Maximum to Spend on Rent

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JstSomeGuy
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Joined: Tue Apr 02, 2013 11:51 pm

Maximum to Spend on Rent

Post by JstSomeGuy » Thu May 31, 2018 3:24 pm

Emergency funds: 6 months of expenses in an Ally account
Debt: None
State of Residence: CA
Age: 28
Salary: ~$120K

I'm currently maxing out my 401k, HSA and Roth IRA. Net of those items and taxes/benefits, $2,345 hits my checking account every two weeks. I'd prefer to plan based on 2 pay checks per month so I can use the extra money in the two 3 paycheck months for other items like vacation.

My lease is up at my current apartment and I need to find a new place. My income has increased significantly since getting my current place (staying here isn't an option), so I'm trying to decide what a reasonable amount for rent is going forward. Based on $4,690 in available funds, what's the most you'd feel comfortable spending on rent?

GAAP
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Re: Maximum to Spend on Rent

Post by GAAP » Thu May 31, 2018 3:30 pm

My guideline is no more than 30% net income spent on total housing costs -- including rent, utilities, and insurance. In your case, that would $1,407/month.

HornedToad
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Joined: Wed May 21, 2008 12:36 am

Re: Maximum to Spend on Rent

Post by HornedToad » Thu May 31, 2018 3:38 pm

$1800-2k/mo.

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Rob5TCP
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Location: New York, NY

Re: Maximum to Spend on Rent

Post by Rob5TCP » Thu May 31, 2018 3:42 pm

Where in CA. do you live. If Bay Area, what you should spend may not be what you end up spending.
Inland or way North of S.F., the rents vary more widely.

30% is considered the standard of what to pay for rent (max).

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flamesabers
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Location: Rochester, MN

Re: Maximum to Spend on Rent

Post by flamesabers » Thu May 31, 2018 4:07 pm

JstSomeGuy wrote:
Thu May 31, 2018 3:24 pm
Based on $4,690 in available funds, what's the most you'd feel comfortable spending on rent?
I think the answer depends on what your circumstances and what your priorities are:

*How much job security do you have?
*What kind of apartment would you be happy with versus unhappy with? (Excluding extreme situations in which you can't afford more then the bare minimum, deciding how much to spend on rent isn't entirely a financial decision. Spending more on rent might be worth it if it means the difference between being content and being miserable with your apartment.)
*Are you willing to cut back in other areas of your budget in favor of living in a more expensive place?
*Do you currently have any debt or will accrue any debt in the foreseeable future? (i.e. student loans, car loan, credit cards, etc.)

6bquick
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Re: Maximum to Spend on Rent

Post by 6bquick » Thu May 31, 2018 8:03 pm

Lots of variables here, but you're 28, making 120k/yr, you have zero debt, and 6mo expenses in cash. I'd trust your instincts as they have obviously not lead you astray thus far.

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Pajamas
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Re: Maximum to Spend on Rent

Post by Pajamas » Thu May 31, 2018 8:09 pm

I think you are looking at it backwards trying to decide how much you can spend and then going out and spending it. Decide what meets your needs and what that costs and then see if you can afford it and if not, look at other options. The right answer is probably, "As little as possible, within reason."

Those percentage rules on what to spend on rent or for a house or engagement ring or whatever are not very helpful because they don't account for differences in costs in different areas or for differences in salary. Someone making $60k a year in Alaska will probably have to spend a much larger percentage of their income on food than someone making $2.4 million in Florida, for example, but they both need to eat a certain amount of food regardless of the cost.

jester14
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Joined: Sun Jul 16, 2017 11:15 am

Re: Maximum to Spend on Rent

Post by jester14 » Thu May 31, 2018 8:33 pm

I'd say go as cheap as you can stand, without compromising safety.

I spent too much on rent several years ago and I regret it - my portfolio could be larger right now. You and I are in essentially the same shoes in terms of salary, etc.

If you want a nice place, you could always go the roommate route if you don't mind it - just another option.

Another take - would you rather have a nicer place or have more money to travel?

This is totally up to you and dependent on many variables. At the end of the day, do what makes you happy within reason! Best of luck in your search as well!

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ram
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Location: Midwest

Re: Maximum to Spend on Rent

Post by ram » Thu May 31, 2018 9:16 pm

Max= 3 months gross salary = 30k/yr= 2500/mo.
In some parts of CA you may be forced to go higher.
My daughter (student) and her friend paid about 3000/mo (1500 /head) for a fairly crappy apartment till this month in Boston in the vicinity of Harvard. I would ideally not like to stay in that apartment if I was making 120K.
Ram

oilrig
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Re: Maximum to Spend on Rent

Post by oilrig » Fri Jun 01, 2018 11:07 am

I make a similar salary to you and am 33. Im pretty frugal so I always try and go for the $800-1100 rent range (I live in Houston, relatively affordable). This leaves me with enough money to max out retirement accounts, save about $2500 per month in taxable accounts, and have enough money left over to go out, travel, eat out etc. My thinking is that if I pay more than $1400 in rent then I might as well buy a house, and that is something I do not want to do yet.

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