How Much Rent Can You Afford?
Whether you’re graduating from college, moving out of your parents’ house for the first time, or moving to a new city, you want to find the perfect apartment or house to rent. Housing will likely be one of your biggest expenditures each month, but how much rent can you afford?
Determining what you can comfortably pay is crucial to budget planning and maintaining healthy finances. These three tips can help.
1. Create Financial Goals
Some experts suggest a percentage of income as a guideline, but Raleigh Werner, Co-Founder of Jumpshell, recommends a more personalized approach. He believes that figuring out how much rent you can afford boils down to two key considerations: your financial goals and personal boundaries.
“Financial goals are easy for most people to grasp,” he explains. “How much do you need to save every month to reach those goals?” These objectives might include saving for retirement, setting aside an emergency fund, or building up a down payment for a house. Once you’ve determined your goals, Werner says, ask yourself how much you need to save every month to reach them.
2. Assess Your Monthly Income and Expenses
Next, determine the cost of necessary monthly expenses, which could include student loans, groceries, a car payment, and phone bill. If you have a car, consider where you’ll you park it and the cost of parking. Find out the expected costs of utilities and other expenditures that come with rentals in your desired location. Once you’ve assessed your expenses, compare them to your monthly income to ensure you’ll have enough money to rent a place. You can categorize and organize your income and spending with a budget calculator.
3. Set Personal Boundaries
Once you set a baseline of your financial goals and your required expenses, Werner recommends considering your personal boundaries for living with roommates, the size of the space, proximity to your job, and the crime rate in your preferred neighborhood. Because the cost of rent depends on these factors, you’ll want to know from the start which compromises you’re willing to make. “Some people know from past experiences that they don’t want to live with anyone else, but that’s going to make it a different kind of search,” Werner explains.
It can seem daunting to balance what you want and what you can afford when it comes to your living situation. By identifying your larger goals and your personal boundaries, you can find a rental apartment or house that will meet your financial, emotional, and logistical needs
