How Much Should You Spend on Rent?

When purchasing for a marriage gown, I used to be given some sound recommendation: don’t attempt it on in the event you can’t afford it. As a result of in the event you fall in love with it, you’ll both be heartbroken when you’ll be able to’t have it otherwise you’ll blow your funds to get it.

What I like about this recommendation is that it’s relevant to extra than simply marriage ceremony gown procuring.

For instance, it really works simply as nicely when figuring how a lot you need to spend on hire. In spite of everything, the very last thing you need to do is use your dream house solely to find it’s manner out of your funds.

Decide How A lot You Ought to Spend on Lease

Listed here are some guidelines of thumb to make use of when figuring out how a lot of your earnings must be spent on hire:

The 30% Rule

This rule is about as fast and straightforward because it will get when making an attempt to resolve how a lot you’ll be able to afford to spend on hire: you need to spend about 30% of your gross earnings (earlier than taxes) on hire.

Be mindful the 30% rule doesn’t embody utilities or some other housing bills — it’s 30% of your gross earnings on hire alone.  

So, in the event you carry house $3,000 monthly, then you need to intention to spend round $900 (or much less) in your month-to-month hire ($3,000 x 0.30 = $900).


Whereas the 30% rule is an efficient place to begin, you should still want to regulate this determine based mostly on what works finest for you.

For instance, in the event you stay in a metropolis with excessive rental costs, then you definitely could be required to pay greater than 30% simply to seek out housing.

However, you probably have tons of scholar or private debt, then spending 30% on hire could be too excessive. 

Learn extra: How To Handle Pupil Mortgage Debt

The 30% rule has its origins in 1937 and the U.S. Nationwide Housing Act, which created the general public housing program for low-income households. Revenue limits have been established as eligibility for households that needed to stay in public housing. Again then, the rule was that, “a tenant’s earnings couldn’t exceed 5 to 6 occasions the hire.” 

Since then, the restrict has elevated. In 1961, the Housing and City Growth Act established that the hire threshold shouldn’t exceed 25% of a household’s earnings. This was then raised to 30% in 1981 — a benchmark that’s since stayed the identical. 

The 50/30/20 Finances Rule

One other easy rule for figuring out how a lot you need to spend on hire is the 50/30/20 funds. This technique advises you to make use of 50% of your web earnings (after taxes) on your “wants.” Your wants embody issues like housing, utilities, automotive funds, and groceries.

Subsequent, allot 30% of your web earnings for needs — issues like clothes, consuming out, and hobbies.

The remaining 20% ought to go in direction of saving, investing, and debt compensation. 


So, in the event you make $3,000 monthly after taxes, this is able to offer you $1,500 monthly to spend in your wants, $900 for needs, and $600 for saving, investing, and debt compensation:

  • To calculate 50% ($3,000 x 0.50 = $1,500).
  • To calculate 30% ($3,000 x 0.30 = $900).
  • To calculate 20% ($3,000 x 0.20 = $600).

Bear in mind, the 50% is for all your wants, not simply your hire alone. So be sure you have a good suggestion of how a lot you spend monthly on issues like meals and utilities earlier than deciding the precise quantity you’ll be able to put in direction of hire. 

For assist calculating your 50/30/20 funds, take a look at our useful 50/30/20 calculator

The 50/30/20 rule was popularized by Senator Elizabeth Warren and her daughter Amelia Warren Tyagi of their guide, “All Your Price: The Final Lifetime Cash Plan.”

Different Issues When Deciding How A lot to Spend on Lease

Whereas these guidelines of thumb are useful beginning factors for figuring out how a lot hire you’ll be able to afford, there are a number of different elements to think about — equivalent to different bills related to renting, the place you need to stay, how a lot debt you have got, and the type of life-style you need. 

Different Bills Related With Renting

Your month-to-month hire fee will probably be your largest housing expense, however it’s not the one expense. Listed here are another stuff you’ll must think about:

  • Transferring prices.
  • Safety deposit.
  • Pet deposit.
  • Utility funds.
  • Renters insurance coverage.
  • Parking.
  • Commuting prices.

The place Do You Wish to Stay?

Should you’re wanting in a high-cost-of-living metropolis like San Francisco, the place the common value of a one-bedroom condo is $2,995, then you definitely might need to spend greater than the beneficial benchmark quantity (or get 4 roommates).

However, in the event you’re on the lookout for a spot in a low-cost-of-living metropolis and also you make a excessive wage, you would possibly spend much less.

How A lot Debt Do You Have?

You even have to think about how a lot debt you might be carrying. If you’re fully debt-free, then you definitely would possibly be capable to spend just a little further in your hire.

If you’re drowning in scholar loans and bank card debt, then you definitely most likely have to be placing extra of your earnings in direction of debt compensation. 

Learn extra: The right way to Pay Off Credit score Card Debt Quick

What Type of Way of life Do You Need?

This is essential: don’t neglect to consider the kind of life you need to stay.

Should you take pleasure in going out for dinner or spending extra cash on hobbies, then be sure you are budgeting for this stuff. You don’t need to be house-poor and compelled to spend all of your time at house if what you take pleasure in most in life is being out and about. 

Learn extra: When It’s OK to Spend Cash

How To Cut back the Quantity You Spend on Lease

If you wish to lower your housing bills, there are some issues you are able to do to scale back what you spend on hire:

  • Transfer to a metropolis with a decrease value of dwelling. Should you can work remotely or you have got the choice to maneuver to a less expensive metropolis, take into account doing it.
  • Transfer farther exterior the town. Residing within the metropolis core will be costly. If you wish to cut back your hire, you’ll be able to look into transferring to the suburbs. This may usually afford you extra space for much less cash. 
  • Get a roommate. Splitting housing prices with just a few roommates can drastically cut back the quantity you might be spending on hire every month. 
  • Negotiate along with your landlord. Relying on the place you reside and the demand for leases, you would possibly be capable to negotiate the price of hire along with your landlord. You may supply to prepay for just a few months upfront in change for a reduction. Or you might supply to increase the size of your lease if they’re prepared to scale back the month-to-month hire. 
  • Supply to assist your landlord. Should you’re the useful sort, supply your companies to your landlord in change for lowered hire. Perhaps you might paint or do minor fixes across the place for a less expensive month-to-month invoice.

The Backside Line

For many people, our housing bills take up the most important chunk of our month-to-month take-home earnings.

Whereas what you need to spend on hire comes down to some private elements, like the place you reside and the way a lot debt you’re carrying, easy guidelines just like the 30% rule or the 50/30/20 funds may also help set a baseline for what you’ll be able to afford.

Featured picture: ADragan/

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