How Much Should You Spend on Rent?

Determine how much of your income should go to rent

Before you start touring apartments or looking at listings, there are a few factors that you need to consider before you move:

• Your income. You may have heard that you should spend about 30% of your total monthly income on housing, but this figure may be unrealistic in today’s housing market, depending on your circumstances. If your annual salary is above six figures, paying thirty percent of that toward housing may be overkill for your needs. And if the area you live in is relatively affordable, don’t feel compelled to spend more than you need to, especially if you can get a great apartment for only 18% of your income. The 30% rule is generally considered to be good to help you determine the real estate market in your area, as well as what you can afford.


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• Your debt. Before you commit to an apartment, think about any outstanding debt you may have. At first glance, you might think that you’re able to afford a place, but if you’re also covering a car payment or student loans, you may have less liquid cash on hand than you initially thought.
• Your savings. While income is an important factor in determining what you can spend on rent, you should also think about how much money you have in savings. An emergency fund is always a good idea, and some landlords may ask for proof of income or bank statements to prove that you’re able to afford rent. Make sure you have enough money to cover move in fees and a security deposit.
• Your lifestyle. The amount you spend on rent should consider the way you live your life. If you work from home, you may want a sizable home office and space to spread out. If you spend a lot of time traveling for work, a smaller, less expensive apartment may make more sense. If you cook at home a lot and spend a lot of money on groceries, this expense may affect how much money you have to work with every month.
• The housing market. Having an idea of how much of your income you want to spend on rent is a great idea but keep an eye on your city’s housing market to keep things realistic. If you’re moving from an expensive city like San Francisco to a more affordable one, like Milwaukee, keeping an eye on the market in your target city can help keep things in perspective. Research average rent costs in your new neighborhood so that you can create a budget that’s realistic.

Make Your Budget and Your Rent Work Together

If you already have a personal monthly budget that works for you, you may have a pretty good idea about what percentage of your income should go to rent. But if you struggle to manage your personal finances here are some tips to get you started:

• Try the 50/30/20 rule. This budget is a great baseline for understanding how to allocate your money. The rule suggests spending 50% of your take home income on essentials like rent, utilities, and groceries. 30% of your income should go to nonessentials, like tickets to a show or treating yourself to a new pair of shoes. The final 20% of your income, according to this budgeting rule, goes to saving for your financial goals. This could mean padding your emergency savings or adding to your IRA. Remember that the amount you spend on rent is included in that 50% of your monthly take home income and that there should be enough left over for other nonnegotiable expenses.
• Accept your spending habits. When you’re apartment hunting, it can be tempting to think that you’ll suddenly stop spending money on something so that you can afford a more expensive place. However, these sorts of changes may not be sustainable, and you may find yourself falling into the same spending patterns, and spending money you had earmarked for a more expensive rent payment. Understanding the ways you choose to spend your money can be a big help when considering how much of your salary you should spend on rent.
• Factor in other costs. If you need to commute to work every day, you’ll need to think about how you’re getting there. A more expensive apartment closer to your job might eliminate some costs associated with transit, but if you need to think about public transit or a car (and associated costs like gas, parking, insurance, and maintenance), these are other expenses that should be worked into your budget and taken into consideration while apartment hunting.

Other ways to help your personal budget stretch a little further during your apartment search are to consider living with a roommate, meal planning, or finding an apartment where utilities are included. But the most useful thing you can do is to pay attention to your personal finances, understand your own limits, and staying on top of your monthly budget.