How to Calculate the Maximum Rent You Should Pay
There's no place like home, which is why it can be tempting to spend a lot of your paycheck on rent. Yet overspending on rent can lead to problems, not only with your finances but when it comes time to apply for credit. The ideal home is one you enjoy and that doesn't break the bank every month.
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Instructions
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Add up your monthly income. Property managers need it to determine whether you can pay rent consistently, so you must have the information available anyway.
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Multiply the sum of your income by 0.28. The result is the maximum rent financial experts suggest you should pay because according to them, rent should not take up more than 28 percent of your income.
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Calculate your monthly debts. In addition to your rent payment, total your financial obligations such as car payments, student loans and minimum monthly credit card payments, then divide that amount by your gross monthly income (see Resources). Experts suggest that this percentage, also know as your debt-to-income ratio, should not exceed 36 percent. Depending upon your percentage, you may want consider a more conservative percentage (less than 28 percent) when calculating how much you can spend on housing.
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