How much should I budget for rent each month?
The cost of living has increased dramatically over the last decade. In addition to rising rents, the average American now spends $1,500 per month on food alone.
This means, for a lot of Americans, that even if you save every penny you earn, you won’t be able to afford a home without a significant amount of debt.
Renting vs buying is a common dilemma faced by millennials. If you don’t want to or can’t afford to spend thousands of dollars on a down payment, renting might seem like the only option.
But before you decide to rent, you still need to work out a budget, and this is what this article is here to help you with.
We tell you everything you need to know about renting and the financial impact it can have on you, as well as give you tips on how to budget. Let’s jump in.
How Much Does Rent Cost?
The amount you spend on rent will differ state by state. Some of the most expensive cities to rent in include New York City, San Francisco, Los Angeles, Washington D.C., and Boston.
In 2022, the District of Columbia has the most expensive average rent in the US, at around $2,324 a month for an apartment with only one bedroom.
In Massachusetts, you will be paying around $1,995 a month, and in California, this will be around $1,777 a month.
New Jersey and Hawaii are also included in the top five rents. Rent is usually a lot higher in states with people earning much higher incomes.
Each of the five states with the highest rent prices is among the highest-earning states in the country.
For example, Massachusetts’s average household income is around $81,215, California’s is $75,235, Hawaii’s is $81,275, and New Jersey’s is $82,545.
If you are looking for the states with the cheapest rent prices, these include West Virginia at $628 a month, followed by Montana and Oklahoma.
Wyoming and Kansas are also among the cheapest, but prices start to rise above $700 here. These states however also have lower household incomes.
How Do You Budget For Rent?
Before we dive into your monthly budget, let us first establish some ground rules. First off, you shouldn’t be spending all of your money on rent.
It’s important to set aside a certain percentage of your paycheck towards other bills such as utilities, groceries, transportation costs, etc.
Once you’ve done that, you’ll be left with enough money to cover your basic expenses as well as your rent.
Now that we’ve sorted extra expenses out, you’ll need to figure out how much you’re going to pay each month when it is all added together. The good news is that there are apps available to make this process easier.
One of them is called “Handy” and allows you to enter where you live and receive estimates on how much you should expect to pay based on local market rates.
Another app that helps renters determine their housing costs is called Apartment List. With Apartment List, you simply search through different properties and see what they come up with.
You can narrow down your options based on features such as the number of bedrooms and bathrooms, proximity to public transport, and even pet policies.
Once you find a place that works for you, you can move forward with viewing the place and signing a lease.
This document will outline when you’re expected to move in, how long you have to vacate the premises, and any additional fees or charges.
If you’re moving in during the summer months, it might be wise to look for a property that offers air conditioning, even if this comes with extra fees.
Once you’ve signed the lease, you’ll want to keep track of how much you’re spending each month. To do this, use a spreadsheet program like Excel or Google Sheets. Enter your total rent payment, along with the date you paid it.
Then, add up all of your other expenses including utility bills, phone bills, internet service, cable TV, gym memberships, food, clothing, entertainment, etc.
Next, subtract your total rent from your total monthly expenses. That amount is now your net income.
Now, divide your net income by 40 (or whatever number of weeks you plan to stay) to calculate your weekly rent. Finally, multiply your weekly rent by 52 to get your annual rent.
To work out how much money you will have left for personal expenses like eating out, clothes trips away, etc., you will need to subtract your total monthly expenses from your monthly income and this will be what is left.
Projected Rent Increase
You also need to consider your projected rent payments for the next year. Be sure to factor in any increases in rent prices over time.
A few years ago, San Francisco was considered one of the most expensive cities in the world. However, since then, the city’s real estate market has been on fire.
As a result, rents have increased dramatically. Average rents in SF rose by more than 50% between 2016 and 2017 alone. Working out projected rent price increases can save you a lot of money and worry further down the line.
Budgeting Apps
There are plenty of budgeting apps that can make budgeting a lot easier. These include Mint, EveryDollar, PocketGuard, and YNAB.
Most are linked to your bank accounts and therefore can help you set aside a set amount of your income into separate accounts.
Some apps can show any of the other payments you’re spending your money on monthly and encourage you to update or evaluate them on a regular basis to see if you can cut any costs.
How To Keep Rent Costs Down
If after working out your monthly costs against your salary, you find you are going to struggle to afford rent, why not take note of some of these tips to keep costs low.
- Choose a studio apartment over a one-bedroom apartment
- Choose an apartment in the suburbs, which might be further from the city center but also cheaper.
- If you choose the city, use public transport as much as you can to eliminate the expense of a vehicle and insurance.
- Always try to rent with a roommate such as a family member or partner.
- Look for apartment communities with money-saving perks, city or occupation discounts. These can include an on-site fitness center or an in-unit washer and dryer.
Final Thoughts
We hope after reading this article you have learned everything you need to know about budgeting and rent prices and realize why budgeting is so important when it comes to renting.
Although it might be expensive to rent on your own, with a budget and proper planning, it can be possible. If you are still struggling, take note of our money-saving tips!
Financial Disclaimer
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