How Much Should You Budget for Rent?

It’s important to ask, “How much should you budget for rent?” when searching for a new apartment. There are surely general rules that some suggest you follow, but it depends on your monthly income and current financial situation.

Let’s look at some of the key things to consider to help you find the perfect place comfortably within your monthly budget.

How Much Should You Budget for Rent?

There are two budgeting rules that expert suggest you follow to help you determine the right rent allowance.

Using the 30% Rule of Thumb

The 30% rule is a common theme that renters consider when looking for their first apartment. In basic terms, you shouldn’t spend more than 30% of your monthly income on rent. That allows 70% of your income to go to bills, living costs, and savings.

Deciding to stay within 30% of your income on monthly rent is a sure-fire way to ensure you’re financially comfortable. However, it doesn’t mean it’s the right option for everyone, as your income can significantly affect your rent. Also, your discretionary spending can have a considerable bearing on how much you should be spending on an apartment.

Interestingly, the 30% rule of thumb is a somewhat antiquated theory with origins dating back to the National Housing Act of 1937. Public housing for low-income families was established using a percentage, starting at 20% of their monthly income.

By the 1980s, this percentage increased to 30%, thus birthing the 30% rule that most use when renting.

Does the 30% Rule Always Work?

Undoubtedly, using the 30% rule can help you budget your income levels accordingly. With the housing market’s current state, it’s challenging to stay within this percentage. Even with 30% of your income put aside for monthly rent, finding a property within your budget is a bit difficult.

In 2020, the median household income in the United States was $67,521, and the average rental price of a one-bedroom apartment neared $1600 in some states. Although this is within the 30 percent rule, most renters are looking for two or more bedroom properties. Unfortunately, with these inflated prices, the dream of renting a reasonably sized property can sometimes require up to 40% to 50% of your annual income.

Another significant issue with the 30% rule is that it’s not tailored to each renter’s cost of living. You likely have other expenses outside of your living costs and rent to consider. Whether it be a car payment, insurance, or credit card debt obligations, each renter has his or her own needs.

It’s always best to consider your personal financial information before settling on rent costs. Otherwise, you could spend significantly more than you should, based on your monthly income and expenses.

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Using the 50/30/20 Rule

Instead of settling for the standard 30% rule, the 50/30/20 rule is slightly easier to customize to your situation. It also helps to account for all areas of spending, offering better blanket coverage for all of your finances.

Let’s take a look at the 50/30/20 rule in further detail.


The first thing to consider with this budgeting guide is where to allocate 50% of your income. As you can expect, this will be the largest chunk of spending for all of your living expenses. After calculating your take-home pay (after tax), you’ll need to determine which living costs must be covered monthly.

Your groceries, debt, rent, utilities, and insurance should all be included in this total. Interestingly, as should your rent.

By keeping this in mind, you have a little more flexibility in determining how much of your income can go to your dream apartment or home. For example, if you only need 10% of your income for most expenses, you can increase your rent budget to 40%.


The next chunk of the 50/30/20 rule is the money you’ll spend on your “wants,” including luxuries and extracurricular activities. This is when you’ll want to start saving for shopping, dinners with friends, birthdays, and more.

Since 30% is a significant chunk of your income, you can also have flexibility in this area. You could allocate 20% to your “wants,” adding the other 10% to your needs or the next section of the rule. Customize it to suit your specific needs as with any budgeting method.


The final part of this rule is where you’ll need to start saving money for extra payments or your savings account. Most spenders find that saving 20% of their take-home pay helps pay down debt and additional bills.

However, if you’re lucky enough to be debt-free, this is a great time to start saving a substantial nest egg for emergencies.

It’s important to remember to put any extra income into this group, allowing you to grow your savings. You never know when you might need extra cash for everyday expenses or special occasions.

learn how much should you budget for rent

Quick Budgeting Tips

Now that you have a general idea of the amount of money you should consider for a monthly rent payment, it’s time to start crafting a budget.

Everyone’s financial needs differ, but these tips will help you get started. The more you’re on top of your finances, the easier it will be to afford your monthly necessities and any extras.

Tip 1: Calculate Your Annual Salary Honestly

The first and most important thing to do when creating a budget is calculating your pay. It’s easy to get carried away and overestimate how much you’ll bring home. However, you must look at your pay stubs to determine your actual take-home pay.

You might be surprised to see the amount of money taken out for taxes and other mandatory elements. With this figure in mind, you can create a concrete budget that will allow you to avoid overspending throughout the year.

Tip 2: Find Affordable Rent Prices

It can be tempting to stay in your immediate area when looking for a place to rent. Unfortunately, this decision leads many tenants to find properties well outside their budget. A better alternative is to consider moving to a more affordable location.

Not only are inexpensive rent prices beneficial on their own, but they can also help your overall finances. The less you spend on living costs, the more expendable cash you’ll have at the end of the month. You can put more into savings and eliminate debt payments with this extra money.

Tip 3: Cut Spending Habits Wherever Possible

If you can’t move or find another way to increase your income before taxes, it’s time to consider cutting costs.

Outside of eliminating frivolous spending, there are multiple avenues where you can reduce your living expenses. You would be surprised to learn that there are ways to reduce your monthly spending when it comes to your bills and living costs.

Let’s look at some of the most common areas where you can save hundreds of dollars annually.

  • Insurance

The first thing to look at is your insurance, where you could find significant savings. As a good driver, most insurance companies will be willing to give you a discount for your clean record. You may also find additional savings, such as maintaining a certain GPA while in university or living within a certain distance of your school.

Outside of car insurance, you can save on your home, life, and health insurance as well. Bundling all of your insurance policies together is a great way to get a specific percentage off. Most insurance companies give their policyholders discounts when they own more than one product.

  • Utilities

Another exciting avenue to potentially save extra cash is with your utilities. There’s no doubt that electricity, heat, and water are necessities. However, managing your consumption is a fantastic way to owe less at the end of the month.

Other utilities to consider cutting include your cellphone, cable, and internet. With the popularity of cord-cutting, more households are beginning to save on cable by getting rid of it entirely.

how much should you budget for rent

The Rent to Income Ratio Matters

How much should you budget for rent is something everyone should consider. This way, you’ll find the ideal and most affordable living situation. By managing your annual income, budgeting effectively, and controlling your expenses, you can find a comfortable monthly rent payment.

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Kristen is the founder and content creator at Mom Managing Chaos where she teaches busy moms how to simplify and organize their life and finances. She writes about frugal living, budgeting, productivity and organization.