How Much Rent Can I Afford? How to Calculate a Rent You Can Afford

/ 01:50 AM February 03, 2019

The question “how much rent can I afford”  is inevitable for those who plan to spend wisely. Your income is expected to be 40 times your rent. Before deciding on what apartment to rent, it’s advisable you deduct the tax payable on the income you earn. The money left after the deduction of the tax is what the planning should be based on.

The most important thing is that other expenses such as clothing, feeding etc. are put into consideration while determining how much rent one can afford. It’s also necessary to consider the bills that would accrue from the use of the apartment. Such bills include: electricity bills, gas bills, water bills, satellite TV subscription bills etc. It is also important to consider all other relevant bills

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Finding It Difficult To Calculate Your Monthly Rent? Here’s How.

Are you having issues calculating your rent?

Do you wanna know the best rent calculation technique?

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Don’t worry! This discourse proffers the necessary solutions to your housing problems.

Calculating your rent might seem difficult while looking at it superficially. But it’s one of the simplest tasks that you can ever attempt. In this write-up, you’ll be taken through the most convenient rent calculating method available.

Calculating your monthly rent from your weekly rent.

Most Tenants make the mistake of calculating their monthly rent by multiplying their weekly rent by 4 and their annual rent by 12. This approach is absolutely wrong.

Maybe this is the reason your calculations have always been different from your landlord’s. In calculating your monthly rent, the right approach is to multiply the weekly rent by 52. The result is then divided by 12. You’ve successfully calculated your monthly rent. Some examples shall be made to illustrate the points above.

Incorrect:
Weekly rent = $200
Monthly rent = $200 X 4
Monthly rent = $800

Correct:
Weekly rent = $200
Annual rent = $200 X 52
Annual rent = $10,400
Monthly rent = Annual rent / 12
Monthly rent = $10,400 / 12
Monthly rent = $866.67

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You can see there’s a great disparity between the results of the first and second approach. There’s a difference of $66.67 in the two approaches.

In some cases, the year has 53 weeks. It then follows that the weekly rent would be multiplied by 53.

Monthly Rent Calculator

Determining your monthly rent, as already established above, depends on how much you can reasonably spend per month. You need to factor things like utilities, renter’s insurance and transportation cost while using a monthly rent calculator. Apply the rule of thumb, which states that no one should spend more than 1/3 of your after-tax salary on rent.

For example, if your annual salary is $50,000, that leaves you with $4,166/month. After taxes, you should have around $3,270. One third of 3270 is about $980, and that is what your monthly rent should be on $50,000 a year.

Going by this logic, the $980 should include extra-costs you’d incur for amenities your apartment does not possess.

Rent-to-Income-Ratio Calculator

How much of my income should I spend for rent? To answer this, you’ve got to figure out the rest of your monthly budgeting. Since the largest percent of your monthly income goes to rent, it’s easiest to figure out the rest of your budgeting once you determine how much rent you can afford by using our Rent-to-income-ratio calculator.

A common budgeting strategy follows the 50-30-20 rule. Applying this strategy to your finances is a great way to maintain a focus on controlling your monthly spending while also planning out your future’s finances.

The 50: The 50 of the 50-30-20 rule means that you should aim to pay no more than 50% of your income towards your monthly necessities. These necessities include expenses such as:

  • The cost of your groceries per month
  • Your utility bills like your phone bill, water, and electricity
  • The cost of renter’s insurance
  • Driver’s insurance
  • Health & dental insurance
  • And of course, how much you should spend on rent

As given above, figuring out the amount of money you should to pay for rent gets you off to a good start on budgeting for the rest of your monthly expenses and helps you lay the foundation for figuring out the rest of your finances. If you’re looking at two different apartments and one is 40% of your income and the other is 25%, you might want to calculate how that slight difference will affect the rest of your monthly budgeting for your necessary costs.

The 30: The 30 represents how much of your income should go to discretionary spending. Basically, you should allocate 30% of your monthly income to cover entertainment, dining, the gas needed for out of town trips, the costs of your hobbies, and anything else that you can live without if you had to.

The 20: The last, and often what feels like the most distant, is the 20. The last 20, according to the 50/30/20 rule, is the percentage of income that should to go towards your financial goals. Whether that is putting down money for your retirement, paying off a car loan or student loan, or saving money for a down payment for your home.

Final thoughts

With this knowledge, I hope you’ll be able to independently determine your rent and make proper housing decisions.

Thanks for reading.

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