If you’re searching for your first apartment or considering moving to a new place, one of the first questions you should ask yourself is “how much can I afford to pay in rent?”. Living beyond your means will quickly become stressful and put you, and your bank account, through a lot of trouble. Thankfully, there are several methods to determine how much you should spend on rent.
Determining a Budget
For many, the cost is the number one factor in deciding whether to rent an apartment or not. This is especially true if you’re on a strict budget. $20 more a month than what you can afford doesn’t seem like a lot, but that’s $240 a year that could be spent elsewhere.
A good place to start when trying to create a budget is your lifestyle and how much you’re willing to sacrifice. If you have to have an apartment that is $50 a month more than you can afford, are you ready to spend less in another area of your life? If you’re a homebody and really enjoy nights in with some snacks and a book, it may be worth spending a bit more on your rent. If you often go out with friends, stay the night at a significant other’s, or travel for work, you may want to consider not renting the most expensive place you can afford.
The 30% Threshold
The 30% threshold details that you should spend around 30% of your gross income in rent. To determine what that amount is, multiply your gross salary by 0.3. Divide that number by 12 to know approximately how much you should spend on rent each month.
While this is a good starting place, if you want a lot of amenities and a convenient location, you may want to spend 30-35% of your income on an apartment. If you’re always on the go and those things don’t matter as much to you, you may want to spend as little as 20-25% of your income on an apartment.
The 50/30/20 Budget
Another way to budget your income and determine how much rent you can afford is with the 50/30/20 budget.
The budget gets broken down as follows:
- 50% of your income goes towards the essentials (rent, utilities, phone bill, any type of insurance, transportation, groceries, etc.)
- 30% of your income goes towards your lifestyle and non-essentials (movies, concerts, shopping, dining out, etc.)
- The remaining 20% should be invested or put in a savings account
The 50/30/20 budget is a simple way to categorize your income and see where your money is being spent every month.
How to Calculate Your Overall Rent
When calculating how much you can spend on rent, there are several things you should ask yourself and the landlord.
- Are utilities included in the rent?
- Does the budget you’re calculating include money to put towards utilities or is that a separate expense?
If utilities are included in your rent then that’s great! The 30% will cover the entire expense of living in your apartment. If utilities aren’t included, you’ll have to move some money around. If 30% of your income affords you $1000 a month on rent, approximately $150 of that should go towards your base utilities (gas, water, electric). So really you have $850 to spend on rent a month.
Once you determine your budget, it’s time to start apartment hunting! At Shaker Run we offer affordable 1, 2, and 3-bedroom apartments for those looking to move to Albany, NY. Schedule a tour today to view your new home!