Why You Should Try to Rent Only What You Can Afford | Stash Learn
What It Means to Rent What You Can Afford
By: Team Stash
Published: Jul 08, 2019
• Updated: Aug 22, 2024
If you pay 30% or less on housing, it can really help you.
In this article:
Strategies
The general rule of thumb is to never spend more than 30% of your gross income on housing—whether you rent or own. Before renting to you, landlords often expect to see proof that you make 40 times your monthly rent annually—it’s the same calculation as 30% of your gross income. (We’ll show you.)
To cut down on costs, consider getting a roommate, or roommates, to split rent with you.
If you know your housing costs will exceed 30% a month, find other areas in your budget where you can cut back. For example, take public transportation rather than owning a car. Reduce dining out, or stop impulse spending.
Look for rentals where utilities are included, as that can help you conserve cash.
Consideration: If you have a lot of debt, your monthly rent plus your other loan payments shouldn’t exceed 43% of your monthly income. You may have to seek cheaper alternatives if it does.
Let’s break it down:
If your gross pay is $3,000 a month, you should pay no more than $900 a month.
To put another way, if your rent is $900 a month, your annual income should be at least $36,000.
While the 30% rule should be your goal, remember there is a well-documented shortage of affordable housing in the U.S., and nearly 40% of renters in the U.S. spend more than 30% of their income on rent, according to research. But doing what you can to get your rent costs down will only help you in the long run.
Written by
Team Stash
We want to turn money into a source of hope and opportunity. We teach people how to build good habits, save more and make it easy and affordable to get started investing. So far, we’ve helped over 6 million people create a more secure financial future with our expert advice and award winning investing app.