How Much Should You Spend on Rent? Money Experts Reveal the Truth

You want a decent place, but you need to build your savings and put away a little for retirement. Here's what top money experts advise.

A for rent sign. KSK Imaging/ShutterstockRents are going up—just like death and taxes, that’s pretty much a certainty. So how much can you comfortably afford? Most experts suggest spending no higher than 30 percent of your monthly income on rent, 25 percent is even better.

“If you spend 25 percent of your income on rent, that leaves you plenty of room to live comfortably while being able to save and contribute to retirement, says Adam Busch, head of Community Outreach at RentLingo, a national apartment rentals search engine. In fact, the site offers a “how much rent can I afford” calculator for renters to use. All you do is plug in your salary and the site then matches you to an apartment you can afford in the city of your choice.

Be flexible

Keep in mind that it’s important to stay flexible depending on your situation. “If you live in a big city and need to spend more on housing due to work and the current rental market, it’s OK to do so as long as you adjust some of your other discretionary spending,” says Ash Exantus, director of financial education at BankMobile, a digital banking platform. “For example, if you live in a city, you won’t have to budget for a car since you can use mass transportation.” Unfortunately, you can plug in those numbers as much as you want and still come up short as certain housing markets in the United States are so expensive that it’s not possible to accommodate that budget item. Here are the U.S. cities with the most expensive rents.

How to adjust

So what are you to do? Look at your personal spreadsheet a little bit differently, says Natasha Rachel Smith, a personal finance expert at TopCashback.com, an online shopping savings site. Consider adopting a fundamental budgeting method such as the 50/20/30 rule, she says. This strategy bundles expenses instead of zeroing in only on shelter costs. “The goal: To spend no more than 50 percent of your take-home pay on essential expenses such as rent, transportation, food, and utilities,” she says.

From there, 20 percent should go towards a strong financial foundation such as retirement contributions, savings, and debt payments, and 30 percent should go to lifestyle needs. “This includes cable bills, personal care, going out, shopping and traveling,” she says. Maybe consider in trading your car, or getting out of your lease.

Stay safe

In the end, nothing matters more than your sense of security. And you shouldn’t settle for living in a substandard environment unless it’s an absolute necessity. “While increasing the amount of money you’re able to put away into savings is great, that doesn’t mean you should trade the safety of your neighborhood,” Busch says.

The best way to budget for rent is to compare your rental costs with all of your other financial obligations and make a decision on where you live based on what you can comfortably afford. “The key is to make sure you are paying yourself first so that you have an emergency fund set up and use what is left over to budget your expenses,” Exantus says. “As Warren Buffett has said, ‘Don’t save what you have left after spending but spend what you have left after saving.'”

Just be sure you take photos of these five things before moving into your new rental apartment.

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