thanks for these tips Carolyn! My partner and I are about to start the moving process due to new construction next door that will last two years, so this is very valuable info! XO

So glad you mentioned the 30% rule! I have worked in affordable housing for a while, where 30% of income is a pretty standard tool for determine what is affordable and what isn't. I'm amazed at how many of my friends took on huge rent burdens when they started working. On the flip side, it's helps you control the rest of your spending -- when you know that your rent is 30% of less of your take home pay, and you are wondering where all your money is going, you can eliminate rent as the source of the problem and examine your other spending more closely.

I was once told by a very cash-savvy person, never to pay more for [your portion of] rent than you bring home in a week. That had to have been twenty years ago now, and although I've never tried it, that's what I'm aiming for.

I'm glad you pointed out that cities may require higher rent/living costs. The extra I spend on rent gets saved by not having a car. Definitely figure out a budget that works best for your personal living situation, even if it doesn't meet any rigid guidelines!

I wish someone told me to stick to 25%. You never know what lies ahead, and 25% is the conservative number that financial advisers suggest when purchasing/renting a home.

You can then take the extra 5% and start saving for future needs or wants.

My rent is EXACTLY 30% of my post-tax income, and I never realized until this post. Patting myself on the back as we speak.

As someone who lives in New York, the 30% mark is almost impossible. 40% is more like it. That's the percentage that I, and most of the people I know, hover around. However, I second Adriana in DC: I do save money not having a car, but every time the MTA hikes subway fares, I cringe.

I think it's safer to include all non-discretionary recurring monthly expenses in your 30%. For me that would include my car payment, car insurance, utilities, union dues, cell phone and internet. It means spending quite a bit less on rent, but I have money to travel and to fully fund my Roth IRA every year.

While it sounds wonderful, it just doesn't work in New york City, Manhattan for the most part. I wish it did. Most people I know who live in the city pay over 50% for rent, or even more, like I do, leaving less $ for living.

Renters usually pay utility, renter's insurance, cable and internet and cell and the MTA and food costs keep going up. Finding a rent I could afford based on my income, I would be living in a very tiny space.

Adding to the comments about New York City, one also has to consider travel time and costs (express buses or railroads instead of city buses and subways) and neighborhood safety. It has gotten much more challenging to find affordable housing and even older than twenty-somethings are sharing apartments - or parents are subsidizing their kids' rent.
Also, empty nesters are selling their houses in the 'burbs, moving into the city and driving up housing costs. I found an un-hip neighborhood - also brings the housing cost down to reality.

I live in a beautiful city, considered to be the American Riviera. We have the ocean and the mountains, but the income level is considerably lower than the rent. For many people that I know, 30% is hardly manageable, especially if you have a family to care for. I'm more like 50%, and I have to drive as we have limited public transportation. Blerg.

I live in Los Angeles.Here landlords and management companies expect tenants to earn 3x the amount of rent they are charging,so about 33%.For some strange reasons apartments here come with stoves but I am yet to see any apartment that comes with a fridge.For 1st time renters this is an up front expense to consider.Anyone who plans to buy a car or upgrade the car they have would be wise to plan for that added monthly cost.In cities like NY,SF or Boston parking is quite costly.

My husband and I are older folks who lost our jobs and had to start over a few years ago. After paying for health insurance (a major expense) and transportation costs each month, a *much* greater percentage of our income goes towards rent. Gone are the days when we could live within our means and put aside a little something each month.

Living in San Francisco doesn't help, yet we've discovered when we take into consideration what it would cost us to commute in for work -using public transportation, which is less expensive than driving- remaining in the City is still less expensive than living in one of the Bay Area's more affordable surrounding areas. For now, anyway.

We're not alone. When my elderly mom was still alive and needed help because of medical needs, a portion of our income (back in the days when we had more of an income) went to help her. It's not like it used to be. Still, if you have the income it's good to be aware of how not to overspend on rent and hopefully save. You never know when you might need to dip into your savings to get by each month. Wish I'd known 20 years ago what I know now!

Interesting discussion...I was browsing apartment listings during lunch, a pretty depressing exercise.

I'm in NYC and I'm finding a lot of management companies are getting stricter about income requirements. My current building requires me to make 46X the monthly rent; I was denied by a building that wanted me to make 50X the rent.

While on the one hand, being forced to go cheap has improved my savings, I absolutely HATE the building/neighborhood I'm in. How are the rest of you getting around the 40X rule??

Agreed! This is a much better rule of thumb.

My rent alone is only 18%, but my recurring living expenses (unavoidable) push it much closer to 35%. Which is a more accurate reflection of the costs. If my rent alone came to 30%, I'd likely be eating ramen noodles and living in the dark.

I guess it has a lot to do with how much insurance/cable/internet/phone/etc cost in your area. In some places rent is cheaper, and those costs are higher, in others it's the opposite, and in some they are both high or both low. Things to consider for sure when calculating the %.

Having lived in LA for 23 years, I have found the rent game a tedious one. You have to search Craigslist (how I found my current place), ask around and literally drive up and down the streets on which you'd like to live. Forget Westside Rentals - they are a rip-off to say the least. Rents are all over the place here but rarely are they less than $1,200 for a 1 bedroom. I got extremely lucky with my current apartment that I love, but I went through some bad experiences prior. I'm just under 30% and purposely looked for a rent controlled building. Where I work, we hardly ever get cost of living increases. Without rent control, I'd be screwed. I'm a perfect tenant (super clean, quiet, take care of my place and follow all rules) and am hoping it will pay off when July rolls around. That's when my landlord could potentially raise the rent but doesn't always (or so I've been told). Even if he does, he's still one of the best landlord's I've ever had. I hope to stay put for a long while so that I don't face living in a dump just so I can afford to continue living here.

Sometimes paying just a little bit more to have access to the things that bring a better quality of life (depending on your needs/tastes) is a better value than moving to far reaches of your desired neighbourhood/city. When we bought our house, we had a sum in mind, but wanted more space and amenities than we could afford in our desired area. We ended up moving to a different city, and found ourselves more or less isolated by friends who wouldn't (or couldn't) make the journey here, or constantly having to get in a car to get somewhere interesting, even if to buy a quart of milk.

Weigh your options, and consider the old adage, "location, location, location". Rent where you want to live, not what you want to live in, even if it means living in the basement or attic.

I would like to note that the 30% rule of thumb takes into account the expectation of designating a large portion of one's income to transportation (the next highest fixed expense after housing in most people's budgets).

In certain cities and neighborhoods, dwellers may commonly expect to exceed the 30% threshold to live in an area that does not require owning a car (according to the AAA, vehicle ownership costs $8700 per year on average). In addition, they may expect to exceed the 30% threshold for living in a high-demand neighborhood with lots of lifestyle amenities such as bars, restaurants, retail options, etc.

So the 30% rule of thumb should be taken in context with the type of lifestyle the dweller expects to have and how they plan to budget the remainder of their income.

Ha! I live in London and 30% is crazy unimaginably low! Unless you earn lots. Also I'm not sure how NY works but everything else apart from some transport is more expensive here than anywhere else in the country.

The 30% rule is a good rough guideline, but it doesn't apply to everyone. The only number that matters at the end of the day is the bottom line: Monthly income (take-home) less monthly expenses (including savings and debt repayment). That number HAS to be greater than zero. If you're running a deficit, move somewhere cheaper, sell your car, get a roommate, cut spending, get a better job... whatever.

What amazes me is that in those 'rent vs. own" calculators, monthly cost of living is almost never taken into account. They all skew towards home ownership by ignoring all the recurring non-equity building costs of owning a place -- everything from maintenance to condo fees to property taxes to those never-ending renovations. If you're spending at the limits of your budget to rent, you can't just assume that if you get a mortgage with a monthly payment roughly equivalent to your rent, you'll be fine. It never works out that way, and that's how people become house-poor.

I live in Toronto and my rent, including utilities and Internet, is under 30%. However, I had to really hunt for my current place and live with two other people (+1 for the next 1.5 months.) While I dreaded giving up my former beautiful 1-bedroom apartment, I've never regretted my decision to live below my means. I was able to quit my second part-time job (!) -- a huge deal for me -- and now have more savings and more money to spend on experiences and travel.

Have to agree; I live in Toronto and 30% seems incredibly low. I'd love to find a decent place for 30% my salary. My rent is going up in April and sadly I've just calculated it at 45% of my take-home pay... ouch! I'm probably not saving as much as I ought to be, but I'm paying all my bills and contributing to my RRSP every month, so it works for me for the time being. (Not giving up my apartment, so maybe time to look for a better job!)

they all skew towards home ownership by ignoring all the recurring non-equity building costs of owning a place -- everything from maintenance to condo fees to property taxes to those never-ending renovations.

While I agree generally, on a point of semantics I would argue that maintenance and renovations are equity building costs.

Though there are lots of living expenses in owning a place (I own mine), a ton of it can be tax deductible, and a lot of calculators don't factor in tax savings either. So for some people it is merely a wash.

But I agree with the general sentiment that if you are going to use one of those calculators or other formula, you should try to factor in ALL the costs of ownership, not just a mortgage.

I'm at 24.5% including my utilities. That's a comfortable amount for me, and I still don't have a car (live on transit lines in a big city), so my transportation costs are $130 plus a bit extra for renting a car every now and then. It helps when you are in a relationship as the costs are much lower per person.

A friend is moving out on his own (from a roommate) and will be paying close to 50% of his take home pay on an apartment in a crap area with no outside space. The unit itself is awesome, but I can't imagine paying that much into someone you don't own.

Great advice, except it only works if you make over $50,000. I think I paid about 50% for a shared apt when I was a grad student making about 20,000.

I'm at 30 % exactly, (after figuring in my 6K tax refunds due to my mortgage and maintenance deductions), which I guess for NYC is pretty good. I would be at a little over 40 % otherwise.

Have your parents cosign.

This is impossible in NYC unless you live with a lot of roommates - and that's not happening with a famiy. Unless you make over $80,000 you can't even afford $1,500 (and you haven't eaten yet, gotten to work or paid for heat or laundry). A lot of broken down apartments in neighborhoods with bad crime stats charge that much. Ugh. I'd love to live below my means but it's not happening any time soon.

@alison the peacock.

Those 40, 46, 50X numbers each reflect a percentage of your gross (I think, or perhaps net) income.

40X = 30%
46X = 26%
50X = 24%

If it's gross income, then it's pretty fair, if not, it's a bit low, but not unreasonable.

Maintenance is not equity building. It is maintaining the expected condition and your house won't be worth more because you maintain it. Even renovations aren't necessarily equity building. Look at the charts on how much you can expect to get for a particular renovation. Also, the only way any of these is tax deductible is if you finance and you are still paying interest. Maintenance should never be financed and renovations should only be financed if you plan to stay long enough to make it worth it. As the other poster said, this is why people end up cash poor - because they don't plan for the expenses of home ownership.

Hm, ours is at 20% for rent alone and 25% including utilities and internet. Our landlord pays water, sewage, trash and yard upkeep. If we paid that, we might be at 30%, but most of that is really cheap anyway. Our cars are paid off, I work from home and the husband drives 10mins to work, so auto costs are relatively inexpensive. We are very lucky in some cases, but sometimes you have to do everything you can to keep your costs low and budget obsessively! We have definitely been there, and the things we learned carried over to when we were more flush with income.

Renting in a big city is a great way to stay poor well into your middle age and that's the truth.

Thank you for mentioning that! I'm planing a move to SoCal and WHY apartments don't have fridges is BEYOND ME! And trying to figure out HOW much rent I can afford is VERY scary task!

I wish! Not feasible in the Bay Area. I live in the East Bay, and could not afford a cardboard box in this area with those calculation. And living outside the city I also have commuting expenses in/out of SF (and BART is not cheap, seriously), a (very old) car for getting around at home. As a transplant from the NYC area, I am used to housing eating up a very significant part of my salary - and don't think that 30% figure is feasible for some geographic areas, epecially for single people.

It's a bit untrue that people in expensive cities can't fit within the 30% rule. If you're not at the bottom end of the salary scale, you are more accurately not CHOOSING to live where 30% gets you. And perhaps in some cities that makes sense in terms of living space, amenities, and safety and so forth, but to say that you CAN'T do it seems more like making excuses for spending more rather than acknowledging why you chose to spend more.

When it comes to budgeting, housing is likely the biggest single expense, so working to minimize it is the easiest way to leave you more to save. Something else to remember is that renting is not always worse than buying. I lived in Montreal for 6 years and the rent control system meant that I was paying less than half what a mortgage would cost for a similar place. The earnings on the amount I saved far outweighed how much value would have accrued on a place I owned during that time. Not to mention that I had the freedom to easily move overseas when the opportunity arose.

lalastylemaster - you can easily pick up a used fridge on Craigslist in LA for $200 or less so long as you dont require a stainless behemoth. maybe because apts don't come with them, people are constantly looking to offload them.

That 30% rule depresses me, we've paid 50% and more sometimes. Most people I know pay that too. But this year we will buy a house.

I live in a rural area with a booming economy, so housing is expensive.

I live in Southern California and just started renting. I'm paying around 40% of my take-home for my apartment which costs about half of what my mortgage cost (which is good, because I'm the only one paying rent!). You can find affordable places around the LA area (most apartments do not come with refrigerators, although some do), you just have to be persistent.

Maintenance is not equity building. It is maintaining the expected condition and your house won't be worth more because you maintain it. Even renovations aren't necessarily equity building.

Even though maintenance is considered for financial purposes to be "home equity debt", maintaining the home allows it to keep its value, and keeping (or improving) value is a way to build equity.

And I agree that renovations do not necessarily build equity, but they could, and often do, so they should not necessarily be excluded from being considered means to build equity.

Also, the only way any of these is tax deductible is if you finance and you are still paying interest.

That is not the only way, as the government (here in the U.S.) gives certain energy tax credits for adding things like solar panels, geothermal heat pumps, and certain brands of windows and skylights.

Also, under certain conditions, moving expenses, property taxes, and discount points can be tax deductible, along with home equity loans. In addition, profit from selling a home (up to a certain amount) can be tax-free, and of course if you use a part of your home as your place of business, then certain improvements could be tax deductible.

Interesting topic - would like to see more of this sort of thing on AT. Actual household budgeting for the real world.

Another New Yorker here, and I have to say in nearly 27 years of renting in Manhattan, I've almost never been able to swing the 30%. But I have always managed to live within my means, and my balance sheet looks pretty good (money in the bank, no debt, good credit).

I agree with a lot of the other posters. Not having to buy and maintain a car helps, and so does not having to maintain a property. People often overlook those expenses in budgeting and when making cost comparisons (renting vs. owning, city vs. suburb). They add up quickly and can really catch you by surprise.

I live in Seattle, where rents are surprisingly high thanks to a glut of tech employment and lack of housing (for now). I still pay less than 25% of mine and my husband's combined income in rent, we don't make a ton of money, and we feel like our place is still quite expensive. I can't imagine actually getting by on a rent that is a solid 30% of my income.

I am living in D.C., and I keep reading articles about a prospective apartment bubble: developers are putting new buildings up as fast as they can, everywhere. In a few years, that bubble might break, providing all us renters with a nice respite....OR, tons of new residents could flood in because of all the jobs.

I'm hoping rents drop, even near Metro stations, because it's getting unnecessarily expensive for a single person to rent a 1BR. Without a reliable roommate, I pay 55% for housing.

That would be a great advice, but it’s beside the point - we, renters, generally have very small pool of decent apartments to choose from

My rent is decent.. my heating bill is not. My fault for living in Maine.

In Honolulu, you'll easily pay 40-50% of your take home pay for rent. The price of paradise. We're on Money Magazine's list of Top Ten Most Expensive Places to Retire. Sigh.

Utilities and cable bills, etc, need to be factored in. In major cities, these are 200-250, which is no small amount!

Yes, I understand -- I was referring to previous posters who were saying they were paying 50% or more of their income towards rent.

I think 50X is unreasonable. Using round numbers for convenience, let's say I make 100K/year. A management company is going to tell me I can only afford to pay $2,000/month in rent? $2,000 just doesn't go very far in NYC. I don't have a car, don't have student loans, don't have dependents -- why can't I spend a little more to get a better apartment?

Kayonyc -- Re: parent cosigning -- I didn't mind doing that in my 20s but it seems a bit ridiculous now that I am in my 30s and I have a steady (and pretty decent) income. I do think that is a good option for some, though.

another piece of the rent v purchase equation not mentined here is that purchasing a house insulates you from rent increases.

@Parnassus - It's true what you say. And yet, older folks often have to remain in the bigger cities because they need to work, and that's where their jobs are. Once you get past a certain age, it's not so easy finding work that pays a decent wage and offers a health insurance option. Even *with* health insurance, medical expenses are the number one cause of bankruptcy. There are other practical reasons people remain in cities, not the least of which are the conveniences many older people can't easily do without.

According to Aon Hewitt, a retirement research consulting firm, loans taken from retirement plans increased by 20% in 2012 ("across all demographics") - and by up to 60% among lower earners. And according to this same research, most of those people aren't borrowing money for big vacations or unnecessary remodels on their homes, instead they're taking money out of their retirement funds to pay for "essentials". Its a new world we live in.

Also the after tax piece of it makes a big difference. Do people generally do that after taxes, saving for retirment, and healthcare? Those items are taken out pre-tax for me.

We are a young and broke recently married couple. Right now, we pay 70% in rent/utilities to live where we are, but we're moving from spending 50% and another 25% in travel. Now we are paying about 5% in travel. 30% of my earnings wouldn't get us anything here that was at all in a safe area. Our new place is walking distance to free activities, less than 2 minutes away from our friends and 2 minutes to work for me.

Hopefully when my husband finishes school it will all balance out and we'll hit that 30% with a combined income! We are young, debt free and have a little savings. It's up to you to decide what's right for you now and what you are willing to give up for it (alcohol, meat, movies and other activities)!

The rule of thumb for housing affordability for mortgages is a monthly mortgage payment of no higher than 28% of gross annual income. Most of the NYC landlords I know look for at least 40x monthly gross income as the ideal candidate, which is pretty much the same. My mortgage numbers are very different if I calculate % of gross income - 20% vs. % of net income - 36%.

Marketplace did a piece on this just last week. The story cited an infographic that demonstrates how many hours a week a person earning minimum wage would need to work in order to have their rent be 30%:

Personally, I pay closer to 50%. For me, it's worth it.

On the flip side, I also live in a very expensive city (DC) and my first apartment here was a disaster because it was too inexpensive. What that translated to was it was a cold, unpleasant, falling-apart basement apartment and despite the fact that I was living well beneath my budget, I was miserable. I paid off debt, saved a bit, and moved to something much more expensive and much more comfortable and though I'm somewhere between 30 and 35% now and I'll admit sometimes that's difficult, I'm much happier. There is such a thing as too cheap.

As a person who in my 20s was diagnosed with cancer and in my 30s had to cut back my work hours to take care of a very ill family member, I cannot stress enough the need to factor a nest egg into this equation. You never know when you might need some unexpected cash. I believe in living below your means as best as you are able, though I realize that is not a possibility for most.

My husband and I are buying a house this month. It is my first time owning. I think it is garbage all of the tax breaks given to home owners. Why should home owners be valued more in this economy than renters? In fact, I assume more renters than home owners could benefit from getting preferential treatment from the government.

literally impossible in NYC unless you want to live in actual squalor

I'm glad to see others are paying well above 30% of take-home - I know I am. I just moved into an Oakland studio, and right now rents are at a premium... If I were to stick to that ratio, I'd be hard-pressed to find a subterranean grotto with 1992 carpet stains (to live alone, at least). Part of my retirement savings is deducted from my paycheck anyway - I take casual carpool in the morning for a dollar, there's a Trader Joe's a short walk down the hill, I own a little scooter & bicycle for getting around town.. I'm sticking the the 30% GROSS salary ratio rule-of-thumb, and you're welcome to as well!

Great article. Thanks for posting. Would love more info on budgeting, although I suppose that might be out of the scope of AT.

Great article! very practical advice that sadly most people don't think about. All those annoying extras like a dish rack, shower curtains, moving expenses, etc always add up and people forget to calculate them into the budget!

@Angorian: " I lived in Montreal for 6 years and the rent control system meant that I was paying less than half what a mortgage would cost for a similar place."

YES! THIS! I live in Montreal and my lovely 2-bedroom rent-controlled rental condo in the Plateau costs me less than *half* of what it would cost to own the very same place. And that's not just an estimate; I've run the numbers when other units in my building have come up for sale.

If I wanted to buy a place, I'd have to either live further out (ugh, suburbs) or reduce my space to the point where I was living in a teensy studio. As it is, I have a great apartment in the best neighbourhood around, and I can literally walk everywhere and I have lots left over for travel and spending money and just general enjoyment of life.

@FixItChick: "another piece of the rent v purchase equation not mentined here is that purchasing a house insulates you from rent increases"

So does rent control, if you're lucky enough to have it. (Ah, Montreal, I love you.)

And owning a house does not insulate you from property tax increases, mortgage interest rate increases when your term is up, or unexpected repairs.

IMHO, renting is far better from a budgeting perspective, since I can anticipate what my expenses will be far more easily than I could as a homeowner. Ownership is where all the uncertainty is.

haha i have a full time job if my rent was less than what i make in a week i'd be living in a box!

I live in Brooklyn with my boyfriend and a roommate in a two bedroom (with a backyard and all utilities included) for a very reasonable amount. Sure, there are certain things that I dislike about my apartment, but I only pay 18% of my income for this apartment. My low rent affords me other luxuries like being able to pay off my student loans in 2 years, saving for retirement and emergencies, while still maintaining a good quality of life. I don't travel right now though- one thing I want to start doing. But sometimes, you have to sacrifice some of your expectations or wants in order to be financially responsible.

I don't believe in a housing cost rule-of-thumb. There are many, many variables: single or double income? dependents? transportation? debt? If I used the 30-33% rule, my child and I would starve -- and I'm a debt-free professional. Consider transportation costs, the costs of raising a child, etc. Draw up your fixed budget, then look at potential housing costs.

I don't live in Los Angeles, but Long Beach is close enough. Our apartment came with a fridge, stove, dishwasher, and W&D. There are places that come with all the appliances out there. They can be hard to find, though.

With new proposals to start taxing landlords who make more than I think 100k, 30% of their rental income, I expect rents to increase. Everyone should sort of count on this. Not too many landlords are going to start handing over 300$ a month out of $1000 to the government without increasing rents.

In the end it comes down to what's most important to you. I returned to the US in the mid-80s, after several years of overseas volunteer work. I had a minimum wage job($3.35) & rent of $230 plus electricity. Having lived in a dorm or with roommates before I left, I had no furniture & few household goods. I slept on a borrowed folding cot & ate at a borrowed card table on a borrowed folding chair off Salvation Army dishes, for a couple of years. It took a long, long time to climb out of that financial black hole--& I had no debt--but it was completely worth it to me, because I so badly needed/wanted to live alone.

To the author of the article: I believe the rule is 30% (the number doesn't matter at this poing) of your NET income. Even if you make $72,000 per annum that is not your after-taxes income. Which, in Canada, is

15% on the first $41,544 of taxable income, plus
22% on the next $1,544 of taxable income, plus
26% on the next $45,712 of taxable income, plus
29% on taxable income over $128,800.

I know you in the US are blessed much lower taxes but even you do pay taxes, hence your example is incorrect.

Sorry, correction. The numbers I quoted are the taxes we pay, not the income.

The 30% rule is a very good one to keep, if your income and area rental can support it. If not, the high rent low income people may have to economize in sharing a unit with roommates.

What i want to address is the opposite scenario: rent expense is below 30% your take home (like my situation).

I moved into my current unit in 1995. Because of City of Los Angeles rent control and my easy going landlord (he doesn't raise me every year), my rent is still below market today.

What I do is to save the portion that makes up to be the market rent.

My logic is that if I move out of my unit today, I will have to pay the market rent renting a new unit. Therefore I just pretend that I must pay this much every month.

Guess what, since I started it in 2007, in 6 years I've saved up over $36,000 after tax money in cash. Not bad huh? :-)

I also live in London, and 30% is a near impossibility! Maybe at a pinch if you were single and living in shared digs and were prepared to make a long commute twice a day, but with a partner and a modest one bed, we're nearer to 50% and that is the norm on our side of the pond.

I'm one of those people who says you have to actually look at what your expenses are when deciding what you can afford. I fall in the 30% range if you look at the total of our rent [not just my portion], but there is no way I could afford that on my own. My student loan payments are almost as much as my total rent a month, which makes them more than what I am actually paying for my half of rent.

Use the 50/30/20 rule...

50% of your income should be housing and utilities (So, 30% housing and 20% living expenses)

30% spending total for all various frivolous wants (makeup, panini press) and entertainment (tickets, parties or whatever) and vacations
20% savings for emergency, investing and retirement

I have reversed my savings and spending to 30% savings and 20% spending because I'm older and expect to retire before 60.

yeahhhh riiiiiight, try doing that in any neighborhood you would want to live in in an urban area.

How much should you budget for upgrades and renovations as recommended on this site?

@Borealis, the 50/30/20 rule is all well and good if you don't have any debt. If you're paying off debt, your rule should be more like 50/20/15/15 for needs, wants, savings and debt repayment respectively.

And like CanadianMango says, that needs to be AFTER tax. I live in Quebec and I'm not exactly rich but I still end up paying roughly one third of my income to taxes. For higher income earners, that number is closer to half. Try calculating those percentages on your gross income and you'll have a serious problem.

(To those Americans who think that sounds insane, consider this: We don't have to pay insanely high health insurance costs; we don't have to be slaves to jobs we hate just to keep our health insurance; health-related bankruptcies in Canada are rare and are mostly due to secondary effects like long-term loss of income, and not due to healthcare costs themselves. We also have things like 1-year subsidized parental leave, $7/day daycare, free college and cheap university so most of us graduate with no student debt... Life's a trade-off.)

@Pearmelon, that depends on the age of your property, its condition, etc. but a good rule of thumb for a house is to set aside 2-4% of the house's purchase price each year for maintenance and repairs. If you don't end up spending it that year, you should put it in a dedicated account so when the big stuff happens, you'll have money set aside.

If you're living in a condo with monthly maintenance fees, you can probably include those fees in the 2-4% and just set aside the balance, since some major stuff will be taken care of by the condo association. But check to make sure how much they keep in reserve, and how often owners get assessed for unforeseen maintenance costs. And don't forget that you're still responsible for the maintenance of your own unit, so you'll need some money for that.

(Hence the reason why I rent. One of many, anyway.)

I pay just shy of 50% of my take home on rent in Los Angeles.

Another thing to keep in mind: if you plan on living in one location for a few years, make allowances for the possibility of rent increase over time and the possibility of not getting a salary increase.

@segac: you are right, I was considering the US tax structure and net income only.

The 30% rule makes good financial sense, with the adjustments for transportation and other expenses mentioned in the post. If you choose to pay more than that because you want to live in a fun city, great neighborhood, whatever, you have to recognize that financial choice and realize that you're going to have to give up something else, like savings, and accept the consequences of that. Most people who live in NYC, LA, etc. could get a job somewhere less expensive (I get that there are exceptions for people pursuing certain types of careers), but they want to live in those cities. That's a "want" just like anything else--it's no different than spending 50% of your income on shoes or buying a luxury car when what you can really afford is a Honda.

@33,
That's amazing - kudos to you. Not everybody possess such discipline.

And if the high taxes I pay as a home owner in NJ went to health care, cheap college and day care, I would be more than happy to pay it, alas, it is not so.

In other words, if you earn $72,000 in San Francisco, you can't afford to rent a one-bedroom apartment -- they go for much more than $1,800 a month.

kayonyc.... really? having one's parents cosign a loan is the worst advice you could give someone, particularly their parents.

as an adult, you must find a way to live within your means, or have a plan for getting there. i would recommend moving in with your parents before legally binding them with their child's financial burden.

suze orman agrees. go to her site or search google to read up.

I currently live in Brooklyn, NY (Williamsburg area) with my mom, until I get a new job and move. Her rent is 30% of her income before taxes. We live in a low/middle income housing. We don't pay for water or electricity. Neighborhood isn't the safest, but getting better. I don't drive and pay for monthly metrocard. It would be great if there was more affordable housing here.

With the job I have now, I can afford $750 a month. No way I can live on my own with that amount unless I live in a sketchy area or far out in the other boroughs. :/

19% in Tampa. Soon to be 17% when I refinance in a few months.

Of net/ take home income.

More like 40-50% of take home pay on rent alone here in Hong Kong. 2k and up for a 400 sq ft studio shoebox is quite normal.

Hey, our taxes go to a lot of idiotic things too, like lining the pockets of corrupt politicians and mobsters, or financing our language police (yes, really). And we have roads and bridges that are falling down, budget cuts everywhere, and potholes the size of small countries. Nowhere is perfect.

BUT... a perfectly nice one-bedroom apartment with rent control in a good centrally-located neighbourhood can be had for less than $800/month.

Everywhere has pros and cons. Most people choose where they live based on work, school, family or history. But ultimately, you gotta be able to afford your life, whatever it is. If you're spending more than you earn, housing could be a culprit.

reasonable tips.

Here is another reason I am not sure this strategy really applies to those areas where rents are higher than the norm.

Living in a more expensive area, I can make about twice what I would elsewhere for the same job. So, if in the bay area, my take home is $8K/month, and my rent/utilities are $3k/month (well over the 30% suggested), I still have $5K left for other expenses, savings, etc.

If I were living elsewhere, making $4K/month and my rent/utilities were $1K (guideline offered here), I would have $3K left for everything else.

Just saying - in some scenarios in high rent areas, the percentage might be higher but you might still be ahead since high rent areas tend to have higher salaries to match.

Re: an above comment. Don't ever have your parents co-sign. Bad idea. :/

Goodjob! haha making good decisions without even knowing it is always nice :)

For people just moving out on their own, expect to spend a rather large amount of money on stuff you've never considered. As the article mentions, a waste basket, broom, etc, but items such as cleaning solutions, kitchen/dish towels, salt/pepper, etc all add up very quickly.

@Segacs: Thanks. So renters who 'improve' their apartments are in effect also paying their landlord's maintenance costs.

OMG people, 90+ comments and not one to beg someone to straighten the frame above the desk!?! It's killin' me!

Segacs, what is the language police? Is that like Joan River's Fashion Police show that critiques people's language skills instead of their style sense?

Segacs, I seriously do wish we had your healthcare, but we don't here. As far as corrupt politicians, yeah we got those :) Who doesn't??

Housing is tough in the NYC area because NJ, parts of CT, NY state & Long Island are all considered the suburbs to Manhattan and the prices reflect that. You can live in a craphole and pay higher rent than someone pays for a mortgage over the border in PA, in certain areas of course because Bucks County is not cheap. Truly crazy.

MissFifi, I lived in N.Dakota for a spell (talk about living on the cheap!) and we saw too many Canadians showing up in our hospitals for standard treatments and surgeries. I think it was similar to medical tourism, like how Americans go to other counties for inexpensive dental treatments. I wished I had the guts to ask them but I was a punk-ass kid who refused to talk to adults.

Where is the desk in the photo from? I absolutely love it! Hopefully less than my rent here in SoCal!

@alison the peacock,

Notice how I said that if it's gross it's reasonable, net, low but not unfair.

If 100K is your gross, your take home would be around 65-70K (here in Canada, perhaps even less). So if the 50X is gross, $2,000 would be 34% to 37% of your take home. If it were net, it would be 24% of your gross salary.

the difference between using your gross vs. net income can be huge. for me, my rent alone is 19% of my gross but is 29% of my net.

add in electricity, laundry, tv/internet and insurance and the percent jumps to 37% of net. and i'm underpaying market by about $200 a month. ugh -- i can't ever move!

I pay 30% here in Tokyo, but that only leaves $1,200 to pay all of my bills. Insurance, heating, phone, Internet, gas, water, etc, and that leaves me about $300/no to cover food and transportation. I wish that I could travel or save a dime, but with the price of food, I'm lucky to not be living on $20 for the last week. (tomorrow I start the fast because that's exactly what happened)

Ah, so my point was: 30% is all well and good. Even 50 percent or 75% is fine, if you make enough money. If you're making $10,000/mo and paying $8,000 for an apartment, that's still totally liveable. You'll be better off than us poor people.

If ideally rent is 30% but utilities and transport are not factored in, what's a good percentage for all those things together? For us it's currently 40% of gross. That's great for now, but we're contemplating a move that would make rent, commute, and salary all go up dramatically (utilities would likely be lower) -- and I'm trying to wrap my head around things like what proximity to mass transit is worth to us and what kind of lifestyle we see ourselves living.

Our rent when we got married was much less than 30% of our gross income, which allowed us to save up for a small down payment on a house. We lived in my husband's crappy student apartment for three years, with a kitchen the size of a small closet. When we bought our house, the market was relatively high and so were interest rates. We were definitely house poor for the first few years, until we could refinance and get out from under the nearly 15% interest rate. Unlike many people here in SoCal, we stayed in our little starter home in a very unhip neighborhood. But it's paid for now. This way, I was able to retire at 58; my husband is retiring in a few months, and our son graduated from college with no debt because we were able to finance his education ourselves. We have not spent our income on fancy furniture or expensive wallpaper. But we are celebrating our 34th year together with a four week trip to France. You have to figure out what is important to you, and budget for that. And I would not advise anyone to move to California right now. The economy here is still in the toilet, and our infrastructure and public school system are both suffering as a result.

@Erica11216

Me too! Although no utilities are included and the apt is about 400 sq ft, I pay about 17% of my net income on rent. Luckily in NYC it was easy to find a roommate who was so busy that she's never really home, which eases the burden of the cramped living space. I realize I'm very lucky but in the NYC area you can save a lot of money just by sharing a room with someone. A 2-bedroom in my area in Brooklyn goes for about $1800 (or a little less, usually with garden space) and having a roommate and then a significant other really brings the price down. I just can't see having my own place in the city at any point in the near future... which is why I'm moving out of NYC.

I spent about 60% of my net income on housing expenses (before refinancing it was more like 70%). But I put at least $500 a month into savings, and 10% of my income into a 401k, and I take a couple vacations every year and own a car... so it seems like I'm doing ok.

I have a good job but 30% of my take-home pay would get me either a tiny room in a group house, a studio in a dangerous neighborhood, or maybe a 1-bedroom with a 2 or 3-hour commute. I tried all three of those things when I was renting, and while it did save me some money I'm not sure it was worth the decrease in quality of life.

Kayonyc,

Some of our parents lost their jobs due to the economic crisis of 2008 and can't help.

"For some strange reasons apartments here come with stoves but I am yet to see any apartment that comes with a fridge"

Never found one in Bayonne, NJ either...

NYC or LA as a choice - precisely why I'm trying to move somewhere cheaper! My job pays the same just about everywhere in the U.S., and I know I need to live somewhere with cheaper living expenses. I have a job in LA right now though, and almost no savings, so I can't really move until I secure a job elsewhere and feel confident in blowing all my tiny savings on moving expenses. I came to LA when I was 21, lived with roommates and had no desire to get married, have children, or buy a house. Now that I'm creeping closer to 30 my priorities have changed, while my income hasn't, but it will take time as my job field is very competitive.

i live in a 1 bedroom with my boyfriend in toronto. my portion of the rent takes up about 32% of my income, so i can't complain. we live in midtown, so everything we need is around.
my metro pass takes up about 6% of my take home income, so that's kind of painful, but it is my next biggest recurring cost.

Sorry - my condolences. There's always the roommate option if you don't make enough to sign a lease. I did it myself for many years through my 20s and 30s.

I was loathe to do it - but when I relocated to Brooklyn from LA to attend law school, and was looking for housing, the only way I was allowed to become a roommate in a coop apt building was to submit my parents' financials. I was 23, had 10 K in the bank, and no job, as I was planning to be a full time student. I never had this problem in LA, where a simple credit check was all that was required to get an apt. NYC is just on a different level.

That said, I am totally with you on living within my means. Though my parents guaranteed my first residence in NYC, I've never leaned on them for anything since. Only way I was able to afford buying in NYC was because I lived within my means and saved for a good 10 years.

I live in Baltimore and for my rent I spend 35% of my take home pay. I could very easily find an apartment in my neighborhood that would be slightly cheaper but I'd rather pay a little extra to have the amenities I have now (Wifi through my landlord, laundry facilities in the building, hardwood floors, new windows, central heat/air, my own hot water heater, maintenance guy close by, etc.). Thankfully I have great health insurance, no student/car loans, so I'm able to squirrel money away for rainy days.

Living in the SF Bay Area is extremely expensive. The increase in my salary over East Coast rates did not nearly match the increase in market values for rentals. I found it personally worth my while to spend 45% of my salary on a place that offered every amenity I could want and adjustment my spending in other areas like clothing and entertainment to cover the cost. It's a trade-off. I cook at home, hang out in the garden or the pool, use the complex gym, or take long walks in the gorgeous neighborhood and think it's worth the sacrifice. I would never, however, sacrifice savings or live without health care or amass a lot of credit card debt in return for amenities.

I've computed my rental fee and it exceeded to 30%. I like to this thought "you should use personal comfort to develop realistic budgetary goals".

toronto, 50%, FML

Reading over these comments, I'd have to say it's very difficult for people to live like this. First off...many people do not make 70k plus a year. And even when they do they can't find a rental in SF/NY/etc.
I'm just going to throw this out there...
There are small towns now that are paying people...some of them paying off people's student loans if you will move there. Sure...it's not SF. But maybe you could live a year or two in some place like SF later. Just sayin'. It may be time to reconsider. The world is getting crowded. Maybe you could be part of the gentrification of the new Austin, Boulder, etc. A LOT of your friends you see on FB living these fabulous lives in big cities don't want to admit to how in debt they are, how they live hand to mouth and won't have anything even in their mid 30's or by the time they think about retiring at 60, or won't tell you how much of their parents wealth is financing their lifestyle. The idea of being a young writer in the city, scoring a rent controlled apartment and having a closet full of Blahniks is a fallacy. There are plenty of authors on the best seller list that made like 30k for that book.

http://consumerist.com/2012/06/13/cities-dangling-enticing-carrot-to-students-move-here-well-pay-off-your-debt/

I've never seen a rental that's only 30% of my income, unless it's a crack shack. Only if I shared with a bunch of roommates would I be spending 30% on rent.

The no-refrigerator in rentals in Los Angeles is true. I do not understand it myself as refrigerators are usually the most difficult things to move (next to a piano). However, when my daughters fridge in her rental (Silverlake) broke down, her landlord pointed out that she was responsible for a new one. When my sister in law was renting out an additional unit, I pointed out that if she included a fridge she could probably charge more rent. She said no one included refrigerators with rentals because tenants always want to bring in their own. Crazy! I've never seen that happen in San Francisco.

@Portlandrules: There are small towns now that are paying people...some of them paying off people's student loans if you will move there.

It's my understanding that these sorts of incentives only apply to certain types of in-demand professionals, particularly doctors and lawyers. Generally speaking, they're the ones with the most options anyway, financially, and not the ones having trouble finding a place to live for <30% of their income.

For the average person in most fields of work or study, small towns offer very little in the way of job opportunities. That's why people move to big cities in the first place.

That rule made me sit back and stare in shock. Who makes FIFTY TIMES their rent?! The only way I got around this is I moved to Astoria (a notoriously cheaper neighborhood) and I live in a 1 bedroom apartment with my boyfriend. I would never be able to afford it myself but with our combined incomes we're doing okay.

And for good measure, a SATC quote: "If there were unlimited apartments in New York, we'd all be single forever!"

I see a lot of people in big expensive cities here, just wanted to state what I like/feel is decent for a smaller cheaper city. I live in kcmo and take home about 48k after tax. Rent here seems relatively cheap. 30% for me would be About 1200. I live in a central area that isn't great safety wise but has renovated apts in cool historical buildings. For an extremely small but nice 400sqft studio with gated assigned parking I pay 666+7 water+~50 elec+ 25 for fiber (June) +65 parking. Drive to work is 18mins highway in a Honda so I spend little on transport. I love my apt and am glad I'm living below what I could. id rather spend my money on nice things than on a fancy place I wouldn't own. My boyfriend lives in LA and pays 1400+ utils for a bigger place but he takes home more like 45k. That just seems too close for me.

I pay about 40% of my take home for my mortgage, taxes, homeowners' insurance, and condo fees. But, this is LESS than I would have to pay for rent in the area in which I live (just outside of Boston). I wish I made more money but the degree I have does not provide entree to higher-paying jobs. C'est la vie!