How to Budget for Utilities

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How to Budget for Utilities

Lisa Bernstein · Nov 9, 2009

Utilities are a key component of your household budget. To keep your finances under control, it’s important to set aside money for recurrent expenses, like utilities.

Understanding Utilities Costs

Depending on location, and the terms of your lease, you may be responsible for different utilities. These may include:

  • water
  • electricity
  • gas
  • cable
  • Internet

For all utilities, your lease will outline what you must pay for. Before signing a lease, carefully read the utilities clauses because they will help you to figure out whether you’re getting a good deal. Apartments with heat and hot water included in the rent are often a better deal than those with a lower rent, but no utilities included.

Budgeting Methods

Prior to moving in to a new apartment, determine how much your utilities will cost by looking up rates on the utility company’s website. Call them to discuss residential rates and to ask whether plans are available for saving money. For example, some electric companies offer discounted rates for using the bulk of your electricity during off hours. In this scenario, there are two rates, peak and off-peak. A higher rate is charged for electricity used during peak hours; but a discounted rate is offered for off-peak hours.

Before choosing a plan, evaluate your current electricity use to see if the majority of it falls into off-peak hours (usually evening and nighttime). Unless you’re certain that you’ll use more electricity at night, stick with the standard residential rate, which offers one electricity rate around the clock.

Your prior apartment’s utility bills provide an estimate of how much various utilities such as your electricity, water, and gas should cost. These bills will serve as a starting point for your new budget. Keep in mind that your utility usage may differ in your new apartment, and the rates in your new neighborhood may be higher or lower than your old one.

Fine Tuning Your Utilities Budget

After moving in, collect utility bills for several months. Sort them by type and look to see whether your bills are consistent from month to month, or whether the cost fluctuates significantly.

Large fluctuations in your bills require some investigation and thinking to determine why the cost varies. In some cases, it’s obvious: apartments with electric heat have higher electric bills in the winter. In other cases, the cause is harder to find.

Think about your use of a particular utility. Do you use more water at certain times of the year, for watering plants or cleaning? Were you using power tools to build bookcases or hang shelves? By asking yourself questions, establish whether you did something out of the ordinary, which might explain cost differences.

At the conclusion of this process, make educated guesses about the average amount you expect to spend every month, for each of your utilities. Based on your analysis, create a utilities budget. Revisit this issue periodically to see if you’re still adhering to your original numbers. If not, use the same process to work out why your utility expenses are not on target. Then, adjust your budget as necessary. Planning and diligence will prevent surprises in your utility bills.

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Lisa Bernstein: As a long-time apartment dweller and seasoned condominium trustee, I have dealt with numerous landlord-tenant, property management, and day-to-day apartment complex issues. My extensive, direct experience has led to invaluable insights into apartment life from both the tenant and management perspectives.

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