How Much Rent Can I Afford?

Budget is ranked first when it comes to the list of requirements of finding a home. But have you ever considered just how much rent you really can afford?

Here are some general guidelines that you can follow.

1. What is Your Budget?

First things first, you need to calculate your income. How much money do you bring in? Do you have any extra incomes? Assets? Bonuses? Add only those that are available on a regular basis and calculate your income. Usually, about 60% is spent on necessities; housing, transportation and food. Try and avoid going above that number, as you still have other expenses that you need to factor in as well.

2. What percentage of your income should go to your rent?

Most industry experts would suggest that no more than 30% of your salary should be geared towards rent, and not more. This obviously varies from one family and individual to the other. However, it is still a good number to try and abide by.

3. The Rule of Three:
There is a simple guideline that you can consider when it comes to your spending which is the 50/20/30 rule. 50 % of your income goes to fixed costs, such as housing, transportation and utilities. 30% should be directed on daily needs and expenses, including dining out and entertainment, and 20% should either be part of your savings, or geared towards your financial goals.

4. Always Consider the Extra Expenses:

There are always extra costs that pop up, not only when you are searching for a home (agent fees for example) but also when you are already settled. Car maintenance, school fees, etc.… these should also be accounted for and calculated within the Rule of Three.

5. Remember Your Comfort:
At the end of the day, these are only guidelines for you to follow. The rent amount you are comfortable with paying ultimately depends on you and what you are comfortable with! Set your priorities and work around that for the right amount of rent you should be spending.