A year of rent day: one renter’s budget, month by month

Rent day is the one fixed point in my financial year. I freelance, which means my income arrives in lumps, late, and occasionally not at all, but the first of the month arrives on schedule every single time. For a long time I treated rent as a single problem: make sure the money is there on the first. It took me an embarrassingly long time to notice that the months around rent day are not all the same, and that most of my money stress came from the other bills that cluster at particular points in the year.

So last year I kept a simple ledger. Every rent day, I wrote down what was in my chequing account, what else was due that month, and how I felt about it. What follows is that year, month by month, with the lessons I would pass on to any renter. The numbers are mine but rounded and simplified, and they are illustrative. Your rent, province and income will be different. The pattern, I suspect, will not be.

January to March: the quiet squeeze

January rent day always feels worse than it is. December spending lands on the credit card statement, clients are slow to pay over the holidays, and the heating part of my hydro bill is at its highest. In my ledger, January was the month with the least money in chequing on the first, even though nothing about the rent itself had changed.

The fix, which I only set up halfway through the year, was a separate savings account that I think of as the rent buffer. The goal is one full month of rent sitting there untouched. When a client pays late, rent comes out of the buffer and the late payment refills it. It turns a slow month from a crisis into an inconvenience.

February was when my tenant insurance renewed. Tenant insurance is usually not legally required, although many leases require it, and it is one of the better-value products a renter can buy: it typically covers your belongings and your personal liability if, say, a leak from your unit damages the one below. My premium went up a little at renewal. I called, asked whether there were any discounts I was missing, and asked them to walk me through the deductible. That fifteen-minute call is worth doing every year.

March was mostly about getting paperwork ready for tax season. As a self-employed person, I need my income records, my expense receipts and my rent receipts, because rent matters for two things on my return: the business-use-of-home calculation for my home office, and, because I live in Ontario, the Ontario Trillium Benefit application, where renters report rent paid for the year. Other provinces have their own credits and benefits, and the rules differ, so check what applies where you live.

April to June: tax season meets rent day

This stretch of the year is the one I underestimated most. In Canada, self-employed people generally have until June 15 to file their return, but any balance owing is still due on April 30. That surprises a lot of freelancers. If you wait until June to file, you may already have been charged interest on what you owed since May.

Here is an illustrative example of why it hurts. Say I owe $3,000 to the Canada Revenue Agency on April 30. My May 1 rent of $1,900 is due the next day. If I have not been setting aside tax money all year, those two payments in two days are $4,900, which is more than many freelancers have sitting in chequing at once.

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Rent never surprised me. Everything that landed next to rent did.

The habit that finally fixed this for me is boring: every time a client pays me, a fixed percentage goes straight into a separate tax savings account before I touch anything else. The right percentage depends on your income, province and expenses, and an accountant can help you set it. The point is that tax money stops being money I think of as mine.

June also brings the possibility of instalments. If you owe enough tax in a year, the CRA may ask you to pay by quarterly instalments, which are due in March, June, September and December. Instalment reminders tell you how much to pay. If you get one, put those four dates in your calendar next to rent day so they never ambush you.

July and August: moving season, even if you are not moving

Summer is when a lot of leases turn over, especially in Quebec, where many leases end on June 30 and July 1 is famously moving day. Even if you are staying put, this is a good time to look at what similar units in your area are renting for. It tells you whether your rent is a good deal, which matters a lot the next time you are deciding whether to stay or go.

July was also my best income month of the year, thanks to a big project paying out. I made the classic mistake in my first year of freelancing and treated a good month as a raise. This year I used it differently: I topped up the rent buffer, topped up the tax account, and only then spent anything. The rule I follow now is that a windfall gets split three ways before it gets spent.

August brought my hydro bill down and my air-conditioning bill up, which in my building is the same thing. If your utilities are not included in rent, look for an equal billing or budget billing option, where your utility averages your payments over the year. It does not save money, but it makes the monthly number predictable, and predictability is most of what a renter budget needs.

September to October: the rent increase letter

In September, a letter arrived with a rent increase. In Ontario, a landlord generally has to give at least 90 days’ written notice of an increase and can raise the rent only once every 12 months. For many units, the increase is capped by an annual guideline the province sets each year, but units first occupied for residential purposes after November 15, 2018 are generally exempt from that cap. Other provinces have different rules entirely: British Columbia also sets an annual maximum, while Quebec handles disputed increases through its housing tribunal. Check your own province’s tenancy body for the current numbers.

My increase was within the guideline. On an illustrative $1,900 rent, a 2.5 per cent increase is $47.50 a month, or $570 over a year. That does not sound like much until you remember it compounds: next year’s increase is calculated on the new, higher rent.

I did three things with that letter. I checked that the notice period and the timing since my last increase were correct. I checked the guideline for the year. And I rebuilt my budget with the new rent as if it were already in effect, three months early, and put the difference into the rent buffer. By the time the increase actually started, I had already adjusted, and the buffer had grown.

November and December: the expensive goodbye to the year

November was calm, which is exactly why I used it to plan December. December rent day lands right in the middle of the most expensive month of the year for many people: gifts, travel, food and the general sense that money is for spending. It is also, for freelancers, a month when clients go quiet and payments slow down.

My solution was a holiday line in the budget, funded a little each month from September. It sounds obvious. It is also the single change that made the biggest difference to how January felt the following year, because the holidays no longer landed on the credit card.

December is also a good month for a once-a-year credit check. In Canada, you can request your credit report from both Equifax and TransUnion, and it is worth reading each one for accounts you do not recognize or late payments that are not yours. Credit scores in Canada run from 300 to 900. Rent has not traditionally shown up on Canadian credit reports at all unless something went wrong, so as a renter, your report is mostly a record of how you handle credit cards, loans and phone bills.

What a year of rent days taught me

Looking back over the ledger, the striking thing is how little the rent itself mattered to how I felt. The rent was the same in eleven of twelve months. What changed was everything around it: tax deadlines, insurance renewals, heating bills, holiday spending and the timing of client payments. The pressure came from clustering, not from the rent.

If you want to try this yourself, you do not need special software. A notebook or a simple spreadsheet with twelve rows will do. On each rent day, write down your balance, what else is due that month and one sentence about how it went. After a year, you will know your own financial calendar far better than any generic budget can tell you, and you will know exactly which rent days need the most help.

None of this is personal financial advice. Your province, your lease and your tax situation are your own, and if you are self-employed, a session with an accountant who works with freelancers is money well spent. But the habit of looking at the whole year, rather than just the first of the month, is one I would recommend to every renter.