How Much Should I Spend on Rent? Guide To Staying Within Budget

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A good rule of thumb is to spend no more than 30% of your gross income on rent. That means if you earn $5,000 per month before taxes, you should aim to keep rent around $1,500.

That 30% standard comes from the U.S. Department of Housing and Urban Development, which considers households that exceed this threshold to be “rent burdened.” It helps ensure you have room in your budget for other essentials — like utilities, groceries, transportation and healthcare — without stretching your finances too thin.

For a more conservative budget, some experts, like Dave Ramsey, recommend spending no more than 25% or your net income on rent.

Good To Know

If you must spend more than 30% on rent, look for ways to cut nonessential expenses and use the savings to build an emergency fund in a high-yield savings account. That cushion can help cover rent if you lose your job or face a surprise bill.

How To Calculate Rent You Can Actually Afford

The 30% rule is a good starting point for determining how much rent you can afford. To see how much that is, use the following formula:

Maximum rent = (gross income x 0.30) ÷ 12

Here’s how that works with a $72,000 gross income:

• (72,000 x 0.30) = 21,600
• 21,600 ÷ 12 = $1,800 maximum rent

That said, the 30% rule comes with a caveat: it tells you the maximum you should pay for rent, but it doesn’t tell you how much you can afford based on your overall financial situation. For that, you’ll need to make a budget.

3 Savings Strategies To Help Pay Your Rent

Making a budget is simple — the hard part is figuring out which method actually helps you cover rent and other essentials. Here are a few to consider:

• 50/30/20 rule: 50% of your income is for essentials, like rent, 30% for wants and 20% for savings.
• Savings buckets: Try setting up automatic transfers into different savings buckets — like rent, vacation or a down payment. Ally’s savings account is one option with this feature built-in.
• Budgeting apps: Tools like YNAB, Mint or Everydollar can help you track your income and expenses.

Follow These Steps To Find Your Ideal Rent

Follow these steps to calculate how much you can afford to pay for rent under the 50/30/20 rule.

1. Note your monthly take-home income from all sources.
2. Divide that amount by half. This is the amount you can spend on essentials, including rent.
3. List your essentials other than rent, and total the amounts.
4. Subtract the total from your essentials budget.
5. The amount that remains is the amount you can afford to spend on rent.

Using $6,000 monthly take-home pay as an example, here’s what that might look like:

• $6,000 / 2 = $3,000 (50% of net income)
• $1,200 essential expenses each month, not including rent
• $3,000 – $1,200 = $1,800 available for rent

How Much Rent You Can Afford at Any Income Level

Thirty percent is a good baseline for determining rent affordability. Here are some examples of how much of your income should go to rent at different income levels.

Keep In Mind

The 30% rule is based on your gross income, or the amount you earn before taxes. But when you’re making a monthly budget, use your net income — your take-home pay — to plan for all expenses.

How Rent Fits Into a Real-Life Budget

Understanding how much should I spend on rent is easier when you see how it fits into a full monthly budget. Here’s an example of what affordable rent might look like on a $72,000 salary. That works out to $6,000 per month in gross income — before taxes.

Budgeting Tips To Keep Your Rent Manageable

Sticking within your rent limit can be tough — especially when prices are high and other expenses add up fast. Here are some practical ways to keep rent from overwhelming your finances:

Trim ‘Must-Pay’ Expenses Without Sacrificing Too Much

Essential expenses are for things you have no choice but to pay, but that doesn’t mean you can’t reduce the costs. For example, you might:

• Shop for cheaper insurance.
• Trade in your car for a cheaper one with a lower car payment.
• Use some of your non-emergency savings to pay off credit card debt.

Reconsider Your ‘Wants’

Review your nonessential expenses periodically to look for spending that no longer satisfies a want. You might find that 30% or 20% of your income is more than you need to spend.

Boost Your Income

Sometimes the best solution isn’t just cutting costs — it’s finding ways to boost your income, too. Here are some methods to consider:

• Get a roommate to share the costs.
• Sell unwanted items to pay off debt.
• Start a side hustle to earn extra income.

Hidden Costs That Could Wreck Your Rent Budget

As you work on your budget, remember to factor in one-time and infrequent expenses you might miss in your bank and credit card statements. For example:

• Moving costs, including application fees and security deposits
• Renters insurance
• Quarterly and semi-annual bills, like community amenities, utilities or professional dues
• Car repairs and home repair costs you’re responsible for paying
• Variable expenses like clothing or shoes
• Veterinary care for your pets

How To Find a Place You Can Actually Afford

Setting your sights on apartments with fewer amenities and the minimum size in which you can live comfortably is a good first step toward finding an affordable home.

Here are some more:

• Compromise on location by renting in a suburb instead of a city. Consider selecting an outlying area that still allows you to commute.
• Look for rental housing from local real estate brokerages and individual owners. You might find better deals than corporate property managers offer.

Final Take: Look at the Big Picture

In the end, an affordable rent is one that lets you make all your housing-related payments and pay your other bills without stretching your budget too thin. Also, consider your long-term goals. This approach ensures a satisfying quality of life now and a financially secure future.

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