Things You'll Need:
- Calculator or spreadsheet program
- or Pencil, Paper and a good head for math
-
Step 1
Calculate your total monthly income before taxes. This includes your annual salary and income from other sources (alimony, child support, rental income, dividends). Total your annual income and divide the amount by 12. The result is your Total Monthly Income Before Taxes.
Example -- $48,000 salary + $2,000 residual income from Ehow = $50,000 annual income/12 or $4,167 per month. -
Step 2
Calculate your total monthly debt. Be sure to include everything you owe, such as student loans, car payments, child support, the minimum payment on credit cards, and any other debts you pay on monthly. Total them all. This is your monthly long-term debt.
Example -- $450 (car payment) + $600 (child support) + $300 (credit card) + $150 (HD TV payment) = $1,500 Total Monthly Long-term Debt -
Step 3
Determine the maximum monthly rental payment you can afford including renter's insurance. Subtract your monthly long-term debt from your gross monthly income and multiply by 28 percent.
Example -- $4,167 (monthly income before taxes) - $1,500 (total long term debt) = $2,667 x 0.28 = $747 (rounded)
$747 is your Maximum Monthly Rental Payment -
Step 4
Determine your maximum monthly debt that includes your rent payment. This helps you understand how much you can spend for emergencies, trips, or new cars once you pay your monthly rent. Enter your total monthly income (remember, this is before taxes are taken out) from Step 1. Multiply this by 0.36. The result is the Maximum Monthly Debt Including Rent that you'll be able to comfortably afford.
Example -- $4,167 (monthly income before taxes) x 0.36 = $1,500 is the Maximum Monthly Allowable Debt Including Rent















Comments
francisfour said
on 8/21/2009 I will figure out the Math. Thanks!!
syriusas said
on 3/19/2009 This is great info! My mom is looking for a place to rent right now so this article will come in very handy~ 5* and a rec!
goodselfme said
on 3/17/2009 Great calculations for a secure plan to know what is affordable. TX 5*
Kathymcbain said
on 3/12/2009 Very good information on checking to see how much rent you can afford. This is important so people don't get overstretched!
ccard123 said
on 3/11/2009 Very helpful article; it's important to figure out how much rent one can afford. 5*