# How Much Should You Spend On Rent?

For some, the responsibility of spending hard-earned money on bills or rent can be anxiety-producing. For others, the thought of getting that first apartment and starting a new life is exciting. But before perusing rental listings, first, you need to answer the question, “how much should I spend on rent?” By understanding the percentage of income that you need for rent, you can answer the question, “how much rent can I afford?”

Because salaries, cost of living, and housing markets vary dramatically by region, it’s challenging to find a one-size-fits-all answer. Instead, you must ensure you are not living beyond your means by setting a budget. The reality is that most consumers spend a large portion of their income on rent. In this guide, we detail what percentage you should spend and steps for creating a budget.

## ‌As‌ ‌a‌ ‌general‌ ‌rule,‌ ‌set‌ ‌aside‌ ‌a‌ ‌percentage‌ ‌of‌ ‌income‌ ‌for‌ ‌rent‌ ‌—‌ ‌and‌ ‌stick‌ ‌with‌ ‌it‌ ‌

When trying to answer the question, “how much should I spend on rent,” your first step is setting a percentage of your income aside for rent. One basic method is using the 30% rule to figure out how much to spend on rent monthly. That means taking your gross monthly income, which is what you make before taxes come out, and subtracting 30%.

For example, take your annual salary and multiply it by 30% (0.3) to learn how much you can spend on rent each year. Then, take that answer and divide it by 12 for the number of calendar months you are renting. Here is what the calculation is going to look like if you are making \$30,000 per year:

• \$30,000 x .3 = \$9,000
• \$9,000 ÷ 12 = \$750

This calculation shows that if you earn \$30,000 annually, you can afford to spend \$750 monthly for rent. Because the 30% rule is not factoring in other expenses, like paying down student debt, others recommend using the 50/30/20 rule.

The 50/20/30 rule, originally coined by Elizabeth Warren (yes, that one) and her daughter, Amelia Warren Tyagi, is thought to be an easier way for budgeting. This method means you are spending 50% of your income on your living expenses, 30% on non-essentials, and 20% toward savings and paying down debt. So, if you earn \$30,000 annually, you break that down to \$2,500 per month. Then calculate that into the 50/30/20 rule:

• 50%: \$2,500 x .5 = \$1,250 for living expenses
• 30%: \$2,500 x .3 = \$750 for non-essentials
• 20%: \$2,500 x .2 = 500 for savings or paying down debt

## How‌ ‌much‌ ‌should‌ ‌I‌ ‌spend‌ ‌on‌ ‌rent‌ ‌if‌ ‌I‌ ‌have‌ ‌a‌ ‌lot‌ ‌of‌ ‌debt?‌ ‌

When you are carrying a significant amount of debt, you might find that the 30% rule and 50/30/20 rule do not work. That is where the 43% rule comes into play. While mortgage lenders typically use this formula, it also works great for renters who have high debt. Say that you earn \$45,000 annually, which breaks down to \$3,750 monthly. Here is the equation you should use to calculate how much you can spend on rent using the 43% rule:

• \$3,750 x .43 = \$1,613

That means those earning \$3,750 gross monthly should not have debts and rent exceeding \$1,613. Your monthly debt could include car payments, insurance (car and renter), student loans, credit cards, phone, utilities, and more. Here are some hypothetical numbers for each:

• Car payment: \$300
• Insurance: \$150
• Student loan: \$200
• Credit card: \$75
• Phone: \$100
• Total monthly debt: \$825

That means, after paying \$835 for debts, you have \$787.50 left for rent and utilities every month. ‌ ‌

## ‌4‌ ‌steps‌ ‌to‌ ‌making‌ ‌a‌ ‌rent‌ ‌budget‌ ‌(and‌ sticking ‌to‌ ‌it)‌ ‌

### Step‌ ‌1:‌ ‌Know‌ ‌the‌ ‌cost‌ ‌of‌ ‌living‌ ‌in‌ ‌your‌ ‌area

Figuring out the cost of living in your area means determining the average rental price.‌ Factors that affect rental prices include location, size, amenities, and other features. You can use a rental affordably calculator with your desired location to help answer, “how much rent can I afford?” For example, if you earn \$3,700 monthly with \$825 in debt and are looking for an apartment in Albuquerque, that calculator indicates you can afford \$1,546 for rent in that area.

### Step‌ ‌2:‌ ‌Determine how much you are going to spend on utilities

Utilities include monthly heat, electricity, and water bills, and their price is going to vary according to your location. For example, if you live in a warm area, you might spend more on electricity to keep your air conditioner running. In a wintery state, you might spend more on heating fuel. Also, factor in your annual costs for the electricity you use to keep the lights on and your appliances running.

### Step 3: Budget for internet connections

The average consumer uses an internet connection for gaming, homework, streaming, working, and more. The cost of these services depends on what you use as a connection. For example, a cable connection could range between \$50 and \$100 monthly. However, if you use a fiber-optic connection, that could range between \$30 and \$65 per month. There are also the costs for streaming services that also add to these expenses that the landlord does not cover.

### Step 4: Factor in renters insurance premiums

While renters insurance is not a requirement, it’s recommended to protect your possessions. According to data available from the Insurance Information Institute, the average cost for renters insurance is \$180 annually. That breaks down to only \$15 per month.

## The‌ ‌bottom‌ ‌line‌ ‌

Answering the question, “how much should I spend on rent,” depends on a wide variety of factors. First, calculate the percentage of income for rent by following the 30% rule, 50/30/20 rule, or 43% rule. Once you determine that percentage, you can better understand how much should you spend on rent and then create a workable budget.‌ ‌

What‌ ‌do‌ ‌I‌ ‌do‌ ‌if‌ ‌I‌ ‌have‌ ‌rent‌ ‌I‌ ‌can’t‌ ‌afford?‌

‌Your first step is to contact your landlord and explain your situation. Ask them for a few extra days or if they are willing to negotiate the amount of rent you have to pay. If that does not work, lower your non-essential expenses to free up extra money.

How‌ ‌can‌ ‌I‌ ‌find‌ ‌cheap‌ ‌rent?‌

‌One of the best ways of finding cheap rent is by studying the average rates for your location.

How‌ ‌do‌ ‌I‌ ‌afford‌ ‌rent?‌

Determine rent affordability by using the 30% rule, 50/30/20 rule, or 43% rule.

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