How Much Should I Spend On Rent? [Without Breaking the Bank]

If you have ever followed personal finance advice, you’ve definitely come across discussion about buying a home versus renting where you live.

And if you look up the direct question online, you’ll generally find a 50/50 split between what is the “supposed” best thing to do.

But renting should not be a dirty word. In fact, it’s been found that 36% of Americans are renting, which ends up being over 40 million people according to these renting statistics.

And whether you are looking for your first apartment or considering renting a house or condo, you have to understand how much rent you can afford before applying or signing any lease. 

Remember, you want to ensure you can afford the basic cost of living and still have money to save and invest for your future. Easier said than done depending on where you plan on living. 

So, if you are wondering how much you should spend on rent, costs to keep in mind, and ways to save money while renting — then the below information is for you! 

Why Renting Can Be A Good Choice

Many Americans believe that the ultimate living situation is to own your own home. Although this has always been part of the American dream, currently there are many cases where renting may be a better choice than buying a home. 

This may be due to cost of living, family situation, working arrangements, or even just a personal preference based on your lifestyle interests.

  • Renting is a good choice for those who want flexibility and don’t fancy being responsible for their own home. 
  • Renting allows you the flexibility to easily move city and state without having to worry about the trouble of buying and selling a house. 
  • Renting is also a good choice for those who live in expensive cities such as LA or New York. And Many times, buying a home is simply not worth it in those areas and the best option is to rent. 
  • Additionally, if your goal is to build generational wealth or increase investment properties, some will follow the “live where you rent, and rent where you own” philosophy.

The main advantage of renting is that you won’t be tied down to a property and won’t be responsible for paying for homeowners insurance (you’ll still want renters insurance), taxes, HOAs, or ongoing maintenance. 

You also won’t need to save up for years for a deposit, and won’t have to worry about mortgages or having an excellent credit score to get the best interest rates. 

Another advantage is that you won’t be affected as much by the housing market — your rent payments are less likely to change by huge swings, making it more secure and predictable for the future. In general, renting is less of a hassle than homeownership.

How Much Rent Can You Afford?

When calculating how much you can afford to pay in rent, you’ll need to keep into account a few things. Some of the first things to understand and figure out includes: 

  1. Your salary after taxes: this is the total amount of money you can spend every month on everything after taxes. You want to ensure you aren’t living paycheck to paycheck just to pay rent and basic living expenses. 
  1. Where you plan on living: if you’re living in an expensive city, do you know which area in the city you want to ideally live? Will you be living in the suburbs or in the city center? Will you be renting an apartment, a house or a condo? Knowing this will give you an estimate of what you’ll need to commit to renting and to find options to save more money.
  1. Credit history: this is something that may be checked if you are leasing an apartment. If you have a bad credit history, it may be more difficult to find the kind of apartment you’re looking for and less landlords willing to approve your application. Use Credit Karma to see your score for free and get recommendations to improve.
  1. Living situation: you’ll want to take into consideration whether you’ll be living with any roommates, a significant other, or if you’re planning on living alone. Sharing an apartment with someone else can drastically reduce your monthly rent and total living expenses if you are splitting costs. But, this is a personal decision you’ll have to consider as well. 
  1. Utilities: While some places you rent may cover some utilities (factored into the rent price) most will require you to cover those too. Like electricity, gas, and oftentimes water. While there are ways to keep your utility bills lower, you have to factor this in when it comes to deciding what you can afford in rent. 

Additional Rental Fees

Once you’ve considered all of the above, understanding how much rent you can afford is not over! Now you’ll need to make sure you keep into account any other renting expenses that may occur when paying rent. Those could be:

  • An application fee: many landlords charge this fee to cover any administrative costs that come with checking your financial records and more. If you are applying to several apartments, you’ll want to factor in that cost. 
  • Administration fee: in addition to the application fee, it’s likely you’ll need to pay an administration fee: this is the fee a landlord or an agency may charge you once you’ve been accepted on the lease and all records need to be updated and transferred. I’ve personally not had to pay this during any of my renting, but note it does exist. 
  • Security deposit and one month’s rent: You’ll want to have a security deposit ready along with the first month of rent. The security deposit will be refunded back to you once you leave the property unless you damage it. Sometimes this amount can be the same as your month’s rent and other times it can be a fraction of it. The good news is it is much less than what you would need for a downpayment on a house. 
  • Pet fee: If you’ve got a pet with you, you’ll also need to be prepared to pay a pet fee or deposit. This is an extra fee that landlords charge so you can keep your pet with you.
  • Amenities fees: These are fees that some rentals charge to help maintain the pool, gym, barbecue and any other amenities that your building may offer.

It’s starting to add up isn’t it? In the next section, I’ll cover the best way to figure out how much you can spend on rent.


Calculating How Much to Spend On Rent 

There is plenty of data out there about the average cost of rent in America, some of which is a bit outdated or low. 

According to data from Statista:

“In February 2020, the average monthly rent for an apartment in the United States was 1,468 U.S. dollars. Rents are trending upwards nationally and have risen significantly since their September 2016 rate of 1,348 U.S. dollars. Since 2016, national rents have climbed throughout spring and early summer, and the increase tends to slow in the rest of the year.”

But that’s just the average; according to another survey by the US Department of Housing and Urban Development, more than 10% of Americans pay more than 50% of their annual incomes in rent. 

That’s a significant amount! But do you need to be spending that much on rent? 

The 30% Rule

A popular rule to follow is not to spend more than 30% of your income on your monthly rent. If you earn $3,000 per month, then you don’t want to be spending more than $1,000 per month on rent.

The advantages of this rule is that it’s easy to remember and you can quickly calculate what you should be spending on rent. 

The disadvantage is that this is a rule-of-thumb, so it doesn’t necessarily apply to everyone. If, for example, you live in an expensive city such as San Francisco, it’s likely you’ll need to spend several thousands for an apartment. 

The amount you spend on rent also depends on your preferences: if you’re young and living in the city, it’s likely you’ll be happy to share an apartment with a few other roommates. This is different to a young family who may want to live in the suburbs in an area with good schools.

And this rule doesn’t give you the “full picture” of your finances, it generalizes it instead.

The 50/30/20 Rule

Another popular rule to help you calculate how much you should be spending on rent is the 50/30/20 rule. This is a stronger rule to help you calculate how much rent you should spend on rent and what you can afford.

This is a budget strategy that says you should spend 50% of your income on needs, 30% on wants and 20% on savings or paying off debt. In your 50%, you would include things like rent, utilities, groceries and transportation. 

We can use the $3,000 per month example like in the previous rule. 

  • $1500 for rent, utilities, groceries, etc.
  • $900 for things you want like shopping, entertainment, etc.
  • $600 for savings and investments

Tip: Personally, I recommend doing more than 20% to save, invest, or pay down debt  and less on the “Wants” — but you do what you feel comfortable doing and can afford to. And As you grow your income, you can start to increase your savings rate slowly.

The advantages is that this 50/30/20 rule will help you create an overall budget that you can easily keep track of every month.

Instead of only focusing on how much rent you can afford, you are building a bigger financial plan.

The disadvantage is that this rule may not work on particular cases, similar to the 30% rule.

Ways to Save Money While Renting


Although gas, water and electricity are essentials, there’s no need to be overpaying if you don’t need to.

Do a bit of research and compare your options: it’s likely you’ll find some ways to reduce your monthly utility bills. Like keeping the temperature at a rate where your air or heat is not constantly running, turning off lights and televisions when not in use, more energy efficient light bulbs and appliances, etc. 

Tip: You can get access to clean energy and lower your electric bill by connecting your account to Arcadia. It takes two minutes to see if it’s available in your area and get your utility account connected. Learn More About Arcadia


If you plan your meals and grocery trips, you’ll find it easier to save money on bills. Try cooking and doing most of your meals at home.

Although you don’t need to cut restaurants completely out of your budget, cooking and eating at home will help you save a lot of money in the long run.

Also look at coupons, sales prices, and even comparison shop at various grocery stores if you really want to go the frugal living route with your food.  

Get A Roommate

If you’re in a position to accept a roommate, why not get one?

Finding a nice apartment with an extra bedroom and then finding a roommate means that you get to choose where you want to stay and you can choose your roommate.

You’ll get to split the cost of rent and you’ll also be sharing expenses such as utilities, supplies and even groceries. I’d recommend someone you know and trust to live with if you are single, but many times in larger cities you’ll need to find someone you may not know. 


If you want to spend less on essentials every month, consider living close to the city center and using public transport.

You can also choose to live further into the suburbs but still close to a subway station — this means you won’t need to pay for a car and you’ll have easy and quick transportation to the city.

Alternatively, you can also opt to ride a bike, walk, or some other cheaper form compared to a car. Only if this is an option for you. 


Before signing up for the first car or rental insurance you find, make sure to do some shopping around.

Ask your friends or roommates what they’re paying and see what the standard is. There may be cheaper options or even discounts if you ask different insurance providers.

Certainly this isn’t going to add a ton of money back to your pockets, but it adds up. You can also consider splitting the rental insurance along with roommates to reduce your monthly expenses.

Live Within Your Means

The best advice always comes down to one thing: living within your means. That simply means spending less than you earn. If you follow a rule such as the 50/30/20 rule, you’ll be sure not to overspend, stick to a budget and also save money. 

Not sure where to start? Begin by tracking your monthly expenses — it’ll give you an idea of where you could cut back and what you need to budget.

Bonus: If you are looking to make a budget and put a plan together, Savology’s free software might be a great start for you. You can get started with Savology in just a few minutes. 

Rent Affordability FAQ

What percentage of income should go to rent?

The ideal percentage of your income that should go to rent is typically around 30%. However, you need to take into account your own personal lifestyle, utilities, and finances to help determine what you can ultimately afford to pay in rent. If you follow the 50/30/20 rule, 50% will be allocated towards total living expenses.

Is renting really a waste of money? 

While you may have heard renting is a waste of money, it can actually be the smart way to live and provides you with more flexibility and less responsibilities compared to owning your home. However, it’s a personal preference based on your interest, lifestyle, and where your finances currently stand.

How much should my rent be if I make 100k?

If you are making $100,000 per year, a quick way to determine how much your maximum rent should be is take 30% of that income ($30,000) and divide it by 12. You’ll be able to afford a maximum of $2,500 per month in rent. But remember, that number is not factoring in the other costs of renting, it’s just a good quick estimate.