How Much To Spend On Rent, Based On Income

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"The goal should be: No more than one-third of your income should be going to housing. Ideally, it's even less."

Whether you rent or own, housing is likely your biggest expense. Still, you shouldn't spend more than 35% of your annual income on housing, says bestselling author and co-founder of AE Wealth Management David Bach.

If you rent, that includes utilities and any broker fees you had to pay. If you own, it includes other costs like mortgage interest, property taxes, maintenance and renovations. And if you want to think about things in terms of gross income, rather than after-tax income, aim to spend less than 30 percent on housing costs.

Another popular guideline people follow is the "28/36 rule," which says that you should spend no more than 28 percent of your gross monthly income on housing costs and no more than 36 percent on total debt, including housing and other debt like student loans or car loans. Mortgage lenders use this rule to assess your borrowing capacity. If your debt-to-income ratio exceeds these limits, you may have to pay a higher interest rate or you might not be able to get a loan at all.

While these guidelines can be helpful, everyone's financial situation is different. If you don't spend much on entertainment or transportation, you may have more room in your budget for housing.

Plus, "it really depends on where you live," says Bach. If you're living in a big city, it may be impossible to keep your housing costs at or below 30 percent. In New York City, residents put nearly two-thirds of their income towards rent, often because they don't have any other choice.

If you're looking to retire early or have other ambitious savings goals, you may want to downsize and spend well under the 30 percent threshold. That's what one Chicago-based couple did: By spending less than 15 percent of their income on housing, they managed to bank $50,000 in just one year.

To figure out how much you can afford to spend on housing, keep these guidelines in mind, look at your budget and consider your long-term saving goals.

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Don't spend more than this on housing, warns money expert | CNBC Make It.
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As a millennial, my perspective, If I have to move in with a roommate that isn't my significant other, I'm not ready to move away from home. Literally might as well live at home and contribute there. Life goal is not to move out and pay extra money to have the same issues.

Edit: I realize everyone has a different perspective and not everyone has the "luxury" of living at home until they make a decent salary.

idontknow-msmc
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Forty acres and a mule. Actually, no mule. Less acres. Really, there won’t be a yard. Or a home. But you can have your own room. Oh, wait, hold on... scratch that too.

michaelwardle
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16% here and 0 car payments :-D money is just flowing into my accounts and life is good

timothygibney
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Considering whether I should rent a flat with 800 Euros per month (including electricity, heating, internet and water) with monthly net income of about 3500-4000 Euros (still don't know exactly because I will start the job a month later)

JgvnkhgbbKhrfhutfhk
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Average rent for a 1 bedroom $1000 a month, full time min wage $1160 a month

AWOLschmidt
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they never tell you if they mean 30% of your gross pr net income.

tmale
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My monthly income 4400 but I want this apartment for $1850

jaywavy
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But what is housing? Maintenance, taxes, etc? Or it is purely the mortgage or rent?

tomg
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Not very helpful - one-third pre-tax or post? Does that count utilities or just rent?

gnoelle
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I spend $450 CAD or $350usd per month lol...thats after utilities and internet...share the place with someone. All you need is a room and nice people to live with you.

edr.
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35% of my wife and me salary is expensive af!

UBeesh
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A Filipino commented on this first. Mabuhay ang Pilipinas!!!

jacquesperez
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Shoot for at least less than 1/5 of take home pay.

chhive
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35% is way too much. 15%, take it or leave it

MashZ