Effective ways to save for rent

Saving for rent can be a daunting task, especially for those who are living pay cheque to pay cheque. With the ever-rising cost of living, it’s easy to feel overwhelmed by the prospect of coming up with a significant chunk of change each month. However, with the right strategy and mindset, saving for rent can be an achievable goal, writes JOSEPHINE OGUNDEJI

The rising cost of living, inflation, and expensive building materials have made affordable housing a significant challenge for many Nigerian residents.

Over the years, the country has experienced a steady increase in the cost of living, driven by factors such as inflation, currency fluctuations, and economic instability.

As a result, the cost of housing has skyrocketed, making it difficult for low- and middle-income households to afford decent housing. The situation is further exacerbated by the high cost of building materials, such as cement, steel, and wood, which has made it expensive for developers to construct affordable housing units.

Moreover, the demand for housing in Nigeria far outstrips its supply, leading to a significant shortage of affordable housing options. This has resulted in many residents being forced to live in overcrowded and unsanitary conditions, with limited access to basic amenities such as water and electricity.

The challenges of affordable housing in Nigeria are further complicated by the country’s rapid urbanisation, which has led to an influx of people to cities in search of better economic opportunities. This has put a strain on the existing housing stock, leading to higher rents and reduced affordability.

Rent is one of the most significant fixed expenses for individuals and families, making it crucial to have a structured plan for saving toward it. Unlike discretionary expenses—such as entertainment or luxury purchases—rent is a non-negotiable financial commitment. Failing to meet rent obligations can result in severe consequences, including financial stress, strained landlord-tenant relationships, and potential eviction, which can lead to homelessness or forced relocation to substandard housing.

For many Nigerians, particularly those in urban centres, saving for rent is not just about meeting monthly obligations; it is about ensuring housing stability in an unpredictable economic environment. The country’s high inflation rate and fluctuating income levels make it even more essential to adopt proactive financial planning strategies.

The financial burden of rent in Nigeria

In cities like Lagos, Abuja, and Port Harcourt, rent often consumes a substantial portion of household income, sometimes exceeding the globally recommended threshold of 30 per cent of earnings. Many landlords demand one to two years of rent upfront, a practice that poses a significant challenge for middle- and low-income earners who struggle to accumulate such large sums at once. Without a structured savings plan, tenants may resort to loans, borrowing from friends, or making drastic sacrifices to meet rental payments, which can lead to long-term financial instability.

Given the importance of rent, tenants must adopt disciplined saving strategies to ensure they can meet their obligations without undue hardship. Some key approaches include:

Understanding the need for rent savings: Rent is one of the most significant monthly expenses for most individuals, making it essential to have a structured plan for saving. Without adequate savings, tenants may struggle to make timely payments, leading to financial stress or even eviction. Unlike discretionary expenses, rent is a fixed obligation, meaning it must always be prioritised.

Setting a realistic rent budget: Before saving for rent, it is crucial to determine an affordable budget. Financial experts recommend allocating no more than 30 per cent of one’s monthly income to rent. However, this percentage varies based on location, income level, and other financial responsibilities. Setting a realistic budget ensures that rent payments do not consume a disproportionate share of earnings, leaving room for other essential expenses.

Creating a dedicated rent savings plan: A well-structured savings plan helps ensure that rent is always covered. This can involve setting up a separate bank account for rent payments and automating transfers to that account each month. By treating rent savings as a non-negotiable expense, individuals can avoid last-minute financial strain and maintain financial discipline.

Cutting unnecessary expenses: One effective way to boost rent savings is by identifying and reducing non-essential expenses. This may include dining out less frequently, cancelling unused subscriptions, or opting for cost-effective transportation. Small sacrifices in daily spending can accumulate over time, making it easier to meet rent obligations without financial strain.

Exploring additional income sources: For those struggling to save enough for rent, finding additional income sources can be a game-changer. Part-time jobs, freelance work, or side businesses can provide extra cash flow specifically allocated for rent. In today’s digital age, opportunities such as online tutoring, content writing, and e-commerce can supplement primary income and ease financial burdens.

Planning for rent increases: Rent prices can fluctuate due to inflation, economic conditions, or landlord decisions. It is wise to anticipate these increases by saving slightly more than the current rent amount. Setting aside an additional 5–10 per cent each month can help cushion the impact of sudden rent hikes and prevent financial hardship when lease renewal time arrives.

Building an emergency fund: Having an emergency fund is critical for rent security. Unexpected circumstances such as job loss or medical emergencies can disrupt income streams, making it difficult to pay rent on time. A general rule of thumb is to save at least three to six months’ worth of rent in an emergency fund, providing financial stability during uncertain times.

Taking advantage of rent discounts or payment plans: Some landlords offer discounts for early payments or flexible payment plans to tenants facing financial difficulties. Exploring these options can make rent payments more manageable. Additionally, negotiating lease terms before signing a rental agreement can help secure favourable payment structures.

Avoiding reliance on loans for rent: While borrowing money to pay rent may seem like a temporary solution, it often leads to long-term financial struggles. High-interest loans or credit card debt can quickly accumulate, making it even harder to cover future rent payments. Prioritising savings over borrowing helps maintain financial independence and avoids unnecessary debt burdens.

Developing a long-term housing plan: Beyond saving for rent, individuals should consider long-term housing goals, such as homeownership or relocating to a more affordable area. A strategic approach to housing expenses ensures financial sustainability and reduces dependency on short-term solutions. By making informed decisions and maintaining disciplined saving habits, individuals can achieve greater financial security and housing stability.

The Chief Executive Officer of Wealthy Motley, Solafunmi Sosanya, said that budgeting was a key factor to note when renting and that individuals should think about the long plan to gather the next payment.

She said, “If your house rent is about N1.2m and let’s say you earn N450,000, you know that at the end of the year, you will pay the rent. Invariably, you should know that from January, you should be removing N100,000 from your salary each month.”

However, she warned against renting apartments that are not compatible with one’s financial income.

She added, “I can tell you that on a N250,000 salary, you should never be living in a house of N1.2m. Because essentially N1.2m is about five to six months of your salary, so that means you are working for six months of the year just to pay the landlord.”

Sosanya argued that factoring other living expenses apart from the cost of the rent will also put things in perspective for the person who wants to rent the apartment.

She said, “So you see that in the first instance when a person plans to take a house rent, after carefully doing some financial mathematics, if you think about it, you will already see if you can afford the house or not. If you don’t do that, it is when you get into debt and start borrowing that you’ll understand better.”

Automate rent payment process

A project management professional, Lawrence Ladokun, says leaving a standing order with one’s banker to automatically deduct a particular sum from one’s account every month and post it into another account can be of help.

“This other account may be known as your rent account; for example, let us assume your annual rent is N780,000 per annum; this would imply that you would be paying N65,000 each month. Okay, let us assume you left a standing order with your banker to automatically deduct N65,000 every month when you receive your monthly payments and post it into another account. The account will accumulate to N780,000 at the end of the year.

“I understand that the number one temptation is to withdraw from this account in the course of the year when you are in dire need of money, but with proper discipline, you would be able to resist this temptation,” he said.

A data analyst, Ayomide Oriwuyi, said he sets aside some percentage of his income every month to avoid borrowing.

He said, “I pay a total of N20,000 into this account every month, which is undisputable for me. So I always have enough to pay for my rent every year.

“To avoid emergency setbacks, I hate to borrow from people. This is actually my motivation in order not to. I don’t have the automated teller machine or bank app or mobile code of this particular bank so as to help from temptation.

“It is very essential to save since the money we spend daily is beyond our thoughts and budget if we continue without thought of separating a particular fee, and then we end up with nothing when the time to pay the rent comes.”

Extra source of income

An auditor at Ernst and Young, Oluwafemi Ososan, says discovering alternative methods of generating additional income is very essential.

“Explore avenues such as passive income streams, which can generate earnings without requiring constant active involvement. Additionally, consider leveraging your existing skills and knowledge to offer consulting services, teach online courses, or provide freelance services within your area of expertise. Engaging in the gig economy through platforms that match individuals with short-term projects can also be a way to earn extra income.

“Explore the potential of leveraging online platforms and social media to monetise your passion, whether through creating and selling digital products, offering online coaching or mentoring, or becoming an affiliate marketer. With careful research, planning, and dedication, you can identify and pursue various avenues to supplement your income.

“If the person has soft or hard skills, they invest in it during the weekends so they can make more money; for instance, if you have a car, you can do Uber; if you have graphics design skills or website development, you can do that as a side hustle.”