How to Determine How Much of Your Income to Spend on Rent

Nobody likes paying rent, but if you don’t have a mortgage, it’s the most important monthly expenditure you’re going to make. Putting a roof over your head is your first priority and when it’s time to start looking for your home, you’ll want to crunch some numbers first. Renting an apartment can already be a challenge as you consider neighborhood safety, traveling distance to and from work, rent prices in the area, convenience to shopping, and so on. But all of these things come second to calculating what price range you’re dealing with commensurate to how much money you make each month to determine how much rent you can actually afford.

Consider Your Income

The general rule of thumb heard from most realtors and landlords is to devote about 25-30% of your income on your rent costs. This makes paying your monthly rent more manageable and allows you to have enough money to pay for bills such as utilities, cable TV, and other expenses for which you’ll be responsible.

Make a List

Write down all of your monthly expenses. If you have car payments, student loans, anything that will take money out of your pocket from month to month, be sure to include it in your list. Don’t forget to budget for things like food, public transportation, and entertainment costs. Once you’ve made a tally of all your major expenditures see how it stacks up to what you make every month.

Check out Your Options

What areas of town are affordable for your budget? Every city has a different cost of living based upon things like desirability and wages paid by businesses in that area. Do a search of the rent prices of the buildings in your desired neighborhood. If they are higher than you’ve budgeted for, then you may need to reconsider that location. Living in San Francisco can get astronomical, but perhaps you can afford to live just outside of the city and commute in and out each day. You may save some money by living in an outlying area that is still close to the city center.

Make Some Adjustments

Only you know what you can afford, so if you really must live in a certain part of town that might require more than 25-30% of your income a month then you need to adjust your budget. Maybe you don’t have student loans to pay off or you own your car instead of having to pay it off each month. Devoting that part of your income to rent can enable to you to live in the place you really want. Some people might spend up to 50% or more of their income on rent but they may need to sacrifice a little in the process.

Get Some Roommates

Living with other people can drive your rent costs down and increase your living space. Whether it’s a significant other, a bunch of friends moving in together, or finding some prospective roommates on Craigslist, splitting the cost of rent can help you live within your means. If you have enough people who want to pool their resources, you may want to find a condo or townhouse for sale. Your monthly finance costs might be less expensive than paying rent and you’ll be paying that money towards ownership instead of giving it to someone else.