Your Home Renting Guide: Figuring Out What You Can Afford

If you’re a renter and you’re looking for a new place to live, you need to iron out some details first.

One of these is how much rent you can actually afford.

Not only will this help narrow down your search, it will also make getting approved a cinch. Before you dive into rental listings, crunch the numbers and figure out the top amount you can pay. This home renting guide will help you do it.

Budgeting for Renting: How to Figure Out What You Can Afford

Figuring out renting costs and how much of your income you can part with is just plain smart. If you’re struggling to manage your finances or you just want to start saving money, this is a great step in the right direction.

Step One: What’s Your Total Monthly Income?

The first step, ironically, is to take a step back. Total up your average monthly or yearly income and lay it out there. Once you’ve done that, you can calculate the top amount you can afford for rent.

Step Two: Go by the Book

There’s a common guideline to follow when figuring out how much rent you can afford, according to Business Insider. Make sure your yearly income is 40 times the monthly rent amount. For instance, if your monthly rent is $1,000, then your yearly income should be $40,000 in order for you to live comfortably.

Another good guideline is to avoid spending more than 30% of your income on rent. Stay under 30%, and you should be able to easily afford all of your other bills and expenses.

Step Three: Factor in Those Other Expenses

The amount of rent you pay needs to include basic necessities like your electricity and utility bills, renters’ insurance, internet, and other related costs. Add up your monthly averages and tack them on to the monthly rent amount. If your landlord includes some utilities in the rent, you can skip this step, or just add on internet and insurance.

Step Four: Plug in the Numbers

You’ve got the numbers you need. Now you just need to plug them into your budget equation.

Divide your yearly income by the total rent amount you’ll be paying at a new place, including expenses. If the number that comes up is 40 or less, you’re golden.

Bad with Numbers? Figure Out Renting Costs with an Online Calculator

If this is all too much math for you to deal with, worry not. There are rent calculators online that will help you figure out how much you can afford – you just need to have your numbers ready. Zillow, for instance, has a good rent affordability calculator that determines what you can afford based on monthly net income, your monthly debts, and your location.

Once you have your rental budget ironed out, it’s time to go forth and find your new abode. You’ll be glad you did the legwork beforehand with this home renting guide when you find your new place.