Are you paying too much for rent? How would you know if you were? According to the US Census Bureau, 25% -30% of your gross income is an ideal amount to budget toward rent. In addition to rent, remember to factor in another 3-4% for housing expenses, like utility costs. When setting your budget for a new place, be sure to follow these tips to prevent overspending.
Calculate How Much to Spend on Rent
Step 1: Evaluate your total income. If you have a roommate, combine your incomes together and follow the same process. (Although if you fear you might not want to live with a roommate forever, perhaps budgeting on one salary can be beneficial.)
Step 2: If you choose to spend 25% of your income on rent and utilities, multiply the gross income by 0.25.
Step 3: Divide the total amount from Step 2 by 12 months, and you will have the recommended maximum amount to spend on rent and utilities.
Example: (The following income rates are from the 2013 average starting salaries for recent graduates via CNN Money.)
|
No Roommate |
You & Roommate |
|
| Step 1 | Income: $44,000 /yr | Combined Income: $37,000 + $61,000 = $98,000 /yr |
| Step 2 | $44,000 x 0.25 = $11,000 / yr | $98,000 x 0.25 = $24,500/yr |
| Step 3 | $11,000 / 12 months = $917/month | $24,500 /12 months = $2042 /mo |
If you plan to spend only 25% of your gross income, and are making $44,000 a year without a roommate, it is recommended that you spend no more than $917 on rent and utilities.
If you budget 25% of your income toward rent and utilities, and make a combined income of $98,000 with a roommate, it is recommended that you spend no more than $1021 for your portion, if rooms are equal.
It is our hope that these tips help you avoid overspending on rent during your next apartment hunt. To find reasonably priced apartments in your area, visit ForRent.com. For more ways to save money on rent, be sure to browse the Apartment Living blog for great ideas!