How much should I spend on rent?

Contributed by Sarah Henseler

Sep 7, 2025

10-minute read

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Couple searching rental listings together on a phone.

When you buy a house and take out a mortgage, your lender decides how much you can spend on a monthly payment. When you rent, however, it’s up to you to determine how much rent you can afford.

It’s an important calculation, which needs to take into account other living expenses and obligations – everything from car payments, groceries, utilities, and, of course, entertainment. There are also hidden costs of renting, along with life’s little surprises. So accurately assessing your rent ceiling is a crucial first step in enjoying your new home stress-free.

Let’s explore different methods to calculate it, based on your particular circumstances, common expenses to keep in mind, and tips on how to keep everything affordable.

Ways to calculate how much rent you can afford

The good news is that you don’t have to guess or create a complex budget to figure out how much rent you can afford. There are several simple formulas to help and one should be perfect for your situation.

We’ll run through each of them, with examples, so you can simply plug in your own numbers and determine exactly how much rent you can afford. But remember, these are more like guidelines than rules. So feel free to alter them to fit your situation.

Option 1: The 30% rule

Simply stated, the 30% rule says that you should limit what you spend on rent to 30% or less of your gross monthly income. This also includes other housing costs, such as renters insurance, utilities, parking, and more. Since these costs vary greatly depending on region, they will impact your rental budget in unique ways.

Use this simple formula for this rule:

Maximum annual rent = your annual salary x .30

or

Maximum monthly rent = your monthly gross income x .30

Here’s what that looks like, both annually and monthly, using the average salary in the U.S. of $65,470.

Let’s say you make $65,500 per year, according to the 30% rule, you could spend $19,650 per year on rent, which is 30% of your annual salary. That translates to $1,638 per month. And remember, this figure includes utilities, insurance, and other housing costs.

Of course, everyone’s situation is different – depending on family size, the rental market of your area, and other unique factors. For instance, while the average cost of utilities nationwide is $266 per month, from state to state that varies from a low of $185 monthly to a high of $389 per month.

Rents have also increased over the past several years, making affordability an issue for many. For instance, despite cooling down recently, rents nationwide are up on average by 22% since January of 2021. Assuming your income didn’t get a 22% boost, that makes the 30% rule a bit tougher to stick to.

So, again, treat this as a guideline, not a rule.

Option 2: The 50/30/20 rule

For a more comprehensive rule that takes all of your expenses into account, as well as savings goals, you might gravitate more toward the 50/30/20 rule. It’s a way of making a complete budget for all of your needs and wants.

The most important number, for this discussion, is the 50, as in no more than 50% of your after-tax income should go toward needs. These include rent, but also groceries, utilities, transportation, healthcare, loan and credit card payments, and any other financial obligations that must be met.

After that, the rule says you can spend 30% of your after-tax income on wants, such as dining out, entertainment, vacations… you get the idea. The final 20% should be reserved for savings, such as retirement accounts or emergency funds. That last 20% is the tough one, but just as important.

Here’s what a 50/30/20 budget might look like, assuming a yearly salary of $65,500, with an after-tax income of approximately $52,000. This assumes a single filer and a middle-of-the-pack state tax rate of 4%. Keep in mind that state taxes vary widely, so your after-tax income might look very different.

 Category  Annual budget  Monthly budget
 After-tax income  $52,000  $4,333
 Needs (50%): Rent, groceries, health insurance, loan and credit card payments, etc.  $26,000  $2,167
 Wants (30%): Dining out, vacations, entertainment, TVs, etc.  $15,600  $1,300
 Savings (20%): Retirement accounts, emergency funds, etc.  $10,400  $867
 
 
 
 
 
 
 
 

Option 3: Rent-to-income ratio

Another way to figure out if you’re paying too much for rent is to calculate your rent-to-income ratio. It’s sort of the 30% rule in reverse and is used mostly by landlords to determine if an applicant can afford their rental. But you can use it, too.

Here’s the formula to determine the rent-to-income ratio:

Monthly rent / monthly gross income

or

Annual rent / annual gross income.

So, if your annual gross income is $65,500, your monthly gross income would be approximately $5,400. Now let’s assume your rent is $1,500. Your rent ($1,500) divided by your monthly gross income ($5,400) equals 28%. You are in a good place.

It should be pointed out that people do differ on whether to include utilities, renters insurance and other housing costs in this formula, as in the 30% rule. So, if you use this ratio, it’s probably best to take those other costs into consideration.

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Other costs to consider when you’re renting

As is painfully obvious to any American, life comes with many other costs than just rent. Make sure you budget for as many as you can think of before you sign a lease. Here are some you may, or may not have, thought of.

Up-front costs

If you decide to rent, there are immediate expenses that come with moving in and setting up your new space.

  • Moving costs: If you’ve ever moved before you know that it always takes longer and costs more than you planned. If you hire movers, expect it to cost anywhere from about $900 to $2,600, with the national average coming in at about $1,700. Solution: If you have a strong back and some strong friends, pretending you’re in college again and moving yourself is always an option. For a local move, truck rentals are typically under $200. Plus pizza, of course.
  • Application fees: These can add up if you view and apply to multiple listings. Application fees, which pay for landlords to check your creditworthiness, can run $25 to $75 per person. Solution: To lower this cost, make sure you really like a place before applying. Another tack could be to run your own credit report (it’s free) and give that to landlords.
  • Security deposit: A security deposit is an amount a landlord collects when you move in to cover any damage you might do while you live in the house or apartment. Although laws and limits vary by state, generally speaking a security deposit can’t be more than 1 or 2 months’ rent. Solution: If you can’t get your landlord to lower this amount, ask if you can use it as your last month’s rent if you move out. This way, you ensure that you get the full value of your “deposit” and hedge against unscrupulous landlords keeping some of your deposit unjustly.
  • First and last month’s rent: First month’s rent pays for the first month you are in your new place, of course. But some landlords also ask for last month’s rent up front. This ensures that you don’t skip out on them. Solution: If your landlord is asking for the last month upfront, there’s likely little you can do. If they also ask for a security deposit, that is the area to negotiate.
  • Utility connection fee: In our modern world where everything is digitized, you’d think turning on the electricity or water or internet would be free. But of course it’s not. Putting electricity into your name can run $30 to $100; gas $30 to $70; and internet and cable $50 to $200. Solution: Try asking for these fees to be waved. Often, when speaking to a live person, this can be achieved.
  • Cleaning supplies or services: Ideally, your new rental will be professionally cleaned before you moved in. But this is not always the case and you might need or want to hire a cleaning service. This can cost, on average, $125 to $200 for a 1,000-square-foot two-bedroom, two-bath apartment. Solution: To mitigate the cost, ask the landlord to have your new home professionally cleaned, or do it yourself.

For more detail on moving costs and ways to shave them down, check out our article on moving costs.

Ongoing expenses

There are a lot of financial advantages to renting, such as avoiding the many costs associated with owning a home, like roof repair, systems maintenance, property taxes and other homeowner expenses. However, renting does come with some ongoing costs that you should factor into your budget when assessing how much rent you can afford.

For instance, you will likely be responsible for utilities like electric, gas, water, and possibly trash. These can add up. As mentioned earlier, the national average cost for utilities is $266 per month.

Another expense you should consider carefully is taking out renters insurance. Like homeowners insurance, this protects you from theft or loss of your personal belongings and liability in case someone is injured in your home. Renters insurance typically costs about $15 to $20 per month, however rates are individualized.

There might be other ongoing expenses depending on your area. Make sure you research these and factor them into your budget. You can also try to lessen their impact. Look for places that include utilities in the rent.

As far as renters insurance goes, there are many factors that could lower your rate. You could choose a higher deductible, get rid of valuables that you rarely use or want, and shop around for the lowest rate, or pay for an entire year instead of monthly – often you’ll get a reduced rate.

Bills and insurance costs

When using any of the formulas for figuring out how much rent you can afford, but especially the 50/30/20 rule, many non-housing-related bills and costs will factor in. Make sure you make a comprehensive list of all of them.

For instance, there are a number of expenses nearly everyone pays, and they can make a major dent in your rent budget. Here are some common costs to consider:

  • Groceries
  • Car payments
  • Car insurance
  • Health insurance
  • Cell phone
  • Internet
  • Credit cards
  • Gas

Make sure you factor these into any of the three budgeting formulas you use. For instance, for the 50/30/20 rule, every one of the costs listed above should go into the 50% column. That might add up to more than 20% of your after-tax income, meaning you will have less than 30% to spend on rent. You want to know that before you sign a lease, not after.

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Tips for making rent costs more affordable

As we saw, rents have been rising over the past few years. With inflation jacking up the cost of food and other goods at the same time, it can be tough to keep up. There are things you can do, however, to make rent more affordable.

  • Cut down on wants: Wants like dining out, impulse buys, new clothes, and more can easily overtake the 30% restriction in the 50/30/20 rule and bleed into your rent money. Take a good hard look at your spending and determine whether those wants are worth the stress they’re placing on rent.
  • Get a roommate: If you’re not using an extra bedroom, turn it into cash. Sure, it might be hard to get used to living with someone at first, but think of the financial freedom slashing your rent could bring.
  • Lower monthly bills: There are many bills you might be able to negotiate or find a better rate for. For instance, cell phone carriers are constantly battling for customers. Same with car insurance companies.
  • Cut the cord: If you have cable TV, ask yourself: How many of those 500 channels do I actually watch? And your favorite shows? Often they are available on streaming services. Or, if you love cable TV, consider cutting movie and music streaming services. Small changes add up.
  • Consider moving: If all else fails, think about finding a new place in a less expensive area. Real estate, and therefore rents, are heavily dependent on location, so finding a new neighborhood could lower your rent significantly.

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FAQ

There are a few common questions that always come up when thinking about how much you should spend on rent. Let’s answer them.

What factors affect how much I can spend on rent?

The biggest factors are your income and fixed monthly bills, such as utilities, loan payments, health insurance and other costs you must cover. Unlike habits such as that morning cafe visits or steakhouse dinner, necessities are difficult to change, so you should take a close hard look at them before signing a lease.

What is a good rent-to-income ratio?

A very common formula used universally is that your monthly rent should not exceed 30% of your gross monthly income. Another popular budgeting formula is the 50/30/20 rule. Here, your rent, along with necessities such as health insurance, groceries, loan and credit card payments, etc., should not exceed 50% of your after-tax income.

Will the amount of rent I pay monthly ever change?

Unfortunately, yes – this is one of the drawbacks of renting. Unlike when you buy a home and take out a fixed-rate mortgage, your monthly housing cost is only fixed for as long as your lease. When it ends, unless you are in a rent-controlled building, it’s likely that your landlord could raise the rent.

The bottom line: How much you should spend on rent depends on your financial situation

Renting comes with many advantages. But it also comes with just as many challenges and uncertainties, such as being at the whim of landlords and building no equity with your hard-earned monthly payments.

This is why it’s so important to consider all your costs, and options, carefully before signing a lease. If you must rent now, but want to save for a home, perhaps using the 50/30/20 budgeting formula will allow you to save 20% of your after-tax income for a down payment in the future.

It might also be a good idea to look into whether a mortgage payment is more affordable than paying rent. If so, you can not only determine your housing cost for years to come, but start building equity and long-term wealth. Rocket Mortgage® can help you explore your options – you could be closer to owning a home than you think.

Terence Loose has held editorial positions at national magazines, as well as analyst and writer positions at Netflix. He has written extensively on everything from finance and real estate to entertainment and travel, and holds an MFA from UCLA. He is the author of the 2024 novel Aloha Is Dead.

Terence Loose

Terence Loose has held editorial positions at national publications, as well as movie and TV analyst and writer positions at Netflix. He has written extensively on everything from business, personal finance and real estate to entertainment, celebrity and travel. His work has appeared on prominent finance sites like GOBankingRates, Yahoo!, CNBC, among others, as well as in publications such as COAST, Riviera, Movieline, The Los Angeles Times, and The OC Register.
 
Loose’s novel, Aloha Is Dead, was published in 2024. He has taught writing and storytelling at UCLA, UCI, and Netflix, and holds an MFA from UCLA. An avid waterman, when he is not typing, Loose is surfing, diving or trying to spear dinner.