Moving to a new home is almost always an exciting time. And when it comes to finding a new place to live, affordability is usually one of the top considerations for any renter. Frankly, when you stop to think about it, “How much rent can I reasonably afford?” should be the very first question of any responsible person who is shopping for housing.
Whether you’re looking at apartments for rent in Hoboken – or anywhere else for that matter – there are many factors to consider when it comes to determining how much of your income should go towards the rent, with the two biggest ones being:
- how much money you earn every month
- where you want to live
The most widely accepted rule of thumb is that you should spend 30% of your monthly pay on your housing. For example, if you earn $2000 every month, then $600 is a reasonable price to target when shopping for an apartment. However, 30% is only a guideline. If you’re fortunate enough to have a relatively high-paying job, it’s not unreasonable to use some of your additional discretionary income to allocate as much as 40% of your monthly nut in exchange for more living space or an apartment in a more desirable location.
On the other hand, there are plenty of benefits to spending less than 30% of your monthly income on rent, including using the extra funds to build your retirement nest egg, or save for a new home or other big purchase. While finding housing in this price range in big cities might be a challenge, many rural and suburban areas have rental properties within this budget. Another great way to stretch your rental budget it by considering having a roommate or two — or even more if you’re looking at larger houses to rent. Doing so will go a long way toward reducing your rental costs to a manageable level.
With all of that in mind, I found a handy online rent calculator, that can be used to help you determine exactly how much you can afford. By entering your desired rental location, how much you earn, your monthly expenses and debts, and your desired monthly savings target, you can determine your optimal monthly rent amount. And if you don’t like the number, you can change your inputs to see how that impacts the results.
The best way to determine what percentage of your monthly income should be allocated to rent is to first establish a monthly budget. To do this, you’ll need to list all of your monthly expenses — including your anticipated rent — and then subtract the total from your monthly income to give you insight into how much discretionary income you have left after paying all the bills. When making your budget, it’s important to remember all of your monthly expenses including food, clothing, gasoline, car payments and other transportation expenses, utilities, and other housing needs.
Finally, it’s important to keep in mind that when you are moving into a new apartment, there are typically additional upfront expenses that you’ll need to pay in addition to the first month’s rent. These expenses may include: security and/or pet deposits, parking fees, move-in fees, and even fees for additional amenities.
Having a budget in mind before signing a lease ensures you’ll be able to comfortably pay your rent every month — and using a rent calculator is a terrific way to help you find the ideal number that’s right for you.
Photo credit: stock photo
This is a great article – and I think many others should read and take this to heart. I’ve seen so many of my friends spend too much on their housing costs.. it’s just unfortunate because they are not setting themselves up for success, especially when they are in their 20’s.
Cheers,
Fiona
Thanks, Fiona. I can see spending a bit more up front if you are, say, buying a home that you know you will be in for a long time. The Honeybee and I did that when we bought our current home almost 25 years ago. We were eating lots of mac & cheese and rice & beans for a couple of years, but the temporary pain was worth it.
On the other hand, I can’t see spending 40% — or more — of your income on housing if you don’t have to.
$500 per month for rent is not realistic. Does not exist in our state.