How Much Should You Spend on Rent

Rent is an unavoidable cost of living. Sure, you want to live in the best conditions possible, but you also need to pay the bills, pay for groceries, school, children… the list goes on. So what amount should you be spending on rent that is a reasonable amount for your specific financial situation? Here are some budgeting tips and things to consider when deciding how much rent is right for you.

Ignore the 30% rule. It’s variable.

You may be familiar with the recommendation that you should spend—at most—30% of your income on rent. However, this rule comes from 1969 public housing regulations that said rent could not exceed 25% of the tenant’s income because that was what most people were spending on rent on average.

Averages are not telling of what individuals are actually spending though, and maybe not even of what most people spend on rent—it’s just a middle ground. According to a 2015 study by Harvard University, most households that make less than $30,000 a year report spending more than 30% of their income on housing. Above an income of $40,000 per year, people tend to spend less and less of their income on housing, to percentages as low as 10% of their income.

So, take your individual circumstances into account to decide what amount is right to spend on your rent.

Use a Financial Calculator

Head to calculator.net to get a more in-depth look at what you can afford according to your income, lease term, asset value and interest rate.

Don’t Track Spending. Allocate Resources.

Tracking spending has been a popular method of budgeting for a long time, but it may not be helpful when it does not turn into money saved. Relieve the stress and anxiety of tracking and instead budget where you want your income to go based on how much you make. Once the money runs out, it is gone until the next payday. This way, each box that you want to drop money into gets its share and you don’t end up spending it all in one place.

That being said, tracking spending can be useful when you first begin budgeting as it lets you know where your money is currently going. Use money tracking apps to tell figure out your current spending habits, and decide from there if you need to make changes.

50/30/20 Budget

If you still like rules such as the 30% rule, try the 50/30/20 budget instead. This budget recommends that of your income:

  • 50% goes towards necessities like rent, groceries and bills.
  • 30% goes to entertainment.
  • 20% goes towards savings, such as for retirement, emergency savings funds, future financial goals, and debts.

Be Strategic

Depending on your individual situation and needs, what you are willing to spend on rent will change. In big cities, it isn’t uncommon for people to spend up to 50% of their income on housing, but they save in areas such as not having a car and being close to affordable food and entertainment options. Being willing and able to add a roommate also curbs some rent costs.