Budgeting, specifically figuring out how much of your budget should go to rent, is really more of an art than a science. The fact is, you have to learn how to calculate what you can afford in rent, as there is no one-size-fits-all approach. How to budget for rent depends on a number of variables and expenses that also need to be taken into consideration.
Especially as the world begins to open up again and the impact of so many employees working from home becomes more and more apparent, many people have begun to reevaluate where and how they live. This is causing them to look at how much they’re spending on rent in a new light.
How to Start a Budget
Figuring out a budget and therefore how much rent per month you can afford takes just four steps:
- Determine your monthly income.
- Calculate all of your current monthly expenses, including groceries, gas, entertainment, subscriptions, streaming services, and utilities.
- Subtract your expenses from your income to see what’s left.
- Give yourself a small buffer.
There are a ton of budgeting apps out there that can make the process easy, including Mint, PocketGuard, EveryDollar, and YNAB (You Need a Budget). Most are directly linked to your bank accounts and can help you automatically set aside a portion of your income into separate accounts. Some apps can also point out which subscriptions and other automatic payments you’re spending money on each month and remind you to reevaluate them regularly to see if they’re still necessary.
The key to successfully budgeting is to create a realistic budget and stick to it. Understanding and adhering to a budget can mean the difference between a great apartment renting experience and a terrible one. Imagine how stressed you’ll be if you’re so financially stretched that you have to pick and choose which bills to pay on time. Before you sign a lease for an apartment, establish a budget.
How Much of Your Budget Should Go to Rent?
Without a doubt, the biggest question when it comes to establishing a monthly budget is: how much rent per month can I afford?
When it comes to how to calculate what you can afford in rent, the general rule of thumb among financial advisors is that no more than 30% of your income before taxes (i.e.: gross monthly income) should go to rent. So if you earn $4,500 per month before taxes, then you shoot to spend no more than $1,350 per month on rent.
But the 30% suggestion has been around since the National Housing Act of 1937. That yardstick number doesn’t take into account other financial obligations that have come into play since 1937 like increased student debt, car loans, and the rising cost of utilities.
Nor does it take into account other variables like living in a high-priced rental market. Sticking to spending 30% on rent isn’t necessarily feasible in an area like Washington, D.C., where median rents are $2,126 per month for a one-bedroom apartment.
Another way to calculate what you can afford in rent is the 50/30/20 method. Under this calculation,
- 50% of your income would go towards fixed expenses including rent, utilities, insurance, and other recurring bills.
- 30% of your income would go towards leisure and fun, including eating out, concerts, happy hours, non-essential shopping, etc.
- 20% of your income would go directly into savings—either a separate savings account or as contributions to your retirement funds.
So if you earn $4,500 per month after taxes, you’d divvy your paycheck up like so:
- $2,250 for needs
- $1,350 for wants
- $900 for savings
NerdWallet has a calculator to help you figure out your 50/30/20 budget.
How to Keep Costs Down
Maybe after all that budgeting, you’ve determined that you cannot afford your desired apartment or location. There are a few things you can do to help lower your costs:
- Choose a studio apartment instead of a one-bedroom.
- Choose an apartment located in the suburbs, further from the more expensive city center.
- If you do choose to live in the city center, opt to use public transportation so you can eliminate the added expense of a vehicle and insurance.
- Split the rent with a roommate, family member, or significant other.
- Look for apartment communities with cost-saving perks, city or occupation discounts, an on-site fitness center (bye, bye expensive gym membership), or an in-unit washer and dryer.
Southern Management Makes Budgeting Easy
The easiest way to manage your rental budget is to choose your apartment community wisely. Choose an apartment community that fits within your means, and you’ll be much more likely to achieve all of your financial goals.
Southern Management is here to help answer the question: “How much rent per month can I afford?” Customer care is our number one priority and the core of all we do. We pride ourselves on the way we treat our residents, and the proof of our uncompromising level of customer service is seen in the long-term relationships we establish with them.
With 75 apartment communities and more than 25,000 apartment homes, Southern Management knows a thing or two about helping people find beautiful and affordable places to call home. Our apartments come with many cost-saving amenities and floor plans that can accommodate roommates. And, our online resident portal, RentCafe, allows you to set up automatic payments, so you can be sure your rent is always paid on time.
To learn more, contact us today.