Creating a financial plan while renting

Let’s break it down: what's a financial plan?

At its core, a financial plan is a roadmap for managing your finances. It helps you assess your current financial situation, set goals for your future, and create a plan of action to achieve those goals.

A financial plan can be as detailed or simple as you’d like. A basic plan could include budget, expenses and savings, or you could take it one step further and include investment strategies, retirement or debt management plans.

To achieve your short and long-term financial goals, it’s important to have a plan in place.

It should also help you achieve security in your life, especially while renting, as it’s there to help you stay on track with your finances and plan for a bright future.

Let’s look at how to set financial goals and create a plan to achieve them.

Step 1. Assess your current financial situation

Before building a financial plan, you should know where you stand. Investigate and confirm things like:

• How much money do you make from work and any other income sources?
• What assets do you have?
• What are your outgoing expenses, both fixed and discretionary?
• How much debt do you need to repay and at what interest rate?
• How does your credit report and score look?
• What other information do you need and how can you get it?

If you're living with a partner, maybe it's time to have some open conversations about money and plan towards your future together.

Step 2. Set your financial goals

Setting financial goals can help you stay motivated and focused. When setting financial goals, it's important to make them SMART: Specific, Measurable, Achievable, Relevant and Time-bound.

Here are some examples of financial goals you might set while renting:

• Build up one month's worth of rent buffer within the year.
• Save $100k for a house deposit within the next five years.
• Pay off your credit card debt within the next two years.
• Build an emergency fund that covers six months of living expenses within the next year.
• Start investing $1k in a share portfolio within the next six months.

Step 3. Create a plan to achieve your goals

Once you understand your financial situation and goals, it's time to create a plan to achieve them. Include specific actions, timelines, and milestones in your plan. For example, if your goal is to save for a house, your plan might involve setting aside a monthly amount in savings, reducing expenses, and researching home-buying programs.

Here are some tips for creating a plan:

• Create a budget: Get on track with your expenses and goals by creating a killer budget! Use your income and expense lists from Step 1 to ensure you're allocating enough funds towards what matters most. Consider using a budgeting tool to track expenses and income.
• Focus on your financial goals: Prioritise and conquer one goal at a time. Move on to the next only after you've achieved the first.
• Slash your costs: Find ways to trim costs and funnel more cash towards your objectives. Think saving on shopping, meal-prepping and more home cooking, ditching unused subscriptions, or downsizing your digs.
• Make extra cash: Score some extra dough by hustling on the side, haggling for a raise, or unloading unused items for cash.
• Save effortlessly: Set up automatic transfers from your main account to a dedicated savings account and watch your money grow without lifting a finger.
• Boost your credit score: If you're planning on applying to a sizeable loan at some point, then having a good credit score is an ideal starting point. RentPay's optional Scorebuilder feature can help you build up your credit rating while giving you access to a line of credit.

Step 4. Stay motivated and accountable

To make sure you stay on your game, set reminders and use a spreadsheet or apps to track your financial progress like a pro! Automating specific tasks can save you from the temptation to use money needed elsewhere, while also saving you time and money.

Having a support system is important. Whether it's a friend, family member, or financial advisor, having someone to keep you on track and provide guidance and encouragement will help to push you along.

Don't be disheartened by any setbacks along the way. Celebrate every milestone and progress you make to reward yourself and positively reinforce your actions.

Step 5. Reassess and adjust as needed

Don't let your financial plan fall behind. Keep it on track by reassessing and adjusting as needed—making changes doesn't mean you've failed!

Be proactive and stay ahead of the game. Tweak your budget, modify your goals, or explore new income streams.

And don't forget the unexpected! Medical bills, car repairs, and job loss can happen to anyone. It can derail people, but you're stronger than that! Be prepared with an emergency fund and adjust your financial plan accordingly.

Always remember to be kind to yourself and ask for help whenever you need it.

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How does renting affect your financial plan?

Being a renter doesn't mean you have to giving up on setting up for healthier finances or planning for your future. Don't stay stuck in renting limbo—be proactive about moving towards your future vision.

Despite the old renting myths, it can be an intentional choice to make way for other priorities rather than it being a last resort.

Many people use renting as a stepping stone to home ownership down the track. Some people choose renting as a lifestyle choice to to put their money into investments and other pursuits. And then there are others who find renting as the most affordable option. Which one are you?

In any case, a financial plan is a useful roadmap to guide your money habits and plan ahead. If you don't have clear goals or a vision to work towards step-by-step, they could forever be out of reach.

As a renter, you may have somewhat different money habits compared to a homeowner. However, there will also be be some that' will be the same's the same for everyone—no one can escape groceries, transport costs and utility bills!

The upside of renting is that you can easily pack up and move home without having to worry about getting your property ready for sale before securing another property. This flexibility also means that you can simply trade up or trade down your rental property, reducing costs or improving your lifestyle depending on your financial goals.

While renting, don't forget to factor in any rental costs when planning your finances. At least you won't have to worry about shire and water rates, strata fees, property repairs, home insurance and more as a homeowner or landlord would!

If moving to another property is on the cards, be ready for the next rental bond and four weeks' rent paid in advance, end-of-lease cleaning and moving costs, and potential rent hikes. If you're renting with pets, budget for a pet bond or potentially higher rent. No car parking at your next rental? Decide whether you'll need to rent a car bay or consider selling your car and using public transport.

Make sure you're across all your outgoing expenses and keep your eye on the prize to keep working toward your financial goals.

These tips will help you stay on top of your finances like a pro!

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