How Much of Your Monthly Income Should Go to 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, many people have debt payments like student loan debt or credit card debt that can weigh in on what would be considered affordable rent.

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. Fortunately, you don’t need a financial advisor for figuring this out – here’s how to calculate the ideal rent for your personal financial situation.

How Much Should You Spend on Rent? Try the 30 Percent Rule

Financial experts generally recommend spending around 30% of your gross income on rent. So if you earn $48,000 a year – $4,000 a month before taxes – you should spend around $1,200 a month on rent. Of course, 30% is a general guideline, and any fixed percentage to spend for housing should be determined by personal financial goals. A prospective tenant should also keep in mind that this fixed percentage does not consider additional expenses such as a security deposit, moving expenses, parking costs, renters insurance, or utilities. 

However, lots of people rebuke this calculation because it’s outdated.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 annual income on housing have historically been said to be “cost burdened.” That income to rent ratio does not consider the financial expenses relevant today — high credit card debt, student loans, medical expenses, 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 level, lifestyle, debt payments, and any other monthly expenses.

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 your budget, your after-tax income, and your entire financial situation.

Consider unexpected expenses.

Do you plan on bringing a car with you to a new city?  Then you may want to budget an extra monthly fee for parking costs.  Taking public transit everyday?  That is also something you will want to consider when estimating how much you can spend on rent.  Some landlords require renters insurance -which can help protect your belongings in the case of a flood, fire, or burglary – that will be an extra monthly fee.  What about an emergency fund?  Do you have the recommended 3-6 months cash reserve that financial experts typically recommend in case of a job loss, medical emergency, or other financial surprise?  All of these unexpected expenses should be factored into monthly budget planning when determining how much rent is affordable.

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 housing expenses 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, and Washington, D.C.


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