How Much of My Income Should Go Toward Rent?

Quick Answer

There are a few ways to ballpark how much you should spend on rent. The 30% rule says no more than 30% of your gross monthly income.The 50/30/20 rule says to allocate 50% of your income to necessary expenses, including rent. But you may need to apply a more holistic approach to reach a number you are comfortable with.

Young woman using laptop at new house

Looking for a new place to live can be a stressful experience, and figuring out how much you should spend on rent can be one of the most challenging aspects of the process.

How much you can afford to pay for rent depends on how much you earn every month, your debt payments, other expenses and your future financial goals. Here's what to keep in mind as you search for a place to live.

How Much Rent Can You Afford?

There isn't a universal answer for how much of your income you should direct toward housing, but there are some rules of thumb you might employ.

Use the 30% Rule

The 30% rule states that you should try to spend no more than 30% of your gross monthly income on rent. So if your salary is $5,000 per month, your target rent payment would be $1,500 or less.

The idea is that if you're using 30% or less of your income on rent, you'll be able to afford to pay your day-to-day expenses and set aside money to meet your financial goals. The 30% rule isn't realistic for all budgets; you'll need to add up your expenses, consider your lifestyle and take other factors into account to determine whether this number makes sense.

Use the 50/30/20 Rule

Another popular budgeting method is based on the 50/30/20 rule. With this approach, 50% of your monthly income goes toward necessities (including rent), 20% goes toward debt payments and savings (including retirement) and the remaining 30% is set aside for discretionary and lifestyle-related expenses.

This strategy usually requires some calculations and tinkering. Start by totalling all of your typical monthly expenses and categorizing them. Because rent falls under necessary expenses, here's how you might determine what you can afford:

  1. Figure out what 50% of your monthly income is. For instance, if your take-home pay is $5,000, you can budget $2,500 per month for necessary expenses.
  2. Calculate the percentage of your income that you're currently spending on other necessities. Try to estimate new or changing expenses, such as utilities at your new place. Don't include existing rent payments.
  3. Subtract the total amount you're spending on other necessary expenses from your 50% figure. This number is what you can afford to pay in rent each month. So, if 50% of your monthly income is $2,500, and $700 goes to bills, you should aim for a rent payment of $1,800 or less.

Decide How Much You Can Afford

While rules of thumb can serve as a helpful starting point when making financial decisions, sticking to the math may not make sense in your individual situation. In some cases, you'll want to take a more holistic approach to budgeting for your new place. This includes when:

  • You're saving for a specific financial goal. If you have a major disruption to your budget coming up, such as going back to school or having a wedding, you may want more wiggle room in your budget. Don't aim to spend 30% of your budget on rent simply because you want to stick to the 30% rule. Reducing your rent to meet other financial goals could be the answer.
  • You're in an unsafe situation and need to move now. If you no longer feel safe where you are, you may need to exceed typical guidelines for rental costs, at least temporarily. While you'll need to be able to afford your new rent payments, spending slightly more to get to safety as soon as possible could be wise. Once you're moved out, you can take time to search for a more affordable housing situation.
  • Access to a unique location is important to you. Sometimes paying more to live somewhere special makes sense, especially if it's related to your job or helps improve your health. Downtown apartments are often more expensive, but if you find yourself happier, walking more, feeling healthier and spending less on transport costs, paying more can make sense.

Regardless of the approach you take, knowing the average cost of rent in your desired area can help you manage expectations. Estimating this alongside your fixed expenses can help you decide how much you actually want to pay for rent each month.

How to Save Money on Rent

Regardless of how much you can afford to spend on rent, it's a good idea to take some time to consider ways you can reduce your monthly costs:

  1. Move in with a roommate. Living with someone else isn't always ideal, but it can cut your rent expense in half every month, or even more if you're comfortable living with two or three people.
  2. Shop around. When searching for a place to rent, you'll typically find several options at various price points. Do your due diligence and shop around to make sure you get the most value out of your lease.
  3. Look for move-in specials. Some landlords may offer special promotions to encourage new tenants to move in. For example, you may be able to get some or all of the deposit requirements waived, or you could get a discount on your first month's rent. As you hunt for a new place to live, keep an eye out for these money-saving specials.
  4. Sign a longer lease. Landlords value stability, so you may be able to negotiate a lower monthly rent in exchange for a longer lease.
  5. Know when to move. Landlords have a tougher time finding new tenants during the winter, which means they may be more willing to give you a break on rent. In contrast, summer months come with high demand for rentals, so landlords may charge higher rents.

The Bottom Line

How much you spend on rent is only part of the story. How much you can afford to spend is the rest. If you're struggling to pay rent where you are now, you may face eviction if you're not careful.

Fortunately, there are some ways to get relief from rent costs. Reach out to your landlord or property manager to find out if they'll offer you some kind of break like forbearance or reduced rent. Many organizations are designed to help people who are having a hard time with rent payments. Tenant protection laws can vary based on where you live, but they can help you in certain situations.

Sometimes moving to a new, more affordable place may be the best option to help make your rent. It's common for a landlord to run a credit check when someone applies for a lease. To improve your odds of getting approved for an apartment, check your credit score to get an idea of where you stand and review your credit report to see where you can make some improvements.

Once you get into your new place, don't forget to see if your rent is eligible to add to Experian Boost®ø. By adding your rent to Experian Boost, you can get credit for one of your largest bills towards your credit report.