How to Determine How Much You Can Pay in Rent

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Determine how much you can afford to pay in rent by taking 35 percent to 40 percent of your overall gross income for rent or mortgage payments. Use 60 percent of your income for food, clothing and variable expenses with advice from a registered financial consultant in this free video on money management.

Part of the Video Series: Money Management
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Video Transcript

This is financial adviser Patrick Munro talking about how to determine how much to pay in rent. There's a general rule of thumb when an individual looks at the amount of dollars they should pay for their shelter and what that means is anywhere between 35 to 40 percent of your overall gross that you do take in as income. The rest of the money, the 60 percent should be used for food, clothing, shelter, variable expenses as well. But that's a good barometer that you should do going forward. It's important not to pay too much for your rent because you can end up having to not pay enough on your credit cards, auto loans, student loans and things that really do depend on a great FICO score because you'd be forced to use that money to make your rent. So it's important to keep affordable in that nature. Many people say that it's great to be frugal and if you can live with other people and trade out the rent that you have to pay sort of in a barter system, then you too will have more money to work with. This is Patrick Munro talking about how to determine the amount that you would pay for rent.

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