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How much should I be spending on rent?

Let’s face it, living in a city can be extremely expensive. Monthly rent costs are incredibly high for tiny apartments, you pay way too much for your salad, and there are too many monthly living expenses (insurances, WiFi, Netflix) to keep track of. Not to mention, paying off your student loan debt is a slow and painful process.

There are plenty of helpful tips out there on surviving the city on a budget, but the main issue on everybody’s mind is how much they can afford to pay on rent. Here’s how to calculate it for yourself.

General rule: spend a fixed percentage of your income on housing.

Most articles and financial experts recommend the “30% rule,” spending 30% of your gross monthly income (before taxes) on your monthly rent. That means, if your income is $4,000 per month (or a $48,000 annual salary), then you should be paying $4,000 x 0.3, or about $1,200, on rent monthly.

However, lots of people rebuke this calculation because it’s outdated. The government declared this standard in 1981 when they found that those who spent more than 30% of their income on housing have historically been said to be “cost burdened.” It does not consider the financial situations relevant today — high debt, student loans, and 401(k) plans — in its calculations.

As a result, we recommend setting your own personal fixed percentage to spend on rent, rather than blindly following the 30% rule. Create a realistic budget specific to your income, lifestyle, and debt/loan payments.

Consider your personal expenses.

The 50/30/20 budgeting standard is a good metric to use. It dictates that 50% of your income be used in monthly fixed payments: housing, utilities (gas, electric, water), transportation costs, and groceries. Next, 30% can go to non-essentials. That includes dining out, entertainment, and shopping. The last 20% of your monthly income is expected to go into savings or paying back extra debts.

From there, you can use the 30% rule as the basis and redistribute your salary based on your expenses. If you don’t have student loans, then you can afford to pay slightly more on your monthly rent. If you rarely buy clothes or dine out, then more of your salary can go toward paying for a nicer apartment with amenities. The goal is to find a balance that makes sense for you, your income before taxes, and your entire financial situation.

Can’t do it? Yes, you can.

Millennials nowadays flock to urban centers, despite expensive housing. Most notably in New York City and San Francisco, 30% of income or any variation close to that just isn’t realistic. Monthly payments will easily exceed such a percentage, especially among young professionals.

Of course, you can make small adjustments and sacrifices. For instance, living in an apartment with good public transportation or within walking distance of your job will save you gas, car insurance, and transportation fees. You can also spend less money on non-essentials or share the costs: live with roommates, use your ex’s HBO login, and meal prep.

Spare yourself the headaches. Move into Common.

Instead of making sacrifices to your lifestyle or paying ridiculous amounts for a rundown apartment, move into Common. At Common, you can save up to $380 a month. Our fully furnished coliving homes offer private bedrooms, beautiful, shared spaces, and incredible amenities across all major U.S. cities.

Leases are flexible, and at one all-inclusive rate, you can enjoy free onsite laundry, free household essentials, free weekly cleaning, free WiFi, stocked kitchens, and more.

Find the solution to your rent frustrations here. Take a free tour of our homes in New York City, Los Angeles, San Francisco, Chicago, Seattle, and Washington, D.C.

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