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What It Means to Rent What You Can Afford

July 08, 2019

Tip of the Week

Rent what you can afford.

1 min read

Strategies

Consideration: If you have a lot of debt, your monthly rent plus your other loan payments shouldn’t exceed 43% of your monthly income. You may have to seek cheaper alternatives if it does.

Let’s break it down:

If your gross pay is $3,000 a month, you should pay no more than $900 a month.

To put another way, if your rent is $900 a month, your annual income should be at least $36,000.

Jargon Hack

What is gross pay?

Gross Pay

Gross pay is the amount you get paid prior to taxes being taken out of your paycheck.

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Jargon Hack

What is a security deposit?

Security Deposit

A security deposit is money you need to put down prior to moving in to a rental, usually in addition to your first month’s rent. It’s protection for your landlord against your not paying rent, and property damage. You typically get your security deposit back with a small amount of interest when you move out.

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While the 30% rule should be your goal, remember there is a well-documented shortage of affordable housing in the U.S., and nearly 40% of renters in the U.S. spend more than 30% of their income on rent, according to research. But doing what you can to get your rent costs down will only help you in the long run.

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By Stash Team

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