Cost of Living: How much should you be spending on rent?
If you’re paying more than 28% of your salary on rent…
…you’re paying too much. In this article from Credit.com, I detail how your monthly expenses should be allotted.
Let’s take a look
If you’re like many Americans, you have debt. This is especially prevalent among young college grads. That has to be a factor in deciding what you can afford in housing costs.
“The conventional statistic is that no more than 28% of gross salary be spent on housing and no more than 36% on consumer debt. However, that does not at all take into account other obligations in people’s budgets,” said Kristi C. Sullivan, a CFP in Denver, in an email. “Student loans are a large bill for many and if that’s the case, you can’t afford to spend 28% on housing because then you’ll have nothing left for food. Rent is not the fixed expense people think it is. You can lower this cost by living in a less desirable area of town, having roommates, or living in a smaller place.”
Roberge said a common mindset he sees is that people will find a place, decide to move in and figure they’ll make everything else work afterward. To improve your chances at financial success and stability, you need to plan more carefully.