How much rent can you really afford? Is there a rule of thumb when it comes to rent costs? These are important financial questions to ask when renting a place. And while you might have certain amenities, locations, square footage and aesthetics in mind — one of the most important factors is price.
If your rent payment is too high, you’ll be scrimping when it comes to food and entertainment, and you’ll hamper your ability to pay bills, save money or establish an adequate emergency fund. That’s why figuring out how much rent you can really afford is critical to your financial success. We’ve put together some tips for getting it right.
The 30% Rule
How much of your income should go to rent? Consider the 30% rule of thumb when it comes to rent. The 30% rule recommends you find a place with a rental fee that is less than or equal to 30% of your monthly take-home pay. Of course, this rule has some wiggle room. For example, if you live in a larger city, you can probably put a slightly higher percentage toward rent if you don’t have car expenses and can use public transportation. Likewise, splitting rent with a roommate means you can select a place with higher rent as long as your portion doesn’t exceed 30% of your income.
Before you sign the lease, add up your monthly bills and expenses aside from rent — such as what you spend on groceries, fun, utilities, car payment, credit card bills, renters insurance, etc. — and make sure the remaining 70% covers the total amount while still leaving you enough money to save and keep yourself financially fit.
We’re Here to Help
Contact a Farm Bureau insurance agent for a renters insurance quote and to determine which coverage is the best fit for your needs.