How much on rent

Again, this idea can be traced to the standards of rental affordability set by national housing guidelines. First, it doesn't account for inflation , income stagnation, or rising rent prices. The median household income for U. However, the median U. It doesn't take into account, for example, how much student loan or credit card debt you might be paying off. Nor does it consider how much money you're earning, what you pay in taxes, your financial goals, or the affordability of the real estate market where you are planning to rent.

That may seem like a lot, but that's based on gross income, which is before taxes are taken out of your paychecks. And when you factor in transportation, health care, insurance, food, clothing, and utilities, that remaining money can disappear quickly. You certainly could do that, but if you're trying to save as much money as possible so you can, say, retire early , you may want to spend much less on rent. Basing your budget on net income after all taxes have been taken out rather than gross income can help avoid spending more than you realistically can afford on rent.

With this method, you spend:. This rule won't tell you exactly how much you should spend on rent each month. But it can help you determine guidelines for how much of your income to allocate toward essentials vs. Or if you live in a housing market where rent prices are high, paying more could simply be mandatory. On the other hand, you may be angling to spend the least amount possible on rent each month so you can pay off debt or grow your savings. A budgeting app may be useful for tracking your monthly income and expenses so you can see where your money is going and which budgeting method is right for you.

To calculate your rent-to-income ratio, divide your monthly rent payment by your monthly gross income before taxes. Different landlords will have different credit standards for determining who is eligible to rent from them. Skip to main content Please update your browser. Please update your browser. Credit Cards. Checking Accounts. Savings Accounts. Home Equity. Invest with a J. Morgan Advisor. Online Investing with J. Chase for Business. Commercial Banking. Some rentals include utilities like gas and water, have an on-site gym or a washer and dryer in-unit.

Factor in those perks when comparing the cost of rentals. And in-unit laundry equals savings on time and money versus coin laundry or trips to the laundromat. Scale back your package to shave hundreds off your cable bill. Or cut the cord completely and snag a digital antenna on the cheap to access local channels. Insurance : Compare car insurance rates to find the best deal. Groceries : Get in the habit of planning your meals and use coupons to maximize your grocery budget.

Rent : Living solo means shouldering the burden of rent and utilities on your own. Instead, find a roommate and split the cost of a two-bedroom. Need a more affordable option? Home Ownership Renting.

Table of Contents Expand. Problems With the "40 Times" Rule. A Better Rule of Thumb. The Budget-Based Approach. Your Rent Allowance. The Bottom Line. However, these calculations are imperfect and too general for many people. A better bet is to add up monthly expenses—utilities, transportation, food, loans, credit cards, savings, insurance, and other spending—and subtract them from your after-tax pay. What money is left is for rent. Related Articles. Renting Are You Ready to Rent? Partner Links.

Related Terms Budget A budget is an estimation of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis.

Personal Finance Personal finance is all about managing your personal budget and how best to invest your money to realize your goals. What Is Financial Literacy? Financial literacy is the ability to understand and use various financial skills, including personal financial management, budgeting, and investing. How a Lease Option Works and Helps with a Downpayment on a Home A lease option is an agreement that gives a renter the choice to purchase the rented property during or at the end of the rental period.

What Is a Discretionary Expense?