Apartment hunting is an exciting time. Searching for a new apartment is a bit like searching for the setting of the next chapter of your life. Chances are, you have a pretty big list of features and amenities that you want, but an even bigger list of questions you need to consider. And at the top of that list is the most important question:
“How much can I afford in rent each month?”
Once you determine your price range, the rest falls into place. Use this guide to figuring out your rent budget and find out once and for all what you can afford.
Determine All Expenses
Before you even begin your apartment search, you need to assess your financial situation. The state of your finances will be the determining factor in what type of apartment you can afford to live in.
First things first — determine all of your expenses. To do this, add up all of the money you owe on a monthly basis. This could include:
- Student Loans
- Car Payments
- Phone Bill
After that, add up all of your fluid expenses. This includes:
Once these are all added up, all that should be left is determining your utilities and cable/Internet bills. Since you don’t yet live in the apartment, it’s tough to make an estimate, seeing that you don’t know what the landlord will cover, what the bills usually look like at the apartment, and other crucial information. It’s safe to say that all of these bills together will add at least $100 to your expenses, but if you live alone, it will likely add up to be a lot more.
To try and get the most accurate estimate of your utilities and cable/Internet bill, make sure you ask the landlord what they cover on every tour you go on. Take notes and reference them later so that you can make a final assessment of your expenses before you sign any lease.
Make a Budget (and Stick to It)
While this tip may be easier said than done, it’s probably the most important aspect of not only finding the best apartment possible, but living a financially healthy lifestyle in general. These days, it’s easier than ever to organize your finances and create a plan that works for you. Websites and apps like Mint do all of the hard work for you — they can track your spending, help you set a budget, and give you a plan for success, oftentimes at no cost to you. Utilize sites and programs like these to create a budget that lets you live a comfortable lifestyle.
Unfortunately, setting a budget is only half the battle. Your budget is meaningless if you constantly stray from your spending limits. This is where self-discipline comes into play. It’s never too early to start practicing frugality as it’s a skill that you will need throughout your entire life. Start practicing self-discipline and healthy spending habits as early as possible, so that you give yourself more and more financial breathing room as you get older. Remember: the more that you spend on unnecessary things, the less you can spend on rent for a nicer apartment.
“Three Times The Rent” Rule
Still need help figuring out how much you can spend on rent? Use the rule that realty companies and landlords use! Most landlords don’t want to see tenants paying more than 33% of their monthly income towards rent. This rule protects you should something come up that interferes with your income — so you still have a financial cushion to get you through the month.
Monthly Income Divided By 3 = Your Monthly Rent (recommended maximum)
By keeping your rent payments under 33% of your total income, you’re giving yourself enough breathing room to make it through the month. You shouldn’t have to end each month hungry, and if you’re paying too much for your rent, you are hindering your budget and your financial wellbeing.
If you want to calculate using your annual income, use the following formula.
Annual Income Divided By 36 = Your Monthly Affordable Rent
|Annual Income||Monthly Affordable Rent|
It’s also important to remember that every city has a different cost of living. NerdWallet’s Cost of Living Calculator can you help you find out the cost of living in your city. This platform uses actual statistics and numbers to provide you with the best estimate as to how far your income will go in a specific city.
Find An Affordable Apartment
Although it may be a little deflating to let money stop you from getting the apartment of your dreams, the reward of financial security far outweighs the risk of overspending. If you stick to a budget and don’t live past your means, you will end up saving money for things outside of living costs, like vacations or even a house! Ready to start finding an apartment that works for you? View our affordable apartment listings today!