How much money should I be spending on rent

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March 31, 2018

The first time I ever truly started paying rent was when I was 24. I'd just landed a dream job working as an Admissions Counselor for my alma mater, The University of Alabama. Getting to talk to high school students about how much I loved UA and trying to convince them to love it just as much? The best job ever.

I jumped at the job offer they gave me without any kind of salary negotiating because I was so ready to start a job I knew that I'd love and get out of one I really hated. During the interview process I'd already started talking to one of my best friends about moving in with her if I landed the job (looking at you CGraham), basically saying yes without even knowing what my income would be. When she told me what rent was I felt like it sounded doable even though I had no real grounds for feeling that way. 

The truth is, I had no idea how much I should have been paying for rent based on my income. I jumped into house after house and apartment after apartment without ever giving it much thought. I knew generally what I absolutely couldn't afford, but never really knew what amount I should be paying to maximize my paycheck. Thankfully, things worked out throughout my entire renter's experience (still happening now!), but knowing what number I should have been aiming for would have made looking for a place to live a lot easier.

So, what is it? How much money should you be paying for rent?

The general rule of thumb is no more than 30% of your monthly gross pay. 

(Gross pay = monthly income before taxes)

So if you're bringing home 2,500 a month (before taxes), you would multiply 2,500 by .3 to get your ideal rent which is (no more than) 750. If you're bringing home 1,500 a month you should be paying (no more than) 450 toward rent. 3,000 a month means (no more than) 900 toward rent and so on and so on. And if you're looking to be a little more conservative with your budget, you could also take the 30% rule and apply it to your monthly net income (the amount of money you actually bring home every month.) It all depends on what you're looking for and what is more important to you (i.e. space vs. bigger shopping budget.) 

Why 30%? 30% is what the government has used since 1981 to determine who qualifies for public housing programs and initiatives.

You can certainly make a higher rent work if you shift things around in your budget, but using the 30% rule as a general guideline when looking for a place to live will help set you up for success. People that spend more than 30% on rent are said to be cost burdened.  So be cautious as you look for your next place to live and remember this guideline. It will set boundaries for the types of places you're looking at and ensure you can still buy all the tacos you want and still having a roof over your head. This rule works for you whether you're looking to live alone or with roommates, as well.

This general guideline also works for mortgage payments when you're looking at buying a home. Somewhere around 25% - 30% of your monthly gross income as your mortgage payment is what many experts recommend. Dave Ramsey recommends your mortgage payment being 25% of your monthly net pay (take-home pay), so just do your research on what works best for you before settling on a home.