How Much Rent Can I Afford? [Free Calculator]

monthly expenses

How much rent can I afford? This question continues to be a common topic of discussion among renters especially as housing prices continue to climb. The answer depends on several factors such as location, size of the apartment, number of roommates, etc.

A recent real estate market analysis shows rent prices vary from city to city. For example, San Francisco rents average $3,244 per month, whereas New York City rents average $3,095 per month. As a result, renters often wonder whether they can afford to live in their current home or should move into a smaller place.

To determine how much rent you can afford, you should consider your income, expenses, savings, and credit score. If you want to save some cash, you can also look at other housing options, such as renting out a room or moving in with friends or family members.

The Steps To Determining How Much Rent Can I Afford

During these current times of the economy, there are many questions about basic survival needs. Mostly with many changes to the monthly income status of people across the nation. There is a need to have a plan if you find yourself in a position of financial growth or challenges.

We will analyze the multiple categories to your total cost of living, and the most expensive will be the cost of keeping a roof over your head.

Renting vs. Buying

A common question with housing is will it be better to rent an apartment or buy a house. It can be a challenging question because there are two main factors. First, you will need to know your income compared to the cost of the average rent or mortgage in your area. How much you make will determine what part of your city you’ll begin your search.

Keep in mind if you can only afford the lower end of the average rent or mortgage, that could potentially put you in areas with higher crime or less than favorable living conditions. These conditions could cost you incalculable liabilities. Subsequently, this could end up costing you more staying in a cheaper area than an area that may be a little more expensive.

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    Saving Up For A Down Payment

    First, I want to highlight how important it is to establish good money management habits. Your current spending habits will determine if your financial situation changes for the better or worse. Housing costs usually take up most of the money you would have designated for essentials, especially if you live in an expensive city.

    In either situation of buying a house or renting, you will need to provide a down payment of five to ten percent or first and last month’s rent if you’re renting an apartment. In most cases, part or all of the first and last month’s rent is a security deposit. A good rule of thumb is to establish a reasonable budget to help you come up with the extra cash.

    If you need help putting together a monthly budget from scratch, I have a post here that will help you out.

    What Is The 50-20-30 Budget Rule?

    50 30 20 budget explained to understand how much rent can I afford

    Establishing a budget can be challenging if it’s your first time. First, you will have to identify some guidelines that will allow you to create good habits. The 50-20-30 budget rule is a tool for organizing your monthly expenses to get the most out of your annual salary.

    • The 20 in the budget rule represents 20% out of each paycheck for savings or debt.
    • The 50 is vital because this is the 50% for essentials. Your rent is a part of the other housing cost like the cost of utilities in this 50%.
    • The 30 is the 30% that falls under everything else.

    Using this method is a way to establish affordable rent for your current financial position.

    I have a more in-depth article here about the 50/30/20 budget rule and how to use it for your own finances.

    Should I Use Gross Income Or Net Income To Calculate How Much Rent I Can Afford?

    According to most financial advisors, you should calculate how much rent you can afford using your net income. Net income is the income that you receive after taxes. To keep it simple, the net income is the money you see in your paycheck each month.

    Gross income should not be used because you may have a hefty amount of deductions and pre-tax income coming out which can significantly reduce the amount of your take-home cash. Keeping these numbers in mind will prevent you from spending most of your salary on rent. 

    How Much Rent Is Too Much Per Month?

    how much rent is too much

    It may be tempting to splurge on a rental property to be in the best environment or living conditions, but there is a danger with not setting a realistic limitation. You can easily find yourself in a lavish apartment with no furniture and very little money for any other expenses. 

    If you’re spending more than 30% of your income on housing costs, you are putting yourself in a position to struggle financially. Your rent-to-income ratio should remain as low as possible while still maintaining a reasonable quality of life.

    The use of public transportation may not be uncommon in the city you choose to live in, but you don’t want to be in a situation where you can barely afford it. A worst-case scenario is you reach a point where you can’t afford monthly rent because of an unexpected life situation making it harder to recover.

    In addition to the immediate challenge, this will cause late payments to show on your credit history or, even worse, an eviction. A bad credit score will make it very difficult when apartment hunting since this is a part of determining if you will be approved or not.

    Too much rent is an amount that would be impossible to recover from if you couldn’t make two or three payments. 

    Use A Rent Affordability Calculator

    Another way to avoid spending too much of your income on rent is to use a rent affordability calculator to find the sweet spot for your monthly income. In addition, this is also what renters and real estate agents use to establish if what you’re looking for will fit in your monthly budget. 

    Click the image below to use my free 50/30/20 calculator:

    free 50/30/20 calculator

    This website also has an easy-to-use rent affordability calculator you can use.

    How Does A Rent Affordability Calculator Work?

    An affordability calculator is a tool that mathematically gives you your financial options when determining what you want to pay a month in rent. The calculation uses your monthly gross income and multiplies it by 20%, 30%, or 40% giving you three options that range from thrifty to splurging. These three situations give you an idea of what you could expect with quality of life.

    The thrifty approach gives you the ability to spend more of your income on non-essentials but also gives you the ability to have a more aggressive savings plan. With an aggressive savings plan, you can build up funds for an unexpected event like the worldwide challenges we’ve faced for the last few years.

    It’s vital to have an emergency fund before building money to invest in a home or rental property. Spending a few years sticking to a monthly rent budget could put you in a position when the housing market changes. If you take the time to build your credit and your money before houses drop in price, you may be able to get a home and pay less on your mortgage than you do in rent.

    When Is It A Good Idea To Rent Versus Buy?

    There are times when it may be a better idea for you to rent than buy a home. In general, if you have a job that requires you to move frequently, like the military or sales, renting may be the best option. There wouldn’t be much time to go through the process of selling or closing on a house. Even if you were to buy a condo, you would have to deal with selling it if you needed to move on short notice. 

    Also, it may be too expensive to purchase a home if you don’t have the money down or credit that’s good enough to give you a reasonable interest rate for a loan. Being a homeowner comes with extra costs and unexpected housing expenses 

    Additionally, the reduced cost of rent may work better for your monthly income if you’re starting a career.

    The Advantages Of Renting

    advantage of renting

    The advantages of renting are you can stay flexible if you don’t know how long you’re going to be in a city or want to be in a smaller space like a one-bedroom apartment. If you choose a smaller space like a one-bedroom or studio apartment, your rent payment could be much lower than a mortgage. There is also the ability to acquire renters insurance which can be competitively cheaper than homeowners insurance. Living in a smaller place can reduce other things like your utility costs.

    Reducing other bills can help you save money and make it easier to build an emergency fund which is necessary to protect you from unexpected financial issues. 

    In addition, you have to consider the number of things you would need to move. If you rent a smaller place, you won’t accumulate as much stuff, and it won’t cost as much to move. 

    Keep Looking To Find A Cheaper Location

    Since the world has seen so many drastic changes to the economy of many different areas, the most important thing is to put yourself in a financial situation where it will be easier to handle life’s unexpected challenges. 

    Using this approach reduces the additional costs of renting, keeping you more flexible. These additional costs like electricity or your other utilities can take away from money for investments in a more stable and secure future.

    Never forget that the goal of finding a cheaper location is so you can afford something better later. Additionally, there may be some locations that have amenities that make your utility costs less expensive such as electricity or gas being included in your rent. 

    How To Set Up A Monthly Rent Budget

    Any time you set up financial guidelines to create a consistent routine, you have to have a clear picture of what you’re dealing with to make an effective plan.

    For example, before making a monthly rent budget, you have to know what other bills you have. If you have things like a gym membership that you make payments on every month, you may need to put that in a separate financial location to keep from affecting the money on rent.

    A monthly budget will consist of needs and wants and give you a clear picture of where your money goes each month. If you need help, you can pick up my free budget template below.

    budgetfreebiewatermark How Much Rent Can I Afford? [Free Calculator]

    Some people use credit cards to pay most of their other smaller bills since they may be due at different times of the month, and the credit card is usually due at the same time as the rent. Using this method can also help improve your credit by paying the credit card balance every month.

    If you get your rent total through multiple paychecks throughout the month, you could also move a portion of each check that month to your savings account, so at the end of the month, you have your total rent.

    Dividing these portions by the number of paychecks your receive and the total amount of rent you pay will tell you what you need to put in your savings or separate account.

    If you need help setting up a budget, check out my article here that walks you step by step on how to start a monthly budget from scratch.

    What Can I Do To Afford My Monthly Rent?

    There are a few things you can do to make sure that you can afford your monthly rent that we list below. Some of the most effective strategies involve creating a realistic budget to allow you to still have money left over at the end of the month. 

    The pandemic has caused many people to find themselves in this situation. Being more mindful of the resources you use can identify funds for rent and help you cut down on unnecessary expenses. 

    1. Rent A Room

    There have always been creative ways to save on the cost of living. There are some cases in certain cities where you can save a lot of money by renting a room. The rent prices for renting a room can be lower than a studio apartment making it an attractive option for people living paycheck to paycheck.

    By renting a room, you can significantly reduce the monthly payment you are responsible for. If you split utilities, by sharing the bills, your utilities will be a fraction of the costs you would have living in an apartment or house by yourself.

    Depending on how disciplined you are and how much you make, it wouldn’t take that much time to save up and put yourself in a more luxurious situation. You could use different traditional outlets to find ads for available room rentals.

    2. Get Roommates

    Instead of renting a single room, you can get several roommates. It may be easier to get roommates now since many people are struggling to afford the climbing housing costs. You could consider friends or classmates that are starting careers in the same city as you.

    As an added benefit, with roommates, you have reduced utilities and a possibility of someone you could carpool with if you work in the same area which will significantly reduce transportation costs.

    3. Start A Side Hustle

    If you’re able to reduce your cost of living with other methods, you can further level up your financial position by increasing your income at the same time with a side hustle. A side hustle is any job or hobby you can do on the side that can bring in additional cash flow to help you pay for day-to-day expenses, pay down credit card debt, or start saving up for a house.

    In addition, with the increase of technology, there are many outlets to monetize skill sets or provide services like Uber or Fiverr that are flexible enough to do in your spare time.

    4. Get A Higher-Paying Job

    Most jobs have a scale of progression or promotion as you continue your time with the company. Therefore, when you consider looking for a higher-paying job, keep in mind the experience and potential progression with the current employment you may currently have if it’s in line with your career goals.

    How Much Should I Budget For Monthly Utilities In My Apartment?

    how much rent can i afford budget

    When it comes to the cost of your utilities, you have to consider that this can be different depending on the living situation and the area you may be living in. You could end up spending about 20-30% of your income on utilities in a worst-case scenario.

    For example, in Arizona during the summer, the hidden costs with electricity to power your air conditioning unit can easily reach $300 – $400 a month!

    Even if your utilities currently it’s on the lower end of this, you can use this as an opportunity to get used to paying more by budgeting a higher amount for utilities. This will allow you to save up the extra you don’t move so you can later move into a more expensive place. Budget and live like you are poor to set yourself up in the future. 

    What Percentage Of My Income Should Go To Rent?

    On average, you should expect around 25% – 30% of your income to go towards rent. If you have to pay much more than this percentage, you may want to consider finding a cheaper location or a place with less square footage.

    The positive is that if you make more money in a year or so – avoiding lifestyle creep and keeping your bills the same allows you to quickly save up to put a large down payment on a house. 

    The use of a rent calculator can help a lot. The calculation is of income to debt which gives you an idea of what you can spend on rent. 

    Should I Split Rent 50-50 With My Roommate?

    Ideally, it would make sense to split the rent 50-50 with a roommate if the situation is considerably close to the same split on living space and use of utilities. However, if you are in an arrangement where you or your roommate can only access 20% to 30% of the living space, you may want to consider a revised agreement on rent. 

    Frequently Asked Questions

    How much rent can I afford on a 30k salary?

    Statistically speaking, for the majority of the people reading this, you are probably in this range of income. This annual income gives you about $2,500 a month. If you cut that in half as a budget for essentials, you have $1,250.

    Take 70% of that, and you have $875 for rent. In most major cities, this doesn’t give you a lot to work with, but you know if you stay in this range, it’s less likely that you will end up in an unrecoverable financial situation if you run into any life financial obstacles. 

    How much rent can I afford on a 50k salary?

    If you are close to the average annual income, you will have about $4,165 a month. 50% of this would be $2,082 that you would have for essentials. Taking 70% of this gives you $1,457 to spend a month on rent. In most areas, you can have a comfortable lifestyle with this amount for rent. As you budget for your expenses, it’s good to consider expenses like pet deposits.

    How much rent can I afford on a 60k salary?

    With an annual income of 60k, you would receive $5,000 a month. Using 50% of this for essentials would make it $2,500. For example, if you use 70% of this for rent, you would have $1,750.

    How much rent can I afford on a 65k salary?

    If your annual income is 65k, you’ll receive $5,416 a month for pay. Budgeting for essentials at 50% will give you $2,708. When you separate %70 for rent, you will have $1,895. At this point, you may want to consider if setting a goal for buying a house could create more financial stability for you long term. 

    How much rent can I afford on a 100k salary?

    for essentials gives you $4,166. If you use 70% of the essentials for rent, you will have $2,916. Additionally, it might not be the best financial decision to pay this much money for rent. You could consider working with property management companies to gauge the rental market. With this information, you can use it in conjunction with your credit report to find a residential property that you may be able to use as an additional asset.