How Much Should I Spend on Rent?

SHORT ANSWER: Experts recommend not spending more than 30% of your gross income on rent. Here’s whether that might be affordable for you.

Before you start shopping for a new living arrangement, you need to ask yourself, how much should I spend on rent? Whether you’re seeking an apartment, condo, home or short-term rental, you’ll need to start the process with a budget in mind. Experts recommend a variety of calculation methods to aid in calculating the ideal rent amount. Here’s a look at various methods for finding your affordable rent value.

What Percentage of Income Should Go to Rent?

When questioning how much rent can you afford, you’ll need to take a hard look at your income, budget and goals. Financial experts recommend these calculations to help you get started.

The 30% Rule

One way of determining how much to spend on rent is to calculate 30% of your gross pay. Gross pay is all income before taxes, benefits and retirement contributions. That means the number on your paycheck before any deductions. 

For example, a person making $60,000 per year can spend $18,000 per year on rent or $1,500 per month. Depending on where you live, this might not provide enough to find a decent renting situation. In other areas, it will provide a comfortable living situation.

Some people cannot afford 30% of their gross pay on rent based on existing commitments, such as existing loans, credit card payments, child support or alimony. In that case, calculating 30% of your net pay, or take-home pay might be more realistic.

Ultimately, affordability will vary based on your specific living situation and existing financial commitments.

The 50/30/20 Rule

Another way of calculating how much to spend on rent is to use the 50/30/20 rule. This calculation is based on spending 50% of your after-tax income on needs, 20% on savings or debt payments and 30% on items you want.

This calculation can help provide a more realistic budgeting goal for rent because it considers all living expenses, such as added expenses for utilities, garbage removal and groceries. With a more holistic view of finances, you’ll start with everything you must spend and then know what you have left over for fun or entertainment expenses. That way, you start with the most important items and find what you can spend on fun things, like streaming services.

It also offers more flexibility for you to decide what a necessary expense is. For example, some people might find that internet service is an essential budgetary item while others see it as a nice-to-have since they spend little time at home and can use their cell phone plan instead.

How Much Should You Spend on Rent?

Just how much should you spend on rent? It depends. Prices in your area will dictate your needs somewhat as will how many bedrooms you need and how much you have in other expenses. 

The U.S. Census Bureau found that the median gross rent for 2018-2022 was $1,268. But you’ll find that varies across geographic locations and how many bedrooms the unit includes. 

The national average rent as of the fourth quarter of 2023 for a one-bedroom was $1,149 and a two-bedroom was $1,317.

Based on the 30% rule, that means that you’d need to gross roughly $46,000 per year to afford the average one-bedroom rental price and $53,000 to afford a two-bedroom. Take a look at how that translates to the average after-tax income in these scenarios.

If you make $46,000, your take-home pay will be roughly $3,134 per month depending on where you live and your local tax rate as well as your portion of your employer-provided benefits.

If you’re spending $1,149 of that on rent, you’ll be left with $1,985. The average utilities cost for a one-bedroom apartment is $133 per month, leaving you with $1,852. Groceries cost an average of $415 per month, leaving you with $1,437 for all other commitments and wants, which should be fairly comfortable.

If you make $53,000, your take-home pay will be roughly $3,581 per month depending on your unique circumstances.

If you’re spending $1,317 of that on rent for a two-bedroom apartment, you’ll be left with $2,264. The average utilities cost for a two-bedroom apartment is $200 per month, leaving you with $2,064. Groceries cost an average of $415 per month, per person so depending on how many people you’re paying for, you’ll still be left with a decent amount of money to save and devote to your wants.

Other Factors to Consider When Deciding How Much Rent You Can Afford

Before signing a lease, consider these factors that will impact an affordable rent for you.

• Student loan payments: If you have a student loan, make sure you’re factoring it into your total monthly expenses.
• Car payment: Include all car payments in your monthly budget.
• Savings goals: You might have long-term or short-term goals for savings. Include that in your total budget to calculate a realistic rent that helps you achieve those goals.
• Distance to work and activities: You might want to spend a little more each month on rent to get you closer to work and common activities. That way, you spend less on gas each month and won’t feel pressured for time, which could mean the ability to take on overtime work or a side hustle to make your budget more realistic.
• Living expenses in your area: You can’t just read national averages for rent, groceries and utilities. Make sure to factor in your specific area to find what is reasonable to spend.
• Safety: Sometimes you need to pay more for rent to live in a safe area. Or you have to take a loss on an existing rental agreement because of a poor living situation. Those are extenuating circumstances, but safety is more important than meeting average rent expenses.
• Timeline: Shopping early will help ensure you don’t end up just taking any unit you can find. But if you are up against a deadline, consider that when evaluating reasonable rent expenses.

Tips to Make Rental Costs More Affordable

If you need a more affordable living situation, consider these tips for lowering your rental costs.

• Negotiate: Work with your landlord to find a reasonable expense per month for rent, especially if they are looking to raise fees upon renewal. You can also negotiate other bills, such as your cable, internet or phone plan. Make sure you’re getting the best electricity and gas rates by selecting a supplier with a good plan in your area.
• Talk to an agent about lowering insurance expenses: You don’t want to cheap out on insurance. However, different insurance companies use varying risk factors to determine your insurance expenses. Talk to an insurance agent about quoting various companies to find an affordable plan for you.
• Lower your grocery bill: You can do this by using coupons, making a list before you head to the store and swapping out expensive protein sources for less expensive ones, such as trading beef for chicken since it is significantly less per pound. Avoid buying too many extras, such as treats and premade food as much as possible to lower your grocery expenses.
• Find a roommate: Living with a roommate can lower your expenses significantly. That way, you can split rent and utilities for a lower overall bill.
• Move to a new complex with move-in deals: The hard part about always seeking move-in deals is that you’ll need to move annually or whenever the move-in special expires. Moving is not free as you’ll need to rent a vehicle and bring in some friends to finalize the process. But if you must move, looking for move-in specials is a good idea.

Building a Realistic Budget Starts with Living Expenses

Your living expenses will dictate your overall budget. How much you have left after paying living expenses will be a deciding factor in how much you can spend on wants in your budget and whether you can meet your savings goals. Find an affordable living situation for your needs and go from there with building out your budgets and tracking expenses.