How much should you spend on rent?

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As prices continue to increase due to inflation, it can be tough to know how much you should be spending on rent. Calculating what you can afford in housing expenses depends on multiple factors, and everyone’s financial situation is different. Therefore, before browsing rental listings, it's important to have a good sense of what you can reasonably afford considering your specific financial situation.

You can use a rent calculator as a place to start. You'll input income, expenses and savings, which will allow you to compare rental prices against your monthly budget. Additionally, the following guidelines can also help you determine how much you should be spending on rent. While these can serve as good general guidelines, determining what’s affordable will be different for everyone. 

The 30% rule

The standard rule of thumb when determining how much rent you can afford is the 30% rule. This rule states that 30% of your gross monthly income should be spent on housing costs. Typically this rule has been used by mortgage lenders to determine loan qualification, and if you’ve applied for an apartment recently, you’ll know many landlords require you to earn three times the monthly rent at least. It’s a good threshold to remain under when determining how much to spend on rent. 

However, this doesn’t mean that spending 30% of your income on rent makes sense for everyone. For instance, you may have hefty student debts to pay off every month, tightening your rental budget. On the other hand, you may live in a city where rent and cost of living are higher than average, pushing you above the 30% threshold. Just make sure your savings goals aren't negatively impacted by what you decide you can afford.

The 50/30/20 rule 

Another option to determine what you should spend on rent is to try the 50/30/20 rule. It’s a way to budget which splits your monthly after-taxes income into three major categories.  

50% of your income will be allocated towards necessities. These are expenses that can’t be avoided or cut out of a budget, including

  • Housing
  • Utilities
  • Food
  • Transportation
  • Child Care
  • Insurance

30% of your income should be budgeted towards wants. Basically, any non-essential purchases will fall in this category, such as 

  • Subscription services, like Hulu or Netflix
  • Vacations
  • Dining out
  • Entertainment
  • Unnecessary shopping

Finally, the last 20% of your income should go towards savings or paying down debt. This section also includes retirement and emergency fund contributions, as well as investments.

Here’s how this budget breaks down. 

For example, say you bring home $4,000 a month. $2,000 will go towards necessities, which includes rental payments. $1,200 will be budgeted toward wants, and you'll have $800 left to pay off debt, invest or save. From here, you'll be able to see how much rent you can afford, taking into consideration other necessary expenses, in order to stay below the $2,000 threshold.

Again, this is a good guideline for budgeting, but not all individuals will be able to use this exact method. Maybe you have a lot of expenses to pay each month, which eats away at your budget. In this case, you'll have to adjust this plan to work for you.

Other costs

When determining how much rent you can afford, keep in mind additional costs that come with renting a new place. You'll need to have enough to cover move-in and move-out fees, which can vary depending on where you stay. This also includes any security deposits that need to be put down before moving in, which usually wind up equaling one month's rent. Some apartments have application, pet and parking fees as well.

Taking into account utility payments is important as well, as these will increase your monthly expenses. Utilities can include electric, water, garbage pickup and internet payments. 

Erin Bendig
Staff writer, personal finance

Erin pairs personal experience with research and is passionate about sharing personal finance advice with others. Previously, she was a freelancer focusing on the credit card side of finance, but has branched out since then to cover other aspects of personal finance. Erin is well-versed in traditional media with reporting, interviewing and research, as well as using graphic design and video and audio storytelling to share with her readers.