How to Calculate What to Spend on Rent

You must take many factors into account when deciding how much rent you can pay.

When house- or apartment-hunting, it's important to be honest and realistic about not only the amount of rent you can afford but also the amount of rent you can afford without making yourself unhappy. A place you can technically pay for isn't much good if paying for it leaves you nothing for savings or for recreation. While determining your ideal rent involves lots of mathematical calculations, it's not an exact science: weigh the benefits of living in a more expensive place against those of feeling more financially secure and confident.

Instructions

1. Calculate your monthly income: the amount of money you actually receive from the first of one month to the first of the next month.

2. Keep a record of your expenses. You don't have to do this for a whole month---doing it for a week and then multiplying everything by four should give you a useful enough figure. Keep track of essentials like groceries and insurance payments separately from less vital purchases, which can be more easily cut.

3. Consider how much money you'd like to have left over for savings at the end of the month. Savings are optional, of course, and depending on your situation you may not be too worried about them, but it's usually better to cut unnecessary expenses than it is to cut savings.

4. Note the utility costs you'll be required to pay in each house or apartment you are interested in living. Since utilities are essential monthly expenses, you can count them as part of your rent. When it comes to use-based costs like those for water and power, the best way to know how much you're likely to need is to look at your current utility bills.

5. Subtract the figures arrived at in Steps 2 through 4 from the one in Step 1. The remainder is the money you have available for rent---not a perfect figure, of course, since your expenses have mostly been estimated. If a place slightly out of your price range is otherwise perfect, you may want to go for it, provided that you're sure you can tighten your spending enough without serious problems.