5 Ways To Cut Monthly Payments and Stop Paying More Than 30% of Your Income On Rent
Written by
Adam Palasciano
Edited by
Susan Kim
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What’s the largest monthly payment for most Americans? The cost of housing — and for many, that’s rent.
A recent 2024 Harvard study indicated that a stunning 22.4 million renter households in the U.S. spent more than 30% of their income on rent and utilities as of 2022. That’s up about 2 million households over three years, and completely offsets the modest improvements in cost-burden rates recorded between 2014 and 2019.
Sky-high inflation and a rise in interest rates since the onset of the COVID-19 pandemic have all contributed to the unprecedented rise of rent-burned American households. Combined with a stagnant housing supply, rents have reached all-time highs across the country.
The Federal Reserve Board defined being rent-burdened as spending more than 30% of your gross take-home pay on rent each month. Severely rent-burdened means spending more than 50% of your gross take-home pay on rent each month. The latter is the case of 12.1 million renter households in the U.S.
Luckily, if you’re rent-burdened, there are five ways you can cut back on monthly payments to increase your cash flow and also reduce your monthly rent.
5 Ways To Cut Your Monthly Payments
Here are five ways to reduce your rent bill or cut back to add more cash flow to your budget:
- Get Roommates: Rising rent prices can be offset by other people without needing to move to a cheaper house or apartment. For example, if you are living in a 3-bedroom home but you only use 1 bedroom, consider renting out the other two bedrooms to trusted tenants. You’ll cut your monthly rent bill significantly, freeing up more take-home pay for everyday expenses, savings, paying down debt and maybe even your next vacation.
- Rent Out Your Empty Space as Storage: If you have extra space in your home, whether it be an empty bedroom, attic or garage, there’s another way to offset your rent without getting roommates. Consider a platform such as Neighbor which allows you to rent your space to others as a storage unit. You’ll earn passive income by allowing others to store their stuff without having roommates.
- Get a Side Hustle: If getting roommates or renting extra space simply isn’t possible, consider increasing your income in addition to your 9-to-5 job. Side hustles can range from babysitting, food delivery driver, rideshare driver or doing freelance work on the side. Side hustles not only increase your monthly income, but they create other revenue streams which are key for building long-term wealth.
- Eliminate Unnecessary Monthly Expenses: Cutting back on unnecessary expenses like your morning Starbucks run, extra streaming services that you don’t use anymore, multiple dinners out, and buying lunch at work will put money back in your wallet each month.
- Create a Budget: Creating a monthly budget can keep you organized, make you fully aware of what you’re spending on and allow you to curtail spending. Consider making a spreadsheet, using the old-fashioned paper planning method or utilizing a financial app to budget aggressively.
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