I spend 6.1% of my Gross income on rent

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WendyW
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I spend 6.1% of my Gross income on rent

Post by WendyW » Sun Sep 15, 2013 1:11 pm

'
Or 7.1%, if I also roll in utilities.

Do I win the internets? Or am I a spendthrift by Bogleheads standards ?
Trulia wrote:The US Department of Housing and Urban Development and many state housing authorities recommend that you spend no more than 30% of your gross (pre-tax) household income on housing and utilities. This means if you earn $50,000 per year, you should spend no more than $15,000 per year—or $1250 per month—on rent and utilities. The Mint, a budgeting and personal finance web site, recommends you spend no more than 33% of your gross (pre-tax) income on housing, meaning that on $50,000 you should spend no more than $16,667 per year—or $1388 per month—on rent and utilities.
...
Then there's the question of what average rents are in your market and how much rental inventory is available in your price range. In many more expensive markets, such as New York or San Francisco, high rents mean that residents may routinely pay more than 30% of their gross incomes for rental housing. In dense urban areas higher rents are a fact of life—unless you want to move outside the urban core.

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cowboy
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Re: I spend 6.1% of my Gross income on rent

Post by cowboy » Sun Sep 15, 2013 1:54 pm

I'm at 11.9% of gross income for mortgage/insurance/taxes, 13.2% with utilities.

Short of college, during which I was at 40% of gross income for rent/utilities, I've stayed under 20% for housing/utility costs (though sometimes to the chagrin of my DW, thanks to higher cost-of-living areas like DC).

Lots of moving pieces with this question, but it would certainly be interesting to see where the Boglehead standard lies...

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Re: I spend 6.1% of my Gross income on rent

Post by Texas hold em71 » Sun Sep 15, 2013 1:55 pm

That's pretty impressive.

I am mortgage free, but if I add up HO insurance, property taxes, water, gas and electric, we are at about 3 percent of gross. I don't track expenses close enough but I imagine by the time I add in repairs and maintenance and some depreciation factor, I wouldn't look as frugal.

I am in a low cola but high property taxes since we don't have a state income tax.

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Re: I spend 6.1% of my Gross income on rent

Post by Kavan » Sun Sep 15, 2013 1:58 pm

I live in the SF Bay area (east bay), and rent and utilities on my current 1-bd apartment comes to about 19% of my gross pay.

stan1
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Re: I spend 6.1% of my Gross income on rent

Post by stan1 » Sun Sep 15, 2013 2:05 pm

I'd be impressed if you made $50K/year, much less so if you make $250K/year (or more).

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Aptenodytes
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Re: I spend 6.1% of my Gross income on rent

Post by Aptenodytes » Sun Sep 15, 2013 2:07 pm

Your question is only implicit, so I'm guessing what you are trying to say. I am guessing that you are asking "How unusual is my situation?"

The answer is not unusual.

You use the term "spendthrift" which implies a further interest in knowing if a low percentage corresponds to diligent effort. The answer to that question is no.

The percentage of your gross income spent on housing depends on many things, including the cost of housing where you live, your level of extravagance, your level of income, and your tax burden.

So you could have a bunch of people all paying the same percentage as you but reflecting vastly different circumstances. If Warren Buffett were to spend 7% of his gross income on housing, he would not be confused for being spendthrift -- he would be considered highly extravagant. You simply can't make any inference at all about a person's moral fiber just from knowing this one number.

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BrandonBogle
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Re: I spend 6.1% of my Gross income on rent

Post by BrandonBogle » Sun Sep 15, 2013 2:47 pm

I "own", not rent.

My mortgage P&I is 8% of gross salary, P&I + property taxes an insurance is 11.9%, and adding utilities comes to 15%.

The numbers would be a good bit lower if I add in my variable bonus and any investment income. In that case, then would you include just taxable investments, or the whole portfolio (taxable, Roth, trad 401k in my case)?

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Re: I spend 6.1% of my Gross income on rent

Post by epilnk » Sun Sep 15, 2013 3:06 pm

A lot really depends on how old you are. Young, broke, and just starting out usually justifies spending a larger percentage on housing. Assuming your earnings potential increases faster than your housing needs, this should go down over your lifetime. When I was in grad school housing was approximately 50% of my gross, and that was for a shared apartment without central heat. Now that we're older with no mortgage it's just property taxes, insurance, utilities, and maintenance, and that's considerably under 5%.

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Re: I spend 6.1% of my Gross income on rent

Post by rr2 » Sun Sep 15, 2013 3:07 pm

stan1 wrote:I'd be impressed if you made $50K/year, much less so if you make $250K/year (or more).
Agree with the above. I would think that at lower incomes housing would tend to be a larger fraction than at higher incomes.

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Re: I spend 6.1% of my Gross income on rent

Post by Colorado13 » Sun Sep 15, 2013 4:36 pm

I'm at 7.3%, including escrow of taxes and homeowner's insurance and at 8.1% if I add in utilities. Without escrow and utilities, I'm at 4.8%. I live in an area with housing costs at 184% of the national average according to Bestplaces.net.

While I know it is controversial, I make extra mortgages payments so typically increase the total payment to about 15.9% of gross. Slightly more than half of my gross is allocated to investments, so I live on about 34% of my income. Then Uncle Sam takes his share so I'm living on even less than 34%. Thanks to Bogleheads I plan to retire early and expect that you may be on track to do the same (if indeed that is your goal...)

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Re: I spend 6.1% of my Gross income on rent

Post by rr2 » Sun Sep 15, 2013 4:50 pm

I read the title and the OP once again. It is about rent and not mortgage. For those who own their house, the housing cost is the equivalent rent that you would pay for that house.

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Re: I spend 6.1% of my Gross income on rent

Post by White Coat Investor » Sun Sep 15, 2013 4:53 pm

I also spend a relatively low percentage of my income on housing (not as low as the OP) I don't necessarily get these "frugal" threads. The point of being a Boglehead isn't to spend as little as possible. Savings rate is important but investing is all about spending, not saving. It's about giving up spending now in order to spend more later.

I like the 20% rule- 20% of gross income spent on housing including mortgage, tax, utilities, rent etc.
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Re: I spend 6.1% of my Gross income on rent

Post by grog » Sun Sep 15, 2013 5:11 pm

It looks like I'm at around 19% of gross. Rent is by far my biggest expense, so I don't think that's unreasonable. I live in a city. I could save on rent by moving out to the suburbs but with the increased transportation costs, it'd be a wash. I prefer to track all my expenses based on net income rather than gross.

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Re: I spend 6.1% of my Gross income on rent

Post by gkaplan » Sun Sep 15, 2013 5:23 pm

sixty two percent
Gordon

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Re: I spend 6.1% of my Gross income on rent

Post by Busting Myths » Sun Sep 15, 2013 6:10 pm

gkaplan wrote:sixty two percent
California FTW!

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market timer
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Re: I spend 6.1% of my Gross income on rent

Post by market timer » Sun Sep 15, 2013 6:17 pm

To make the comparison apples-to-apples, owners should use what they could rent their house for, not what they actually pay in property taxes, etc.

I'm somewhere between 5% and 7%, living way below my means right now as an experiment.

Paul78
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Re: I spend 6.1% of my Gross income on rent

Post by Paul78 » Sun Sep 15, 2013 7:20 pm

between 14%-21% Depends on the amount of OT and differentials I get. Ie 21% would be my "base" pay but that is not realistic because I work every weekend (10% bonus to base) and NOC shift (10% bonus to base). This year it is probably about 15% because I worked/am working more OT then I would in a normal year.


That number should actually go down a bit because I will get a 9% raise in 1-2 months and a 6% raise in 1 or 2 years. Meanwhile my rent can only go up 3% a year.


In the long run the percent will go up if I stay in my current area

1. My next two raises are good (9% and 6%) but after that it is pretty much just a 2.5% raise every other year for the rest of my career. If COLAS are not restarted (been over 3 years since we got one) that 2.5% will not even cover the cost of inflation.

2. If I stay where I am living I will want to upgrade my apartment. Moving from my studio to a 1 bedroom apartment will greatly increase cost.

3. "Promotions" in my job actually CUT pay (ie you get an easier job, get to work day shift Mon-Fri, and get holidays off. But you lose a lot of money in differentials and OT).

So really for me in the long run it will be about 25% of my gross pay.

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Re: I spend 6.1% of my Gross income on rent

Post by YttriumNitrate » Sun Sep 15, 2013 7:22 pm

I spend more now, but my all time low was 4.5% and that included all utilities (except electricity) and cable TV with HBO. 8-) I was a year or two out of grad school and my roommate got a new job and moved away. With little time to look for a new place and being a cheap S.O.B., I ended up splitting a 4 bedroom two bath apartment with 3 college students.

While there were obviously a few things that took *ahem* getting used to, it turned out to actually be a lot of fun with regular poker games, HALO tournaments, and a few memorable parties. :sharebeer

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Re: I spend 6.1% of my Gross income on rent

Post by Ketawa » Sun Sep 15, 2013 7:36 pm

My place was rented just before I bought it. Using that number for the equivalent rent, I'm at 24% for rent only, 29% including utilities (cable, cell phone, electricity).

That makes me feel pretty good. I'm single and max my retirement accounts, for about 27% of my pay. Federal income tax is about 6% and my portion of FICA tax is about 5%. Debt service not related to housing is currently about 12% of my monthly cash flow. This means the rest of my expenses are only about 21% of my monthly income. :shock:

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Re: I spend 6.1% of my Gross income on rent

Post by SteelPenny » Sun Sep 15, 2013 9:04 pm

Assuming you are including both incomes for two income families, 14-15% for 2012. Will be less in the future as income has increased more than rent.

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Re: I spend 6.1% of my Gross income on rent

Post by abrash » Sun Sep 15, 2013 10:53 pm

I was at 5% (6% with utilities) for several years until recently when I moved to a nicer place. I now pay 7.5% (8.5% with utilities).

My overall low housing costs over the past several years definitely have been an important contributing factor to my ability to save and invest.

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BrandonBogle
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Re: I spend 6.1% of my Gross income on rent

Post by BrandonBogle » Sun Sep 15, 2013 11:07 pm

market timer wrote:To make the comparison apples-to-apples, owners should use what they could rent their house for, not what they actually pay in property taxes, etc.

I'm somewhere between 5% and 7%, living way below my means right now as an experiment.
If I had to rent a house the size of the house I own, I would never be able to afford it. My next door neighbor has a house that is slightly smaller than mine and has one fewer bedroom and no formal dining room (just a nook). She rents one ROOM of her house for my mortgage's P&I!

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Re: I spend 6.1% of my Gross income on rent

Post by techcrium » Mon Sep 16, 2013 12:17 am

yes you are pretty spend thrift.

Assuming you rent in a low income neighborhood at $400 a month, that would mean you make $78K gross

I am renting for $320 a month (inc utilities and internet) and this is probably as cheap as you go in my city. Any cheaper would be at a homeless shelter. At a 45K income, that is still 8.5% of my gross income.

I am curious as to your income and networth now.

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Re: I spend 6.1% of my Gross income on rent

Post by cheesepep » Mon Sep 16, 2013 1:44 am

I live in one of the most expensive areas in one of the most expensive cities in the world and spend about 10% of my monthly income on rent including utilities.

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Re: I spend 6.1% of my Gross income on rent

Post by JoMoney » Mon Sep 16, 2013 5:39 am

WendyW wrote:'... Do I win the internets? Or am I a spendthrift by Bogleheads standards ?
I have employer provided housing (although I do have to pay income taxes on the value of the benefit). I've known people who manage to travel consistently, and in addition to their housing get meals and other expenses paid for.

But at the end of the day, anyone would be better off with a job paying $200k a year and spend 30% on housing then a job paying $60k and spend 10% on housing.
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Re: I spend 6.1% of my Gross income on rent

Post by SHB » Mon Sep 16, 2013 8:18 am

31% including utilities, living in NYC.

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Riceman
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Re: I spend 6.1% of my Gross income on rent

Post by Riceman » Mon Sep 16, 2013 8:23 am

If you combine housing, insurance, utilities, phone, and internet, i.e., all standard living expenses related to one's house, i am paying 150 dollars per year (recharging two china mobile cell phones). But my wife and i combined don't make six figures. It makes comparing frugality w others an even more pointless exercise.

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Re: I spend 6.1% of my Gross income on rent

Post by investingdad » Mon Sep 16, 2013 8:44 am

When I got my first place, I was spending about 18% of gross on Rent. That was 18 years ago.

Today, our PITI on the house is 12.3% of gross. If I take the property tax component out, it's 6.5%. High real estate tax area, unfortunately.

If I add in my utilities (gas, water, electric, garbage) it's 14.3%.

I guess this means that if I listened to the government guidelines, we could have easily bought that 3/4 million estate home in the country I would have liked. Alas, we did not do this.

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Re: I spend 6.1% of my Gross income on rent

Post by VictoriaF » Mon Sep 16, 2013 9:29 am

WendyW wrote:Or 7.1%, if I also roll in utilities.

Do I win the internets? Or am I a spendthrift by Bogleheads standards ?
If the price of an apartment is the main criterion--you win the internets for getting the cheapest one.
If the main criterion is a nice comfortable apartment--you win the internets for the magnificent income.
It's a win-win,

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Re: I spend 6.1% of my Gross income on rent

Post by staythecourse » Mon Sep 16, 2013 9:34 am

EmergDoc wrote:I also spend a relatively low percentage of my income on housing (not as low as the OP) I don't necessarily get these "frugal" threads. The point of being a Boglehead isn't to spend as little as possible. Savings rate is important but investing is all about spending, not saving. It's about giving up spending now in order to spend more later.

I like the 20% rule- 20% of gross income spent on housing including mortgage, tax, utilities, rent etc.
Kudos. This should be a sticky.

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Re: I spend 6.1% of my Gross income on rent

Post by jlawrence01 » Mon Sep 16, 2013 9:44 am

Over the last five years, we have averaged about 4-5% as our only housing expenses are taxes and utilities. It is the advantage of living in a small condo.

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Re: I spend 6.1% of my Gross income on rent

Post by TSR » Mon Sep 16, 2013 10:43 am

Obnoxious English Major Public Service Reminder: This is a good time to remind everyone that "spendthrift" means "a person who spends money in a careless or wasteful way," not someone who is thrifty with their spending. (FWIW, the OP is using it correctly.)

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Re: I spend 6.1% of my Gross income on rent

Post by investor1 » Mon Sep 16, 2013 10:53 am

Well, you beat me.

I'm at 8.1% including utilities. Well, 8.1% of my base pay anyway...

I'll add that I rent rather than own.
Last edited by investor1 on Mon Sep 16, 2013 1:47 pm, edited 2 times in total.

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Re: I spend 6.1% of my Gross income on rent

Post by DVMResident » Mon Sep 16, 2013 1:09 pm

Wow, reading this board can make a person feel like a slacker!

Anyways, we spend 33.9% of gross on mortgage (P+I), taxes (CA), insurance, PMI*, and utilities (including our tax deduction). We rent a mother-in-law unit in the back. Subtracting the rental income stream from the 33.9%, everything costs 22.4% of our gross (all taxes included). We live in west LA.

* I know this board is against this. I felt the market was moving away from us faster than we could save and decided to move fast. The bet paid off: the mortgage rates increase over the past year is greater than the cost of our PMI (including tax consideration) and market appreciation of similar homes in the area. If we bought our house today, we'd spend $450-$500 more a month, well out striping the $159 month PMI costs. All in all, the total cost is about $250-$300 less a month than renting a 2 bedroom apartment in the same area.

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Re: I spend 6.1% of my Gross income on rent

Post by buckstar » Mon Sep 16, 2013 2:42 pm

I'm at 5.7% for mortgage, taxes and insurance. Haven't figured utilities, but it wouldn't add more than 1/2%.

I remember the days when it was closer to 30%, back in the day we were "house rich". I much prefer being "house poor" :)

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Re: I spend 6.1% of my Gross income on rent

Post by mojave » Mon Sep 16, 2013 2:58 pm

We're at ~21% right now which is good, it's an apartment and realistically it could be less. We're looking into buying a condo for about $60k, which would cut it down to about 10% and then in a few years use it for rent income if we don't sell it.

Previously we had a very overvalued home - my husband had a large pay decrease from when he bought it (was making $120k or so and it went down to $75k) and he was spending about 50% before we got married :oops:

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Re: I spend 6.1% of my Gross income on rent

Post by Atilla » Mon Sep 16, 2013 8:15 pm

Our mortgage payment is 4.6% of gross income. But we live in the hood - I go to the grocery store with a pistol in my pocket.
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Re: I spend 6.1% of my Gross income on rent

Post by Colorado13 » Mon Sep 16, 2013 8:36 pm

BrandonBogle wrote: If I had to rent a house the size of the house I own, I would never be able to afford it.
Same here. Even considering costs of home maintenance that I would not occur if I were renting, owning is more cost effective for me.

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Re: I spend 6.1% of my Gross income on rent

Post by Colorado13 » Mon Sep 16, 2013 8:38 pm

Atilla wrote:Our mortgage payment is 4.6% of gross income. But we live in the hood - I go to the grocery store with a pistol in my pocket.
666 posts!

No, I'm not superstitious (as demonstrated by the #13 in my user name...but that was a typo, I wanted it to be 14. :( )

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Re: I spend 6.1% of my Gross income on rent

Post by Harold » Mon Sep 16, 2013 9:59 pm

Atilla wrote:I go to the grocery store with a pistol in my pocket.
And on an unrelated note -- Atilla spends 0.0% of his Gross income on groceries!

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Re: I spend 6.1% of my Gross income on rent

Post by VictoriaF » Mon Sep 16, 2013 10:08 pm

Harold wrote:
Atilla wrote:I go to the grocery store with a pistol in my pocket.
And on an unrelated note -- Atilla spends 0.0% of his Gross income on groceries!
His bullets count towards the grocery budget.

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Re: I spend 6.1% of my Gross income on rent

Post by Harold » Mon Sep 16, 2013 10:13 pm

VictoriaF wrote:
Harold wrote:
Atilla wrote:I go to the grocery store with a pistol in my pocket.
And on an unrelated note -- Atilla spends 0.0% of his Gross income on groceries!
His bullets count towards the grocery budget.

Victoria
Thought of that -- but who says he needs to shoot? Gun-toting grocery shopper who keeps mutual fund expense ratios down is probably going to keep bullet costs down as well.

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Re: I spend 6.1% of my Gross income on rent

Post by VictoriaF » Mon Sep 16, 2013 10:18 pm

Harold wrote:
VictoriaF wrote:
Harold wrote:
Atilla wrote:I go to the grocery store with a pistol in my pocket.
And on an unrelated note -- Atilla spends 0.0% of his Gross income on groceries!
His bullets count towards the grocery budget.

Victoria
Thought of that -- but who says he needs to shoot? Gun-toting grocery shopper who keeps mutual fund expense ratios down is probably going to keep bullet costs down as well.
"Down" is not the same as zero. As with mutual funds.

Victoria
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Re: I spend 6.1% of my Gross income on rent

Post by chipmonk » Mon Sep 16, 2013 11:24 pm

I spend about 20% of my annual earnings on rent, living in a large and comfortable condo in one of the trendiest parts of town. I eat out 2-3 times week, but I'm otherwise fairly frugal.

No regrets... my apartment is the most luxurious thing I pay for and it's comfortable and low-maintenance and makes me quite happy. And it's also quite a steal given what others are paying to rent or buy in the area.

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WendyW
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Re: I spend 6.1% of my Gross income on rent

Post by WendyW » Tue Sep 17, 2013 9:42 am

SHB wrote:31% including utilities, living in NYC.
When I lived in Manhattan I spent about 20% of gross income on rent.
I suspect that there are few people that live there that spend much less.

On the plus side, unlike most low-rent U.S. cities, you don't need to own a car there, which frees up a big chunk of income.

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Re: I spend 6.1% of my Gross income on rent

Post by bungalow10 » Tue Sep 17, 2013 10:15 am

12.5%, including mortgage (15-year), taxes, insurance, gas, water/sewer, electric, trash.
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Re: I spend 6.1% of my Gross income on rent

Post by tdonline » Tue Sep 17, 2013 10:36 am

I rent and it's just under 19% of gross income. I do live in a super convenient and safe area so I haven't had a car in 9 years. Owning a low end condo in my neighborhood would run about 30% of my income. Owning a moderately nice condo would run up to about 40%. I don't even want to think about what the luxury condos would cost me. I do know the rent for them ranges from 2,500 to 2,800. This is for one bedroom units.

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Re: I spend 6.1% of my Gross income on rent

Post by ryuns » Tue Sep 17, 2013 10:57 am

If you want to really win the internet, you have to include transportation costs.
tdonline wrote:I rent and it's just under 19% of gross income. I do live in a super convenient and safe area so I haven't had a car in 9 years.


Transportation is a huge factor that a lot of people leave out. http://htaindex.cnt.org/
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kramer
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Re: I spend 6.1% of my Gross income on rent

Post by kramer » Tue Sep 17, 2013 11:05 am

I am retired and I calculate my base living costs, a level of living that is lower than I live now but one I would be comfortable with if I really had to deal with a lower standard of living, and calculate that as a percentage of my assets.

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Re: I spend 6.1% of my Gross income on rent

Post by greetje » Tue Sep 17, 2013 11:06 am

Much different lifestyles may up the amount spend for rent.

We are retired and in mid 70s, and use the money we received from sale of our lake home and business (OK due to low CD interest income we do have to add to that now) to pay for 16 months of condo rent 12 months at our main residence and 4 months in south as we are snowbirds.
We had rental and business properties and all the maintenance and headaches associated with that for 50 years.
We enjoy the hassle free living we can now enjoy. Lock the door and go!

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