How A lot Ought to You Spend on Lease?

When looking for a marriage costume, I used to be given some sound recommendation: don’t strive it on if you happen to can’t afford it. As a result of if you happen to fall in love with it, you’ll both be heartbroken when you may’t have it otherwise you’ll blow your funds to get it.

What I like about this recommendation is that it’s relevant to extra than simply wedding ceremony costume purchasing.

For instance, it really works simply as effectively when figuring how a lot hire you may afford. In spite of everything, the very last thing you need to do is use your dream residence solely to find it’s means out of your funds.

Decide How A lot Lease You Can Afford

Listed below are some guidelines of thumb to make use of when figuring out how a lot of your revenue ought to go to hire:

The 30% Rule

This rule is about as fast and simple because it will get when attempting to determine how a lot you may afford to spend on hire: you must spend about 30% of your gross month-to-month revenue (earlier than taxes) on hire.

Take into account the 30% rule doesn’t embrace utilities or another housing bills — it’s 30% of your gross revenue on hire alone.  

So, if you happen to deliver dwelling $3,000 monthly, then you must purpose to spend round $900 (or much less) in your month-to-month hire ($3,000 x 0.30 = $900).


Take into account, that is only a common rule. The 30% rule is an efficient place to begin, you should still want to regulate this determine primarily based on what works greatest for you.

For instance, if you happen to stay in a metropolis with excessive rental costs, you then is likely to be required to pay greater than 30% simply to seek out housing.

Alternatively, when you’ve got pupil mortgage funds or different loans, then spending 30% on hire is likely to be too excessive on your month-to-month funds. 

Learn extra: How To Handle Pupil Mortgage Debt

The 30% rule has its origins in 1937 and the U.S. Nationwide Housing Act, which created the general public housing program for low-income households. Earnings limits have been established as eligibility for households that needed to stay in public housing. Again then, the rule was that, “a tenant’s revenue couldn’t exceed 5 to 6 instances the hire.” 

Since then, the restrict has elevated. In 1961, the Housing and City Improvement Act established that the hire threshold mustn’t exceed 25% of a household’s revenue. This was then raised to 30% in 1981 — a benchmark that’s since stayed the identical. 

The 50/30/20 Funds Rule

One other easy rule for figuring out how a lot of your revenue ought to go to hire is the 50/30/20 funds. This rule states you cam use 50% of your internet revenue (after taxes) on your “wants.” Your wants embrace issues like housing, utilities, automotive funds, and groceries.

Subsequent, allot 30% of your month-to-month revenue for desires — issues like clothes, consuming out, and hobbies.

The remaining 20% ought to go in direction of saving, investing, and debt reimbursement. 


So, if you happen to deliver dwelling $3,000 monthly after taxes, this might provide you with $1,500 monthly to spend in your wants, $900 for desires, and $600 for saving, investing, and debt reimbursement:

  • To calculate 50% ($3,000 x 0.50 = $1,500).
  • To calculate 30% ($3,000 x 0.30 = $900).
  • To calculate 20% ($3,000 x 0.20 = $600).

Keep in mind, the 50% is for all your wants, not simply your hire alone. So ensure you have a good suggestion of how a lot you spend monthly on issues like meals and utilities earlier than deciding the precise quantity you may put in direction of hire. 

For assist calculating your 50/30/20 funds, take a look at our useful 50/30/20 calculator

The 50/30/20 rule was popularized by Senator Elizabeth Warren and her daughter Amelia Warren Tyagi of their e-book, “All Your Price: The Final Lifetime Cash Plan.”

Different Issues in addition to the Lease Value

Whereas these guidelines of thumb are useful beginning factors for figuring out how a lot hire you may afford, there are a number of different components to think about — corresponding to different bills related to renting, the place you need to stay, how a lot debt you have got, and the sort of life-style you need. 

Further Prices Related With Renting

Your month-to-month hire cost will possible be your largest housing expense, nevertheless it’s not the one expense. Usually landlords require all types of extras. Listed below are another belongings you’ll must think about:

  • Shifting prices.
  • Safety deposit.
  • Pet deposit.
  • Utility funds.
  • Renters insurance coverage.
  • Parking.
  • Commuting prices.

The place Do You Need to Stay?

For those who’re trying in a high-cost-of-living metropolis like San Francisco, the place the average cost of a one-bedroom apartment is $2,995, you then might need to spend greater than the really useful benchmark quantity (or get 4 roommates).

Alternatively, if you happen to’re searching for a spot in a low-cost-of-living metropolis and also you make a excessive wage, you would possibly spend much less.

How A lot Debt Do You Have?

You even have to think about how a lot debt you might be carrying. If you’re fully debt-free, you then would possibly be capable of pay slightly extra to your hire.

If you’re drowning in pupil loans and bank card debt, you then in all probability should be placing extra of your revenue in direction of debt reimbursement. 

Learn extra: The right way to Pay Off Credit score Card Debt Quick

What Type of Way of life Do You Need?

This is essential: don’t neglect to consider the kind of life you need to stay. Your spending habits and different monetary objectives matter. 

For those who get pleasure from going out for dinner or spending extra cash on hobbies, then ensure you are budgeting for this stuff. You don’t need to be house-poor and compelled to spend all of your time at dwelling if what you get pleasure from most in life is being out and about. 

Learn extra: When It’s OK to Spend Cash

How To Scale back the Quantity You Spend on Lease

If you wish to lower your housing bills, there are some issues you are able to do to scale back what you spend on hire:

  • Transfer to a metropolis with a decrease price of residing. For those who can work remotely or you have got the choice to maneuver to a less expensive metropolis, think about doing it.
  • Transfer farther exterior town. Dwelling within the metropolis core might be costly. If you wish to scale back your hire, you may look into transferring to the suburbs. It will typically afford you extra space for much less cash. 
  • Get a roommate. Splitting housing prices with just a few roommates can drastically scale back the quantity you might be spending on hire every month. 
  • Negotiate along with your landlord. Relying on the place you reside and the demand for leases, you would possibly be capable of negotiate the price of hire along with your landlord. You may provide to prepay for just a few months upfront in trade for a reduction. Or you can provide to increase the size of your lease if they’re keen to scale back the month-to-month hire. 
  • Supply to assist your landlord. For those who’re the useful kind, provide your companies to your landlord in trade for decreased hire. Possibly you can paint or do minor fixes across the place for a less expensive month-to-month invoice.

The Backside Line

For many people, we’re spending the most important chunk of our revenue on hire.

Whereas what you must spend on one month’s hire comes down to some private components, like the place you reside and the way a lot debt you’re carrying, easy guidelines just like the 30% rule or the 50/30/20 funds may also help set a baseline for what you may afford.

Featured picture: ADragan/

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