Housing is one of the biggest expenses on your monthly budget. If you’re seeking a new place to live, choosing a place you like is important – but so is choosing a place you can afford. If you’re new to budgeting, it can seem complicated figuring out how much rent is a reasonable amount for you to pay.
It’s not only important to know your rent limits so you don’t overstretch your finances, but also to you don’t waste your time. In most cases, a landlord will have you fill out an application before approving you to move in to a property. This includes your credit score. If your income is too low, you may be rejected immediately, meaning you filled out that application and got your hopes up for nothing.
Most landlords prefer your annual income be at least 40 times your monthly rent. If you don’t know your annual income, now is the time to find out. When determining how much rent you can pay, divide this amount by 40. If you plan on living with a roommate, combine your annual income and divide that new amount by 40.
It’s also important to take into account not only typical landlord requirements but your standard of living. If you’re only just managing the rent amount in your calculation, it may not be an ideal apartment for you to move in to. You must also consider other expenses you are going to have, both monthly and yearly. Utilities, clothing, groceries, car payments, entertainment, and other expenses can eat up a lot of your money. Be sure to budget for these expenses when you decide how much rent you want to pay.