If you are new to renting, you might be wondering: How much should I spend on rent? There are lots of factors that go into finding a home that you love, but the monthly housing cost is likely the most important factor. Before starting your apartment search, there are a few ways you can determine how much rent you can afford.
Start with the 30% Rule of Thumb
When it comes to calculating how much money you can afford on rent, 30% of your monthly income is the general rule of thumb. When calculating this number, we suggest looking at your gross income instead of your take-home pay. If you need some guidance on how to find this number, use our rent calculator.
This 30% number is just a rule of thumb to guide you in your planning. There are many other things to consider. If you are living in an expensive city like New York or San Francisco, you might have to pay more than 30% to find a liveable home. If you live in a more affordable location, 30% of your gross income may be way more than what’s necessary.
Evaluate Your Financial Situation
The issue with the 30% rule is that it doesn’t consider an individual’s unique financial situation. If you are swimming in high-interest student loan debt and prioritizing paying those off, you may want to aim for less than 30%. If you make $10,000 a month, that doesn’t mean you have to spend $3,000 on monthly rent. Your financial goals also play a role in determining your rent allowance. If you want to contribute more to investments, lowering that 30% to 25% might be a good idea.
Factor in Additional Costs
Beyond the monthly rent price, there are some additional costs that you need to look out for. First, be aware of some extra costs that come when your first sign your lease. Make sure you consider your moving costs, application fees, and deposit. If you forget about these, your first month may cost you way more than you initially planned.
If you are moving into an apartment with a pet, that might tack on a good amount of money to your rent. Many apartments require a “pet rent” on top of your monthly rent. For more information on everything that goes into renting with pets, check out our guide.
Consider Hidden Costs
There are a few other things to consider that probably go under everyone’s radar.
Commute: If you will be relying on public transportation every day, this is a cost that can add up quickly, depending on where you live.
Parking: Oftentimes parking isn’t free. Check to see if your apartment includes parking, and how much it will cost. There is a wide range for the cost of a parking space, so be sure to check with the landlord. If there is no parking available and you have a car, you might need to look for a nearby garage. On-street parking could work, but may be hard to come by.
Amenities: If your apartment complex has a suitable gym that allows you to cancel your current membership, that’s just extra money in your pocket. If you love throwing down on the grill and your complex has barbecues available for use, that could save you $500.
Ultimately, how much you should spend on rent is going to come down to more than your annual income. Before calculating that 30% and calling it a day, write out a budgeting plan that gives you an overview of your personal finance situation. This will give you the best idea on how to adjust that 30%.