How much rent can I afford?

Finding a place to live and rent can take time. But before you begin your home search and start to pack, it’s a good idea to figure out how much rent you can afford.

If you’re not sure how much of your budget should go to rent, read on for some useful tips.

Key takeaways

• You can use the 50/30/20 rule or the 30% rule to figure out how much to spend on rent.
• Basing your rental estimate on your net income—rather than gross income—can help you stick to a more conservative budget.
• It’s important to factor in discretionary spending and essentials, like debt payments, when determining your final budget.

If you’re looking for help deciding what percentage of your income should go to rent, you could consult one of two budgeting approaches: the 50/30/20 rule or the 30% rule.

The 50/30/20 budget rule

The 50/30/20 rule is an approach that may be helpful when determining how much rent you can afford. 

This budgeting approach suggests that you spend about 50% of your monthly income on necessities like rent, utilities and groceries. Then 30% is for discretionary income you can put toward nonessentials. And the remaining 20% goes toward debt, savings and investing for short- and long-term financial goals. 

Some people base the 50/30/20 rule on their gross income. But for a more realistic estimate, it may be useful to look at your net income—or take-home, after-tax pay—to determine how much rent you can afford.

For example, let’s say you’d like to move from your current apartment to a bigger place across town. You make $75,000 a year after taxes. This means you take home about $6,250 per month. According to the 50/30/20 rule, you’d want to spend about $3,125—50% of your after-tax monthly income—on essentials per month.

Let’s say you spend about $400 on groceries and anticipate spending $250 on transportation every month once you move. You also anticipate paying $400 for utilities and internet per month. When you subtract $1,050—the total of these essentials—from $3,125, you get a rental budget of $2,075 per month. 

The 30% rule

This method says that you should spend no more than 30% of your monthly take-home income on rent. If you follow the 30% rule for the scenario above, that would be 30% of $6,250, which is $1,875. It’s a little more conservative than the budget using the 50/30/20 rule, but it’s in a similar range.

Regardless of which method you choose as a starting point to figure out your budget for rent, it’s important to make sure you can afford the rest of your monthly expenses. Consider your monthly bills, and have an understanding of your discretionary spending. It may also be useful to think about any savings you might want to put away for unexpected expenses.

If you’re moving across cities or states, it may be worth calculating how much more or less you think you’ll need to spend in these areas, as some cities are known to be more affordable than others. Your current budget in Detroit or Pittsburgh may not get you as far in New York City or San Francisco.

Here are some categories that might be important to consider as you calculate your rent budget:

• Debt: You might have student loans, a car loan, credit cards or other forms of debt. It’s a good idea to make sure you can stay on top of your debt payments with your new rent budget. Otherwise, it could affect your credit scores.
• Transportation costs: If you own a car or have a car payment, you can include these here. If you take public transportation, use ride-share services or fly regularly, these also can be useful costs to add.
• Renters insurance: Some landlords require you to purchase renters insurance. Or you might want to purchase it on your own for peace of mind. This type of insurance can cover your personal belongings if they’re stolen or damaged while you’re renting. 
• Moving expenses: There may be move-out fees at your old place or move-in fees, a security deposit, and the first and last months’ rent due at your new one. You also might need to budget for a rental truck or van and anything else you need to physically make your move, like gas and shipping.

If you can’t afford rent in your area, there are some options to consider, depending on your situation:

• Look for move-in specials.
• Negotiate a discount on monthly rent by signing a longer lease agreement.
• Move during the winter months if you can. Rent is often cheaper, since fewer people move in the winter.
• Move in with roommates to split the cost of living.
• Research rental assistance or voucher programs.

Both the 30% method and the 50/30/20 rule can be helpful tools when figuring out how much to budget for rent. But the actual rent you can afford will depend entirely on your situation and financial goals. 

When you nail down your budget, you might want to make sure your credit score is in good shape so you can get approved for your dream apartment. Landlords or property managers may run credit checks when you apply for a lease. If your score isn’t where you’d like it to be, learn more about how to improve your credit score so you can be prepared for your future move.