Figuring out how much you should spend on rent can feel like a crossroad. On one path, there's the amazing apartment you've always dreamed of. On the other path, there's the reality of your financial responsibilities.
Whether you're a young adult stepping out on your own for the first time, or someone looking to adjust your housing costs to better fit your financial situation, this guide will help you answer how much of your income should go to rent.
Get that dream apartment with the help of a high-paying job—check out these amazing opportunities on The Muse and get closer to your financial goals »
So how much should I spend on rent?
Deciding how much to spend on rent involves several approaches and considerations. While there are many personal factors that factor into the decision, such as your income, location, and personal financial goals, there is a rule of thumb that financial experts adhere to.
The most common guideline is the 30% rule, but it's not a one-size-fits-all solution. “Think of it as a possible starting point and not a rule that is set in stone,” says finance expert Ryan Carrigan, CEO of moveBuddha, a technology company that helps people relocate.
Using the 30% rule to calculate your ideal rent price
The 30% rule suggests that you shouldn't spend more than 30% of your gross monthly income on rent. It's a widely accepted standard because it helps ensure you have enough leftover budget for other living expenses and savings.
For example: If your gross monthly income is $4,000, you should aim to spend no more than $1,200 on rent. This rule provides a solid starting point for budgeting and can help you avoid overspending on housing.
The 30% rule also comes hand in hand with the 50/30/20 rule, which proposes that 50% of your gross monthly income should go towards fixed expenses, 30% should represent your variable personal wants, and 20% should be invested towards your savings goal.
Exceptions to the 30% rule
While the 30% rule is helpful, it's not always practical for everyone. Think of it as a good point of reference to start. Various factors can influence whether you should spend more or less than 30% of your gross monthly income on rent:
Areas with a higher cost of living
The 30% strategy won't match the reality of the real estate industry in some cities. Good luck sticking to the 30% rule in cities with a high cost of living, such as New York and San Francisco.
You'll also find a major difference between different areas in the same town: “City centers are typically more expensive than say suburban areas, so you will have to consider the amount you are comfortable with, as well as your commute to the office,” Carrigan says.
Low income
If you have a low income, spending 30% on rent might not leave enough for other essential expenses. In this case, we suggest finding more affordable housing options, such as living with roommates or moving to a less expensive area.
Personal financial goals
Your financial goals are crucial in determining your rent budget. Whether you're saving for a down payment on a house, paying off debt, or building an emergency fund, you might need to allocate less to rent to achieve these goals.
Having high debt will also limit your possibilities. “Be honest about your debt and take everything into consideration from student loans to car repayments”, Carrigan says.
Follow these steps to figure out your ideal monthly rent
Determining the right amount to spend on rent requires careful consideration of various factors. Here’s a step-by-step guide to help you make an informed decision.
1. Calculate your monthly income
Start by calculating your gross monthly income from all sources. This will give you a clear picture of your earnings and help you set a realistic rent budget.
2. Factor in transportation costs
Consider your transportation costs when choosing a place to live. Sometimes, living farther from work to find cheaper rent can increase your commuting expenses, offsetting any saving goals.
3. Include utilities in your budget
Rent isn’t your only housing expense. Make sure to factor in utilities, internet, and other monthly costs when budgeting for rent. Don't forget to include moving expenses in the first month's budget.
4. Set your savings goals
Ensure your rent budget allows you to meet your savings goals. Even if you can't follow exactly the 50/30/20 rule at the moment, it's important to put part of your income aside towards building an emergency fund, saving for retirement, or planning a vacation. Ideally, your rent payments shouldn't get in the way of your saving goals.
5. Evaluate your lifestyle
When creating a budget, it's crucial to consider your lifestyle and spending habits. If you still don't know how much money you spend each month on non-essential activities, it's time to come face-to-face with your finances.
No shame here! If you enjoy dining out, shopping, and traveling, that’s OK—just make sure your rent budget leaves room for these expenses. On the other hand, you can opt to cut out some of these non-essential costs to afford to pay a higher rent price and move into your dream home.
Some people may prefer to pay for a simpler apartment but have more money to go to a restaurant or movie every weekend. Others may prefer to pay for an apartment that is perhaps more spacious or located in a better neighborhood, allowing them to save money on public transportation or spend their free time at home. There is no wrong way to live—it’s a matter of recognizing your preference and budgeting accordingly.
Bonus tips to lower your rent price
If you're finding it hard to afford rent, know you're not alone. Research shows that rent costs grow faster than wages across the U.S. Here are some practical personal finance tips to help you cut costs:
Get a roommate
Living with roommates can significantly reduce your rent and utility costs. It’s a great way to afford a nicer place and save more money.
Negotiate rent
Don’t be afraid to negotiate rent with your landlord. They might be willing to lower the rent or include some utilities to keep a good tenant. “If you have a history of on-time payments then don’t be afraid to negotiate the rent with your landlord, you might be surprised,” Carrigan says. Also, consider if a rent freeze for long-term leases is a possibility.
Consider location
Look for housing in less trendy or up-and-coming neighborhoods. These areas often have lower rent prices but can still be convenient and safe.
Downsize
Consider moving to a smaller apartment or renting a room in a shared house. Smaller spaces come with lower rent and utility costs.
FAQs about rental costs
How much disposable income should I have?
Aim to have at least 20-30% of your income as disposable income after paying for rent and other necessities. This ensures you have enough for savings and discretionary spending.
How much is rent in the U.S. per month?
According to 2024 data by RentCafe, $1,713 is the average rent for an apartment in the U.S., including all locations and sizes. Sixty-two percent of renters pay between $1,000-$2,000 for housing.
If I make $53,000 a year how much rent can I afford?
If you make $53,000 a year, your gross monthly income is likely about $4,417. Following the 30% rule, you should aim to spend no more than $1,325 on rent.
What percentage of income should go to rent and utilities?
Generally, aim to spend about 30% of your gross income on rent. Utilities and other housing costs should ideally fit within this budget or add an additional 5-10%.
How much do you need to make to afford $1,500 rent?
Assuming you stick to the 30% rule, your gross monthly income should be at least $5,000 to afford $1,500 rent.
How much rent can I afford making $18 an hour?
If you work 4 hours per week for $18 an hour, your gross monthly income is about $3,120. Following the 30% rule, you should aim to spend no more than $936 on rent.
The bottom line
Determining how much you should spend on rent involves considering your income, expenses, and financial goals. The 30% rule is a good starting point, but it’s essential to tailor your budget to your personal situation. By carefully planning and considering all factors, you can find a rent amount that works for you and supports your financial well-being.
Good luck on your housing hunt, and know you can count on The Muse to help you navigate the job market and achieve your financial goals!