Part of maintaining a healthy budget is determining how much you can afford to pay for all of your living expenses. One of the largest expenses that people pay every month is the rent payment. Creating and sticking to a budget is not something that is simple for everyone. Your monthly income should always factor into the amount you can afford to pay in rent each month but don’t forget to also include all of your other expenses. As a general rule, most experts advise spending no more than 25 to 35 percent of your monthly income on rent or a mortgage. This percentage is before all of your extra expenditures such as utilities. This number will also vary depending on the additional bills that you have. Calculating all of your expenses before rent will help you to determine how much you can afford to spend each month.
You will also need to decide where you want to live and how much space you will need. While having more space and high end finishing is luxurious, it may also cost you a bit more each month. However, you also don’t want to feel cramped in a smaller home if you can afford something a little bit more intermediate. Make sure that you budget out all of your finances to decide what size is best for you. Another major factor on deciding where to live is which part of town you want to be on. While being right in the middle of town might be nice, it may also cost you a bit more. Choosing a rental unit somewhere a little further outside of town may cost you less in rent but don’t forget to factor in the additional gas you may need.
Make sure that you are comfortable with your monthly rent payment. Best-selling financial author, Dave Ramsey, suggests that you not spend more than a quarter of your monthly income on rent. For example, if you earn $4,000 a month, you should not spend more than $1,000 a month on your rent. When creating your budget don’t forget to add in utilities such as electric, water, television, and internet. You don’t want to suffer through the cold of winter or be bored with no TV or internet.
According to Bank of America there are 6 steps to creating a budget: set your goals, know your net income, make a plan, track your spending, personalize and create your budget, and have a monthly check-in. Personalizing and creating a budget can be broke down into 4 steps as well: recording dialing spending, plan for the all of the monthly expenses, look for ways to spend less, and find ways to boost your income. Having a budget can help you manage your expenses and help you get where you want to be.
If your rent payment cannot fit in 25 to 35 percent, you can always look into moving some of your other expenses around. For example, if you don’t have a car payment you may be able to spend more on your rent. When you add together all of your housing expenses, food, and transportation it should take up about 60 percent of your budget. You will want to leave room in your budget to pay down any debts, should you have any, as well as some entertainment money for when you want to get out of the house.
In the end, there is no magic number for how much you should spend on rent each month. You will need to determine what is best for you by adding up the numbers and creating a budget. Once you determine how much you can afford each month, visit our website to learn more about becoming a tenant with Thousand Hills Realty.