I'm looking to move into a new apartment. The problem (aside from not knowing neighborhoods and wanting to get a dog), I'm not sure how to find out how much I can afford for rent. I've been told to take my either net or gross income for a month and subtract my bills, etc. for a month from it. About a year ago, I did this and I was a little in the red. Today I do this, after my rent going up almost $100 and getting a 50 cent raise at work, and I can afford nearly $200 more than the last time. HUH? What is the actual equation I need to find out what I can afford? I hope this made sense to everyone. :-)
A lot of people say gross income but are wrong
You don't see all the money after taxes so go by net income
Use your net income since this is your actual 'take home' pay. And remember after deducting your ongoing monthly expenses to allow yourself a little breathing room with money also, you never know what kind of emergency might crop up. There's nothing worse than continually having nothing left over.
A couple of places I've rented expected my weekly income to be 1/4 of the monthly rent. So if the rent was $800.00 monthly, they would expect me to make $200.00 weekly. It worked out well.
I've see the equation as 40% to 50% of your net income is for rent. 25%-30% should go to other bills (electricity, gas, insurance, food) and the rest is "fun" money. But I have known rental places to base income on your gross and assume you can pay more for rent. Take care.
Whatever you do, remember, we never plan on our car breaking down, getting sick or having an accident. We never plan on something happening to a member of our family & having to take a week or 2 off work to take care of them, We never plan on having to fly out of town for a funeral. Unexpected doctor bills. etc. etc.
Life is unpredictable to say the least...
---> BE CAREFUL! You should rent at much less than you can afford. "just in case"
UNLESS, you have at least 2 months salary in savings for emergencies.
It's funny. Back in the 60s they recommended 25% of your monthly income for rent. In the 80s it was 30%, not it is probably 40-50%. Rents have gone up much faster than income in most cases.
Susan from ThriftyFun
I've heard from a friend who rents apartments they require someone to earn 2.5 times the monthly rent, before they will qualify them.
I'm a CPA and I suggest no more than one third of your Net Pay (e.g. after taxes etc) goes to rent. Try to save at least one tenth of your net for emergencies, with the balance going to other essentials, and treat yourself to a nice dinner some times
anna from ny
It makes sense to take your income and subtract your bills and expenses and see what's left. Just don't forget to subtract for emergency savings. If you end up in the red, then you need to see where you can cut back on spending. You HAVE to have a place to live, but you don't have to eat out, buy lots of clothes and home furnishings, etc.
One person said that it "worked out well" when their weekly income was 1/4 their monthly rent. I hope everyone can see this doesn't make any mathematical sense-- then 100% of the income is going toward rent! Yikes. (4 x 200 = 800)
Something my dh and I do is the envelope system. We figure out how much we need for each thing we spend money on in a month or year then divide by 4/52 depending on however often we get paid. We then take out however much that is and put it in an envelope designated for just that one thing (ie food, entertainment, insurance, gas, rent, etc). Use only what you have in that envelope. My suggestion for you is to take your utilities, food, and other bills and see how much you actually spend. See how much you can spend from there. If you don't have enough then look again where you spend your money and see where you can take something away. I also agree that you have to have some type of savings. My dh and I have spent probably over $1000 on trying to get his car fixed alone. Not to mention you will probably want to eventually have enough to buy a home someday.
Wish you luck.
Check out the book "Your money or your life" from the library. It has wonderful ideas about jobs, money and how to get it all together.
Please don't get a dog until you find a place to rent. Most places will not allow animals. I volunteer at a shelter, and am shocked by the number of individuals who get animals and relinquish them because a new place they are moving into will not allow pets. Most pets unfortunately get euthanized. Adopting a pet is a responsibility for the life of the pet, not just a inconvenience to be given away for another to deal with. Please make sure you are able to care for the pet for its lifetime, and the place you move into will allow it, before making the decision to adopt one. And if you are able to have a dog, please consider adopting one someone surrendered. Those of us who deal with putting them down will thank you.
Don't pay more than 30% of your take home pay. To really figure it out right, take your last pay stub, look at your net pay figure, and multiply by 52 (weekly pay), 26 ( every two weeks) or 12 (monthly). Now multiply that answer by .3 and that gives your rent figure.
Do not anticipate raises, bonuses or other windfalls.
Regarding the pet issue when renting. Remember they charge pet rent. Usually 20-30 dollars a month and also high deposits just in case of damage. One deposit is actually non-refundable.
As far as a pet is concerned, please remember that most apartment complex that accept pets charge rent for that pet. It is usually 20-30 dollars a month. Also, they charge you a non-refundable pet fee just in case of damage due to the pet. Remember to mention this to the rental agent.
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