How much should you budget for rent? This easy question can leave a lot of us unsure about how to move forward. With a host of responsibilities on your plate, it is hard to make sense of a good rent budget. Try reading the advice below for a clearer idea of how much to aside for your living expenses:
Experts Weigh In:
According to experts, the best rent budget would not require more than 25 to 30% of your pre-tax income. Ideally, you would pay less than those percentages or approximately 20% for living expenses. When you calculate this rate, make sure to include any fees associated with your rent. If you have to pay a realtor’s fee to move into your apartment, calculate that additional cost as part of your rent over the course of a year. You can also try to work with a broker who only shows no-fee apartments, avoiding that kind of extra cost.
Differences in Housing Options
Despite the suggested percentage of your income going toward rent, meeting this benchmark can be challenging. In places like New York City, housing costs can be sky-high, requiring a higher percentage of your income. If you do have to pay above 30% of your income toward rent, make sure that it is not a lifestyle choice but a true need. You don’t want to limit your ability to meet other fiscal obligations by choosing a higher rent. Consider looking into affordable or mixed-income housing programs. Many cities offer an array of different affordability options for families.
If you have extensive financial obligations outside of your rent, it may be beneficial to detract money from your rent budget. If you have student loans, credit card debt, or medical debt, make sure that you leave yourself enough financial leeway to continually meet your payments. Start with your pre-tax income and decide how much money you need to pay down your loans. Once you have subtracted those costs, you can properly assess a realistic rental budget while leaving room for other demands like food, education, and insurance.
No matter your income, you can creatively save money, maximizing your rent budget and paying down your loans. Focus on limiting small spending --- that extra cup of coffee in the morning or that phone upgrade. When you develop positive financial awareness, you open up unlimited possibilities, even within limited means.
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