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How Much Rent Can You Afford?

Looking for a new place to live can be a stressful experience, and figuring out how much you should spend on rent can be one of the most challenging aspects of the process. How much you can afford to pay for rent depends on your monthly income, debt payments, other expenses, and future financial goals. Here’s what to keep in mind as you search for a place to live.

Use the 30% Rule

The 30% rule suggests that you should aim to spend no more than 30% of your gross monthly income on rent. For example, if your salary is $5,000 per month, your target rent payment would be $1,500 or less. This rule helps ensure you can cover day-to-day expenses and save for financial goals. However, this rule may not be realistic for all budgets, so consider your lifestyle and other factors to determine if it makes sense for you.

Use the 50/30/20 Rule

Another popular budgeting method is the 50/30/20 rule. With this approach, 50% of your monthly income goes toward necessities (including rent), 20% goes toward debt payments and savings, and the remaining 30% is for discretionary expenses. Start by totaling your typical monthly expenses and categorizing them. For instance, if your take-home pay is $5,000, you can budget $2,500 per month for necessary expenses. Subtract the total amount you’re spending on other necessary expenses from your 50% figure to determine what you can afford to pay in rent each month.

Decide How Much You Can Afford

While rules of thumb can be helpful, sticking to the math may not always make sense for your situation. Consider a more holistic approach to budgeting for your new place, especially if you have specific financial goals, are in an unsafe situation, or need access to a unique location. Knowing the average cost of rent in your desired area can help you manage expectations and decide how much you actually want to pay for rent each month.

How to Save Money on Rent

Regardless of how much you can afford to spend on rent, it’s a good idea to consider ways to reduce your monthly costs:

• Move in with a roommate: Sharing your living space can significantly cut your rent expense.
• Shop around: Explore various options at different price points to get the most value out of your lease.
• Look for move-in specials: Some landlords offer promotions to attract new tenants, such as waived deposits or discounted first month’s rent.
• Sign a longer lease: Landlords value stability and may offer lower monthly rent in exchange for a longer lease.
• Know when to move: Moving during the winter when demand is lower can sometimes result in lower rent.

The Bottom Line

How much you spend on rent is only part of the story. If you’re struggling to pay rent where you are now, you may face eviction if you’re not careful. Fortunately, there are ways to get relief from rent costs. Reach out to your landlord or property manager to see if they can offer forbearance or reduced rent. Many organizations are designed to help people who are having a hard time with rent payments. Tenant protection laws can vary based on where you live, but they can help in certain situations.

Sometimes moving to a more affordable place may be the best option. Landlords often run a credit check when someone applies for a lease. To improve your odds of getting approved, check your credit score and review your credit report for areas of improvement. Once you get into your new place, consider adding your rent to Experian Boost® to get credit for one of your largest bills towards your credit report.

For any mortgage-related needs, call O1ne Mortgage at 213-732-3074. We’re here to help you find the best solutions for your financial situation.

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