“One main aspect of maintaining a healthy budget is knowing how much you can afford to spend on various items. Rent is often the biggest part of a person’s monthly expenses, and determining how much you should spend on your rent can be tricky. While your income might indicate you can afford a certain amount, when you factor in other expenses, the amount that you can really comfortably afford can change.”
Are you looking for a new place? Not sure how much you should be spending on rent? We’ve come up with some general guidelines to help you determine what the ideal rent is for your income.
1. Establish a Budget
First, you need to assess your income. How much do you bring in every year, with any salary, bonuses, dividends, interest, support, or other means of income included? If you’re not sure where to get started, you can easily calculate your monthly budget using simple home budget calculators.
You should expect to spend about 60% of your budget on the top three budget items for most families, which includes housing, transportation, and food. Avoid going too far over this number, because you’ll also need money for emergency funds, your retirement plan, entertainment, credit card payments, insurance, and all of your other monthly expenses.
2. The 30% Income Rule
In the past most experts recommended spending no more than 30% of your income on rent — and it’s still a fair rule of thumb. On the other hand, this may just be an arbitrary number because every person’s situation is different. For instance, approximately 20% of households spend more than half their income on housing and are still living comfortably.