Figuring out how much you can afford to spend on rent is the first step you should take before hunting for a new place to live.
Let's dive into some straightforward ways to determine this.
What's a Good Amount to Spend on Rent?
A common rule is to allocate around 30% of your gross monthly income to rent. This means if you're making $4,000 a month before taxes, you could consider spending up to $1,200 on rent.
However, this isn't a strict rule for everyone. In more affordable areas, you might find a great deal that's less than 30% of your income.
But in expensive cities like New York or San Francisco, even 30% might not be enough to cover the typical rent for a one-bedroom apartment.
Check out: 15 Cities Where Many Renters Pay Less Than $1,000 a Month
Other Ways to Budget for Rent
Another method for budgeting is the 50/30/20 rule. This approach suggests splitting your after-tax income into three parts: 50% for necessities (like rent and groceries), 30% for wants (like dining out and entertainment), and 20% for savings and debt repayment.
If your take-home pay is $4,000 monthly, you'd aim to spend $2,000 on needs, leaving a specific portion for rent and other essentials.
Calculating What You Can Afford
Let's stick to the 50/30/20 plan with a monthly income of $4,000. If you have other significant expenses (student loans, car payments, etc.), you might find that after those, there's not much left for rent and utilities.
For example, if your necessary expenses add up to $1,120, you would have around $880 left for rent. Considering the average rent across the U.S. is more than that, you might need to adjust your budget.
When It's Okay to Stretch Your Rent Budget
Sometimes, it's necessary to spend more than planned on rent. This could be due to urgent circumstances requiring you to find a safer place or a job relocation.
Remember, these should be exceptions rather than the norm.
Don't Forget the Extras
Choosing where to live also affects other costs like commuting, fitness, and laundry. If you move further from work, you might save on rent but spend more on transport.
Some places offer amenities like gyms or included utilities, which could save you money overall.
Finding Ways to Save
Prioritize saving money, even if you're spending a significant portion on rent. Don't cut into your emergency fund or retirement savings if possible.
To free up more money for rent, you might negotiate your bills, find a roommate, or look for rental deals.
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