How Much Rent Can You Afford? The 30% Rule vs the 40x Rule
- 1. The 30% rule
- 2. The 40x rule
- 3. Check it against take-home pay
- 4. Don’t forget move-in costs
- 5. Roommates and utilities
- Free tools
Two rules of thumb come up when renting. One is a budgeting guide, the other is a landlord screening rule. They give different answers.
1. The 30% rule
Rent at or below 30% of gross (pre-tax) monthly income.
| Gross yearly income | 30% per month |
|---|---|
| $40,000 | about $1,000 |
| $54,000 | $1,350 |
| $72,000 | $1,800 |
2. The 40x rule
Many landlords want gross yearly income of at least 40 times the monthly rent. For $1,350 a month that means $54,000 a year. It works out close to the 30% rule, and some use 30x or 3x monthly instead.
3. Check it against take-home pay
Both rules use gross income. Taxes, retirement contributions and debt payments come out first. A quick check: rent plus utilities plus minimum debt payments should leave room for food, transport and savings from take-home pay.
4. Don’t forget move-in costs
First month, security deposit, application fees, movers and basics for the new place often add up to two or three months of rent in cash.
5. Roommates and utilities
Split rent is only part of it. Agree on how utilities, internet and shared supplies are divided before signing.
Free tools
- Rent affordability calculator: https://smartbudgetsheets.surge.sh/calculators/rent-affordability-calculator/?utm_source=nostr
- Rent vs buy calculator: https://smartbudgetsheets.surge.sh/calculators/rent-vs-buy-calculator/?utm_source=nostr
- 50/30/20 calculator: https://smartbudgetsheets.surge.sh/calculators/fifty-thirty-twenty-calculator/?utm_source=nostr
- Debt Payoff Planner, up to 8 debts (Payhip): https://payhip.com/b/PtBLU?utm_source=nostr
- 42 free budget templates, pay what you want ($0 is fine): https://smartbudgetsheet.gumroad.com/l/ngpkrb?utm_source=nostr
General information, not financial advice. Figures are rounded examples.
Write a comment