How much rent can you afford? It depends on your budget. Use a rent calculator to make it easier to figure it out. Spending the right amount of money on rent is one of the most important financial decisions you will make.
This is a hard topic to write about because housing is such a complicated topic in the US. On the one hand, housing costs have gone up tremendously in many places but on the other hand, spending too much on housing is a big financial problem for many people.
Many of the people in real life who I speak to have a housing problem. They want to cut their budget but the biggest expense that they have is housing costs. Sometimes extraordinarily so.
The experts will tell you not to spend more than 40% of our income on housing, and ideally around 30%. I, for one, spend more than that. We spend around 50% of our budget on housing (I know- it’s crazy. Not every decision is about the money and this one certainly isn’t). Dave Ramsey suggests 25% which would be great (let me know how you make that happen!).
So how much should you spend on rent?
Ideally, you should figure this out BEFORE you go shopping for apartments. Having a good target in mind will help you filter out apartments or houses that will not work for you or will greatly strain your finances.
One of the best ways (yet certainly not the simplest) to start cutting expenses and start saving money is to save money on housing. If you can cut that expense then you will be able to start saving so much more money. Although it may be painful or difficult at first it is so much less draining than constantly having to cut small luxuries that make your life easier. If you can get a reasonably priced apartment or house early on in your financial journey you will be so much better off down the road.
How do you know how much rent you can afford?
With a budget! Yes, I know I say this a lot but having a budget is the most crucial tool you need to be able to figure out how much you can and should spend on ANYTHING- especially something as important as housing.
- Make a list of all your expenses.
(look online and ask around to find out what utility averages in your area are)
2. Make a list of all your income.
3. Use a rent calculator
After you have all this information hop on over to Zumper where they have a rent calculator that will help you figure out how much you can afford to spend on rent.
Zumper is a cool website that has rental listings that are easy to apply for using their digital application process. They also have a rent calculator which can help you figure out how much rent you can afford.
We have been renters for years and I know first-hand how hard it is to find a good place to live that is within your budget. However, it is so incredibly important to make sure your rent is in the range of what you can afford. So many people make the mistake of splurging on their rent only to discover that they can’t afford it.
There are also a lot of other living expenses that can come with pricier apartments or houses that you should keep in mind. Bigger places cost more to heat or cool. Bigger places can sometimes be harder to manage without cleaning help. If you damage a more expensive apartment that you will have more to pay in damage costs. These are all factors that you should keep in mind when you are looking t figure out how much rent you can afford.
This is some advice I would like to give to college students, young people, newlyweds, and others who are just starting out: it is so much harder to downsize or move once you are used to something. Before you get used to a bigger or nicer place please consider finding something that is well within or under your budget. you can always move up but it will be so much harder to move down. Take these years and use them to keep yourself financially stable and hopefully put away money and start investing in your financial future. It is OK to have the smallest place of all your peers. You will be grateful that you did this later on.
Be responsible and sacrificing now so you can be happier later.
There is so much information available to help you figure out how much rent you can afford and how much you can spend on housing. Use them! Use the rent calculator. Use the budgeting tools. Make sure you are making an educated decision because this is one of the biggest financial decisions you will make (and will have very large ramifications on your financial future.).
Are you already settled in a home?
you can still use the rent calculator to see if you are on target for your rent expenses. Don’t forget that you can’t fix something when you don’t know if there is a problem. Take the time to sit down and figure out if your housing expenses are too high or just right. Having this information can help you decide if there are changes that need to be made. When you know what is wrong you will be able to change it: you can close the gap when you know how big the gap is. Knowledge is key. Once you have the knowledge then you can use saving strategies to afford anything.