Conservative wisdom says not to spend more than 25% of your total income on rent or a mortgage. By this measure, if you make $800 per week, you can spend up to $200 per week, or $800 per month. This estimate is slightly conservative since there are 52 weeks in a year, not 48, but you get the idea. An easier way to look at this is to only look at prices less than your weekly paycheck. If your weekly pay fluctuates, take the average across several months to determine your average cash flow.
Budgeting for rent is not an exact science, so here are other considerations:
Will you be commuting more if you take a lower rent further away? Will spending money commuting be equal to paying more for a place that is within walking distance or public transportation? If you live further away and will be driving to work factor in any tolls, gas and parking expenses.
Really think about the amenities you want and can not live with out. Is laundry in the building a must? Do you require AC? Are you looking for a place recently renovated? All of these conveniences tend to add on to the rent.
If the space comes with an air conditioner and you will be using it, ask how much it costs to operate. The same goes for a dishwasher, electric heat, and laundry in your unit. If you will be paying for heat separately, call the heating company and find out the annual operating costs. You should do this with water and sewer if you are buying a property as well. I never paid more than $40 per month in electricity when I rented. As a home owner I pay close to $150 per month. The difference is staggering. I am now paying for laundry, electric hot water, dishwasher, more lighting, a dehumidifier and a radon mitigation system in the basement. All of these operating expenses are factored in when determining what I can afford for rent or a mortgage.
The larger the space the more expensive to heat and cool and generally speaking, the more furniture and window treatments you may need. Similarly, if you live alone or are getting your first apartment you will have to supply all of the household items. Before you jump at the chance to move into your own space, be realistic about what you will need to do so.
Image: Tanya Lacourse