Amid surging heating bills and the rising cost of fuel, an important but often-overlooked factor in your overall cost of living is how much you spend on utilities each month.
From a budgeting standpoint, it’s important to estimate how much you’ll pay monthly for services like electricity, water and internet, among other costs, since they can add significantly to your living expenses. In particular, households are facing the shock of this winter’s gas and electric bills, with energy prices overall up 27% in January compared with a year ago and inflation running at a 40-year high.
Take this expert advice into account when creating utility cost estimates:
— Create a realistic budget for cable, electricity and air conditioning.
— Ask the right questions to predict your average utility bill.
— Account for other variables.
Read on for more information on each strategy.
[Read: How to Make a Budget — and Stick to It.]
Create a Realistic Budget for Cable, Electricity and Air Conditioning
While it can be hard to pinpoint precisely how much your electric or water bill will cost each month, credit counseling agencies suggest planning to spend 5% to 10% of your annual income on utilities.
According to Move.org, a moving resource site, apartment renters should budget a minimum of $240 a month for utility costs such as cable, electricity and natural gas.
If you own a house, your utilities budget should be closer to $400 monthly, according to Move.org. It also found that the average utility cost per month is $114.44 for electricity, $63.34 for natural gas, $70.93 for water, $14.03 for garbage and recycling, $59.99 for broadband cable and $47.43 for streaming services. In total, that comes to $370.
And if these numbers seem particularly high or low to you, remember that they are averages. The state you live in and whether you’re in a house or an apartment have a lot to do with how much you’ll pay. Surging fuel prices like we’re seeing now can also send utility bills much higher.
Electricity. Of all your utilities, you’ll likely spend the most on electric each month. This bill will fluctuate based on energy prices, the season and your usage. One strategy to take the surprise out of electric bills is with equal billing, which some utility companies offer and is also called budget billing, balance billing or even billing. This option allows you to pay the same amount for electricity each month, and at the end of the year you may pay extra or have money credited to your January bill. (Your utility calculates the amount by dividing the total you spent on electric bills in the past year by 12.)
Heating and air conditioning. The high cost of natural gas is causing electric and heating bills to soar this winter. These bills are climbing surprisingly high: According to the consumer price index, electric rose 4.2% in January from December, the biggest price jump since 2006 and a rise of 10.7% over the previous year. Meanwhile, household gas prices fell 0.5% in January from December. While that sounds better, keep in mind that in the past year, natural gas prices for the average household have shot up almost 25% (23.9%) since January 2021.
Internet and cable. Faster internet will add more to your bill. Move.org’s research shows that the average price of an internet speed of 25 megabits per second is $35 a month. For an internet speed of 100 Mbps, you’ll pay $47 a month, and $1,000 Mbps a month is $77.
You might be able to reduce costs by requesting slower internet speed. After all, if you don’t stream a lot of movies and play a lot of video games, a slower connection may not bother you. On the other hand, if you’re on a tight budget and you’ve opted for high-speed internet access, you might want to consider dropping your cable subscription and streaming TV to optimize savings.
[See: 12 Ways to Save on Utilities.]
Ask the Right Questions to Predict Your Average Utility Bill
While you may have a rough estimate of how much your utilities will cost each month, there’s a simple way to take the guesswork out of calculating such fees. To get a sense of the average utilities bill for a house, apartment or condo, ask the right questions — and the right people — about average utility costs. For guidance, turn to the following people and service providers:
— Your real estate agent: If you’re moving to a new home and speaking with the previous homeowner isn’t feasible, ask your real estate agent. “Your agent can often request a history of utility costs from the seller’s broker, but when that is not available your agent should be able to see the annual utility costs for similar homes and give you a reasonable range,” says Ben Creamer, co-founder and managing broker of Downtown Realty Company in Chicago.
— Your utility provider: Check with the provider of each service that makes your home hum, like your electric utility, the water company, waste management company and others. For example, “internet and cable can be calculated with a quick call to your local cable provider,” says Ericka Rios, co-founder and director of leasing of Downtown Apartment Company, based in Chicago. If you’re dealing with an apartment complex, Rios suggests contacting the electric company, which can furnish cost data for similar homes and apartments.
— Your landlord or apartment manager: According to Rios, many new apartment communities recognize that utilities are a concern for new residents and have them calculated into the rent price based on unit size. With many apartment communities, she says, “the major utility expenses — heating, air conditioning, gas, water, trash removal — are covered in a single monthly fee, eliminating much of the budget guesswork. The only variables are electricity, internet and cable.”
Account for Other Variables
Other factors to keep in mind when estimating your utility costs include:
Location. Utilities will be far pricier in places with a high cost of living. According to 2021 data from the U.S. Energy Information Administration, the national average retail price of electricity is 13.75 cents per kilowatt. North Dakota and Alabama currently have the cheapest electricity costs, with residents paying 9.35 cents per kilowatt and 9.79 cents per kilowatt, respectively. Hawaii has the most expensive fees, with residents paying 35.57 cents per kilowatt. Why so high? Because most of Hawaii’s electricity is generated from petroleum fuels that are imported. That’s just one of the many factors that make Hawaii’s cost of living the highest in the country.
Age of your home. Older houses can raise your utility costs. They are less likely to be as well-insulated and may be draftier, which could translate to a higher heating bill than average. It’s also worth paying attention to plumbing costs; if your pipes are old and you have leaks, even small ones, your water bill may run higher than it needs to be.
Age of appliances. Old appliances can also increase utility bills, says Christopher Totaro, a real estate agent with Warburg Realty in New York City.
Totaro advises buying Energy Star appliances. “Each appliance comes with an annual cost of use estimation,” he says. He also suggests switching to LED light bulbs, purchasing your energy through a third-party provider and installing a programmable thermostat or a smart thermostat.
“These simple fixes may help you save 10% or more a year on your utility costs,” Totaro says.
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How to Make a Budget — and Stick to It
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How to Estimate Your Utility Costs originally appeared on usnews.com
Update 03/09/22: This story was published at an earlier date and has been updated with new information.
