing an engine will not be something you want to add to your PFP!
Buying a car/ auto insurance/ fuel from a company because it's the one with the cool ad on TV	Shop around and compare auto, insurance, and gas prices
Buying premium grade gasoline	Check owner’s manual for octane requirements You may not need the expensive gas!

Other Living Expenses

In addition to the basic expenses you included in your Personal Financial Plan (food, rent, gas, etc.), you may need to consider additional costs as you strike out on your own. Be sure to consider these costs in your PFP as they may apply to your personal situation:

Insurances:

• Health: Medical & Dental
• Disability: Short and Long-term
• Life
• Homeowners/ Renters

Debts:

• Student Loans
• Credit cards

Banking/ Investments:

• Transaction fees
• Account fees

Childcare expenses

Additional education costs

Other Expenses Tips for Living on a PFP

Instead of...	Try this...
Selecting a bank, credit card, or investment because of the cool ad on TV/ the internet	Shop around for the best deals Read the fine print and know the real costs. Fees add up!
Forgoing insurance to save money	Create a PFP that allows you to purchase the coverage you need Determine what you really need for medical, dental, and life insurance Consider medical insurance plans that have lower premiums (what you pay in your paycheck or in routine billing) but higher deductibles (the amount you need to pay before the insurance coverage kicks in) Make sure you have some savings or PFP allocation to pay for deductible costs should you choose this option Consider medical insurance plans that have lower premiums (what you pay in your paycheck or in routine billing) but higher co-payments (the amount you need to pay for each office visit or prescription) Should an emergency arise requiring you to pay a large sum of money, you may have to live with an excessive financial burden for years to come – hindering your ability to meet your future goals
Skipping annual check-ups and teeth cleanings to save money	See your doctor or dentist regularly "Preventative maintenance" for people saves money just as it does for cars! Don't ignore symptoms, as this may result in a serious illness (with higher costs for care) A cleaning may cost $40, but a root canal can be over $600!

Other Resources

• See 40 Money Management Tips every College Student Should Know via SmartAboutMoney.org
• National Foundation for Credit Counseling's resource for financial education and counseling
• See "Tips for Living on a PFP" within Personal Financial Plans for other money-saving tips

Interest: This is the additional amount you will pay to a lending institution to borrow money. In terms of savings, interest is the additional amount you will earn for having your money in a bank account or other savings vehicle.Total Cost of Borrowing: The total monetary amount you will pay over the life of the loan.