Before you begin looking on Craigslist or Zillow for options to rent, consider how much you can spend on the rent. Here are some ways to calculate that.
What you can afford will depend on your income and other expenses such as student loan repayments and food items.
How much do you need to pay for rentals?
Test the 30 percent rule
One common principle is the 30percent rule that says you should pay around 30 percent of your total salary on rent. For example, if you earn $2800 per month after taxes, you’ll need to spend about 840 dollars per month for rent.
It’s a reliable guideline, but it’s not universally applicable.
If, for example, you reside in a low-cost region, you shouldn’t have the chance to rent an apartment for $500 per month simply because it’s just 17% of the earnings. However, keeping to 30% of your rent can be difficult in Hoboken and San Francisco, where median rents can reach $2,000 per month for a one-bedroom unit, as per recent statistics from List of Apartments. List.
Incorporate rent into your budget using the rule of 50/30/20
You could also apply the 50/30/20 plan as a reference to determine how much you can afford on rent. This strategy allocates your home salary (after taxation) at 50% to necessities and 30% for wants, and 20% for savings and any additional repayments on debt.
Also, if you earn $2,800 per month after tax, You’d divide your pay in the following manner:
- $1,400 for necessities like groceries, rent, utility insurance, and the minimum amount of debt.
- $840 for things such as shopping or happy hour and concerts.
- $560 savings as well as additional debt payment.
Determine what you afford to pay for a rental
Let’s go with the $2,800 monthly figure. If you’re a homeowner with many costs in the need category, the budget for rent may be pretty limited. Take this as an example:
- $280 per month installment of student loans.
- $360 monthly car payment.
- $135 monthly car insurance.
- $100 monthly grocery bill.
The total cost is monthly, which leaves only $525 a month for rental and utility costs. It could mean you have many choices in areas such as Odessa, Texas, where the median rent for a single-bedroom apartment is $503. However, you’d find it challenging to find the perfect spot in Cincinnati, Ohio, where the median cost for a single-bedroom apartment was $676 per month, according to the Apartment List.
Costs associated with other factors
Your location can affect all aspects of life, from how you commute to your exercise routine. Add on additional expenses (or savings) that you may incur based on the type of rental you select.
Living in a location that is further from the city’s central hub, For instance, can be less costly. However, you can spend hundreds every month on transportation expenses to travel to work and back and to social events.
Some rentals come with utilities like water and gas and include a gym on the premises or a washer and dryer within the unit. Include these amenities when comparing costs for rental properties. A gym on-site is one example. The in-unit laundry is saving on time and money over coins as well as trips to the laundry. It could save the user $100 monthly or more than the cost of a gym membership.
Search for savings
If the amount you can afford does not match the rental market in your local area, Look for ways to save money elsewhere. It’s normal and sensible to focus on non-essential expenditures to free up some room within your budget. However, it’s not uncommon to find savings in your essential expenses.
- Utilities: Heating, water, and electricity are necessities; however, premium cable falls directly into the “wants” category. Cut down your cable package to save hundreds on your monthly cable bill. Cut the cord entirely and get an antenna for your digital device for a low cost to access local channels.
- Insurance Compare the rates of car insurance to get the best price. A 2017 NerdWallet analysis revealed that smart drivers might have missed out on savings of $416.52 per year in the United States without comparing rates for insurance coverage on cars.
- Grocery shopping: get into a routine of taking note of your meal plans ahead and using coupons to maximize your budget for groceries.
- Rent: Living alone means paying the cost of rent and utilities by yourself. Instead, you can find an apartment with a roommate to share the price of a 2-bedroom. Do you want to find a less expensive alternative? Think about renting a room at the group home.
Last Thoughts
Do not neglect your savings to pay more for rent. In the future, you’ll be grateful for having made your emergency savings and retirement savings a top priority.
