What Percentage of Income Should be Spent on Rent?

Video Transcript

"This is Financial Adviser Patrick Munro talking to you about how much money you should spend on rent. Basically, preparing for life, you have to look at rent as a function of when you eventually have a home. What I like to tell folks is that they should never spend more than 33 1/3 percent of their overall income on shelter, in other words on rent. That would be the maximum amount because you have to allow the rest for food and clothing and discretionary income as well. There are creative ways to bring that 33 1/3 percent down by getting a roommate perhaps, by being a little more frugal in your living requirements, therefore your savings will go up and you'll have an opportunity to go from rent to home ownership. Once you go into home ownership banks and brokers that put mortgages together normally will not allow you to participate in a mortgage unless your mortgage payment is at 35 percent or less. So it's a good idea, while you're renting, to get used to that 33 to 35 percentile as a target figure. This is Patrick Munro talking about how much you should budget for rent."