How Much Should You Spend on Apartment Rent?
Moving out of your parents’ place and starting to live alone can be daunting. While being the in-charge of your life is very liberating, the challenge of finding an apartment to live in starts haunting you the moment you step foot outside of your parents’ home. One of the main challenges that are posed by independent life is managing finances. “How much should I spend on apartment rent?” is one of the first questions to pop up in your head once you start living alone. Initially, this whole new responsibility might feel overwhelming, but by using some techniques, you can control your expenditure while saving some money for future endeavors. One of the key monthly expenses you need to plan for is the apartment rent. If you end up spending too much money on your apartment rent, you may end up having no money left to use by the end of the month, or even worse, you may fall into debt. On the other hand, having a too little budget for apartment rent might get you into a small or desolate location that isolates you and reduces your quality of life. We have picked the most effective ones and made this highly curated list so that you do not have to spend your days stressing about how much you should spend on your apartment rent. Here’s how to figure out what to pay for your apartment rent:
Document Your Current Income & Expenses
One of the first and foremost things for a person trying to figure out how much money to spend on apartment rent is to know their spending habits and how much they can afford to pay for apartment rent based on their income. To determine the optimum amount of money to be spent on apartment rent, one must take into consideration the total current or expected living expenses such as gas, water, internet, and other utility bills, credit card bills, other expenses, debts, or loans, if there are any. You will be comparing your monthly income number to your monthly living & mandatory expense number in the next section of this article. Be mindful of all your expenses that you may be incurring, from subscription services like netflix and internet to car and property insurance and mobile bills. Creating a google sheet to track your monthly expenses and income can help you clearly identify how much is going out and coming in. While no exact number or law can be given with regard to how much an individual should spend on apartment rent as rents vary from place to place, we realize that people have different needs and demands when it comes to finding the perfect apartment. If you are somebody who only uses their apartment as a sleeping den at night and a shower room in the morning, spending the least amount of your income on rent with roommates would be your utmost priority. On the contrary, if you like to spend a calm and serene afternoon at their apartment with no sound of roommates while reading a classic novel, you may consider spending some money on a good apartment that provides you the comfort you hope for.
Don’t Spend More Than 30% on Rent (1/3rd your Income)
The thirty percent (30%) rule is regarded as a standard for figuring out how much should be spent on apartment rents. This rule encourages the renter to limit their expenditure on house rent to 30% of their total monthly income. This rule has been celebrated since the late 90s, making it one of the most popular rules for assessing the amount of money to be spent on house rent. By limiting your house rent expense by 30% of your total income in a month, you can spend the remaining 70% of the income for other mandatory and optional expenses. There is a good chance that you may even end up saving a good amount of money after dealing with all the expenses, and may even begin putting some into investments like stocks or bonds. It is true that the rule of 30% income as rent has been proven effective worldwide and thus gained popularity. However, strictly following this rule might not bring the same result for everybody. As a general rule, the 30% rule is an effective technique. Nevertheless, one should not shy away from renting a good apartment that fits their needs if the house rent accounts for 34% of their income instead of 30%. This general 30% rule of thumb is also important because usually apartments want to see at least 3 times monthly rent in income, meaning if rent is 3,000 you should be making 9,000 per month or more. If you can’t afford an area, consider somewhere further away, smaller, or with roommates. When calculating rent, also take into consideration if the location is paying or providing any services like utilities, internet, or gym access that you would otherwise be paying for going somewhere else.
Plan Your Budget Using The 50/30/20 Model
This is another widely accepted scale for making a budget, the 50/30/20, allocates 50% for needs, 30% for wants, and 20% for savings. The most advantageous feature of this scale is that it can be used to make the whole expenditure budget, whereas the 30% rule can be used as a guideline for how much to spend on apartment rent. This scale suggests that 50% of your income will be spent on all combined essential items. This gives a renter a bit of leniency in relation to determining how much they should be spending on apartment rent rather than imposing a rigid 30% rule. Following the 50/30/20 model, apartment tenants can allow themselves to pay more or less than 30% on house rent while making adjustments with respect to other essential payments, i.e., Utility bills, Credit card bills, Insurance, Food, Loans, etc. as long as the total needed expenses to live add up to 50%. The next 30% of your income shall be dedicated to recreational expenditure per this rule. After containing all of the necessary expenses with 50% of your income, this rule allows you to spend 30% of your income wherever you wish to spend it, on things that you like. The money that you spend going out with friends, expensive meals, parties, buying lipsticks, nicer car leases/loans, or buying toys and games shall be within 30% of your income. The remaining 20% of the budget is for saving. Saving some money every month shall always be a priority, and if you have a lot saved already you can consider reallocating this for investing. There is no guarantee as to when people will need instant money as accidents do not give heads up before coming. Following the 50/30/20 rule assures that you have covered all your expenses while saving or investing a considerable chunk of your income every month.
Use Your Conscience and Judgment
Sometimes one of the best pieces of advice comes from within yourself. Hence, it is pertinent that you do not disregard what your wisdom and conscience tell you to. Rules and thresholds regarding how much you should spend on apartment rent are not set in stone. Rather, they are mere guidelines that may or may not succeed to satisfy your requirements. Therefore, taking inspiration from these rules is encouraged but keeping your eyes and ears open is a must. While deciding how much to spend on apartment rent, these rules can provide a general guideline and pave the way for arranging your budget.
You must also consider your long term life plans and ambitions. Are you planning to live and work in the same place, and so signing longer term contracts make sense to save money? Are you unsure you can keep your job or current living situation, and so would prefer a monthly option?
However, you should not rigidly follow these rules if it does not entertain the variables of your circumstances. If you are looking for an apartment in a city center where the resources the city has to offer is well within reach, and there is an abundance of opportunities in relation to work, education, trade, commerce, etc. it is quite obvious that you will have to pay comparatively higher rent compared to the houses in the suburbs. In such cases, even if your apartment rent does not fall within the widely accepted rules, but the apartment fits your purpose, you should simply flush the rules out of your head and listen to your better judgment. Nevertheless, make no mistake to think everything through before you commit to spending a considerable portion of your income on apartment rent. Make sure that you are not falling into debt after paying all of your bills.
Finding an apartment that checks all the boxes of requirements is tough, but finding an apartment that fits the budget is different. However, as the saying goes, “where there is a will, there is a way” there is always a way if you search for one. As mentioned, you can alter parameters like location, size, and number of roommates to drastically change the cost of your rent. You can also consider applying for a new job to increase your income to be able to pay for more rent. Apart from the tricks entailed in the preceding paragraphs, one thing needs to be kept in mind- whether you are trying to decide how much money to spend on apartment rent or to make a budget that accounts for all your expenditure effectively. That one thing is to remember to always put more emphasis on saving money. Keep away from your urge to waste money on fancy stuff like cars and premium food and save as much money as possible. Obviously, this does not mean you will not spend your money on any of your desired items. Just make sure that you are saving some money at the end of each month, and more importantly, you are not incurring any debt. Along with the other techniques, finding your dream apartment within your budget shall be nothing short of a breeze if you can convince yourself to follow this final advice.