How much should I spend on rent? (2024)

In a nutshell

Exactly how much you should spend on rent depends on a few factors. Some experts say you should spend no more than 50% of your budget on living expenses, including rent, but this depends on your income and priorities.

• Rent is only part of your housing expenses — make sure you consider the whole picture.
• Sometimes, paying more for rent makes sense — for example, if the location saves you money in other areas.
• Avoiding large commercial properties and getting a roommate are a few ways to lower your rent.

The rent is too damn high

Rents have increased about 30% since 2020. One of the reasons for this is building slowed during the pandemic, leading to housing shortages. Higher interest rates have also caused housing prices to increase, making it more difficult to purchase a home. This means people who may have become homeowners are continuing to rent instead, leading to higher demand. With higher demand and a lower supply, prices are bound to increase.

However, some parties feel that these rent increases are nefarious — at least in part. The Arizona Attorney General filed a lawsuit against a company called RealPage for allegedly conspiring to raise rents in the state.

But, whatever the reasons, you still need a place to live, and we all have to deal with the current realities of renting.

Calculate how much home you need

If you are looking for a new place to live, you'll want to carefully consider your needs. A large place close to the center of town will be more expensive than a small home in the suburbs. If you want to lower your rent, you should look for the smallest home that still suits your needs.

How much space you need will depend on a variety of factors:

• What areas of town are you willing to consider?
• How many bedrooms do you need?
• Are you willing to get a roommate?
• Do you need a home office?
• Do you have pets?
• Do you need designated parking?
• Do you need outdoor space?

Also, understand what you must have and what you can live without. A private backyard is nice, and designated parking is convenient, but do you need these things? Only you can answer that question.

When spending more on rent makes sense

The rent itself is only one part of your costs. Living in a downtown area where you don't need a car may be cheaper than living in the suburbs and commuting — even if rent is higher. Living in a more expensive area may also give you access to higher-paying jobs, which could more than cover the additional rent.

The apartment itself may also offer amenities that make up for a higher rent. For example, if it offers a gym or covers utilities, you may save money in the long run — even if the actual rent is a bit higher.

The 50/30/20 rule

The 50/30/20 rule is a popular budgeting formula. It states that you should spend 50 percent of your take-home pay on necessities, 30 percent on wants and 20 percent on savings:

• “Necessities” include all the things you need to live: rent, groceries, utilities, health care, transportation, minimum debt payments, child care and insurance.
• “Wants” include the extras in life that make life more convenient or fun: restaurants, vacations, more than basic clothing, gym memberships and entertainment.
• “Savings” include putting money aside for emergencies, saving for retirement, debt payments above the minimum payment or saving for large purchases.

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Best for: flexible budgeting

Simplifi - Budgeting App

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Simplifi lets you choose the budgeting style that’s best for you, whether that’s 50/30/20, the envelope method, or whatever else you prefer.

Product details

• Features: Tracks expenses to build a personalized budget using your preferred method, including zero-based, envelope, 50/30/20, and more.
• Usability: Imports banking transactions and adds flexibility with categorization.
• Mobile app: iOS and Android.
• Links to accounts: Yes.

Understand your total costs

Rent is a big part of the equation when considering a place to live, but it's not the whole story. You'll also want to consider other expenses, such as utilities, laundry, parking, pet fees, maintenance fees and insurance.

Also, consider your transportation costs. An apartment close to public transportation or your job may save you a lot of money, even if the apartment itself is a little more expensive.

You may also have a few one-time costs to pay, such as an application fee, security deposit, moving costs or new furniture to furnish your new place.

Utilities can be a fairly big expense. This can cover services, such as water, trash, heating, cooling and internet. Understand which utilities the landlord is covering and which expenses you will be responsible for. If you are paying for the heating, know the type of heating the unit has because this can impact the costs. If you are new to the area, do some research about the average cost of utilities for your type of apartment.

Be sure to ask about any additional fees, such as maintenance or pet fees. Some apartments also require renter's insurance, but, even if it's not required, it's still a good idea to have it.

How to spend less on rent

With rent prices as high as they are, wanting to spend less makes a lot of sense. There are a few ways you can lower your rental costs.

First, shop around. A large apartment complex will likely charge market rents, and you won't have the power to negotiate, so you are unlikely to find a good deal there. Instead, look for privately owned homes, perhaps on Craigslist, Facebook Marketplace, or through an estate agent.

Second, keep in mind that private landlords can negotiate with you. You may get a lower rent by signing a longer lease, agreeing to do small maintenance tasks or proving you'll be a good tenant.

Next, consider having a roommate. Instead of looking for your own home, look to see if someone has a room to rent. You could also choose your own place and then look for a roommate. Half the rent of a two-bedroom apartment is less than the entire rent of a one-bedroom apartment.

Lastly, look in less desirable areas. The trendy downtown area is going to have higher rents than a sleepy bedroom community. You'll have to weigh your options and decide for yourself how important your ideal area is.

The AP Buyline roundup

The 50/30/20 budget is a good starting point for figuring out what you can spend on rent. This budgeting framework recommends that you should spend half your net pay on needs, including rent. Therefore, understanding exactly how much you should spend on rent also depends on the amount you are spending on other expenses.

Frequently asked questions (FAQs)

Is spending 40 percent on rent too much?

Probably. It is recommended not to spend more than 50 percent of your income on necessities. This means that only 10 percent of your pay must cover all of your other needs, which seems difficult to do.

However, it may make sense if the home's location significantly reduces transportation costs. If you don't have to have a car, that may be enough to justify the additional cost of rent.

What is the 40/40/20 budget rule?

The 40/40/20 rule is an extreme budgeting scenario where you set 40 percent of your gross income aside for taxes, save 40 percent and live on only 20 percent of your income. This may only be possible if your income is high.

What does the average person spend on rent?

Nationally, the average rent for a two-bedroom apartment is $1,317, but where you live has a big impact on what you'll pay for rent. For example, in Los Angeles, the average two-bedroom apartment is $3,690, while in North Dakota, the average cost is $910.