Rent prices vary depending on size, location, what kind of amenities are included, and that sort of thing. But precisely how much should you spend on rent? Rather than looking at this question as if there is a universally appropriate answer, look at it in terms of what it is you need in a living space. Do you generally spend a lot of time at home? Are you away a lot and just need a place to sleep? Simply consider your needs, combine those needs with what you can afford, and ta-da! Your ideal amount.
Without considering utilities, your cell phone bill, car insurance, or whatever else you for which you earmark your paychecks, the basic test to see what kind of rent payment you can afford is to calculate one-third of your net annual income. If you divide that number by 12, you have essentially the maximum number of dollars your wallet will allow for rent each month. A smaller percentage might be best for someone who doesn’t spend much time at home, and a slightly larger percentage might be best for someone who hosts Thanksgiving or just likes to plant themselves at home most of the time. Considering these figures alone tend to get people in over their heads, however.
Know what happens frequently? Rent increases every year or two. Know what doesn’t happen frequently? You getting a promotion or other significant pay increase. That means that something you can technically afford this year might put you in financial trouble next year. Give some thought to what kind of value you’re getting with each month’s rent. What’s included? Gas, water, electricity, and even waste management aren’t guaranteed to be worked in. Be cognizant, and also remember security deposits, application fees, and other unseen expenses. It’s also fairly common for on-site luxuries such as a pool, gym, business center, and conference room to have usage fees attached. Just like on December 31st moving into a new place can seem like you’re about to walk across the threshold into a brand new start. If you think you’ll actually use that pool and gym, maybe the fee is worth it. But remember, maybe it’s not.
Other miscellaneous types of fees are inevitable too, so keep that in mind when you’re figuring out what you can afford. Be glad the property manager needs to run credit checks and background checks because it means he’s doing it for the rest of the residents also. Do you have pets? There’s probably a fee for that. Are you hoping to opt for the parking space or the garage? Suddenly 30 percent of your income might look like a lot.
How much should you spend on rent? Spend enough that your comfortable in your own home, but not so much that you worry about making payments.