When it comes to renting, there’s no set price point. No matter where you live, there are probably thousands of rental listings available all at their own price point and with different amenities. Some people want to find the best place possible given their income, others want to save as much money as you can and find a cheap place with no extra amenities. But how can you know how much rent you can afford to pay each month?
How much rent can I afford?
The traditional, simple answer to this question is that you should pay no more than 30 percent of your monthly pay on rent. For instance, if you make 3,000 dollars per month, you should pay no more than 1,000 dollars a month in rent and rental insurance. At the same time, some states and property managers actually have their own rules for determining the highest amount of rent you can pay based on your income.
If you want a more detailed answer to this age-old question of rent payments, there are a few things you need to consider.
Look at your entire budget and see how your rent fits in
You can find hundreds of different budgeting rules out there, but 50/30/20 is the most popular one. Basically, it means that you should spend 50% of your monthly income on essentials: rent, food, utilities and transportation. The next 30% percent of your income can be spent on the things you want - eating out, shopping, entertainment, and travel. Finally, the last 20% of your income should go towards your financial goals like debt repayment and savings. Using this rule, you can adjust your rent allowance to be higher if utilities are included, for example.
Consider furniture and moving costs when calculating your rent
Moving to a new home comes with lots of added expenses that you may not think about right away. For instance, you will most likely need to put down a security deposit, a pet deposit, hire movers and/or a moving truck, buy new furniture, and sometimes pay the last month’s rent. It’s important to take all of these expenses into account when calculating how much rent you can afford.
Don’t make compromises you can’t stick to
In some cases, you may want to get a better apartment than what you can actually afford. Often times, people start compromising with themselves saying that they can give up some of their other expenses like hobbies, gym memberships, or eating out in exchange for a better apartment. Promises like this can be dangerous if you can’t actually keep them because you might end up spending all of your income on housing and other expenses and have no money left for savings or loan payments. In any case, you should always be realistic about your expenses and what you can afford to give up for a better place to live.