How much should I spend on rent?
Your guide to budgeting for rent and minimising your rent costs
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Whether you're living in an apartment, condominium or mansion, there's a high chance that you're paying rent on your home if you don't own it. Rent is an essential cost that should be paid off on a regular basis – but exactly how much of your income should go towards rent? This guide answers all your basic questions on rent, from "how much should I spend on rent?" to "how should I minimise my rent costs?"
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Considering your overall finances
In order to get a clear understanding of your rent budget, you first need a clear understanding of your finances. This means knowing the amount of cash you have monthly after paying off taxes. The best way to get a clear overview of your finances is by using a smart budgeting tool. The Finder app, for example, is a money management tool that helps you stay on top of your finances. Using a single dashboard, you could get a clear understanding of your bank accounts, loans, investments and credit card bills. Additionally, the Finder app helps you monitor your transactions, find the best shopping deals and monitor your credit score – all for free. It's a simple, intuitive tool that goes a long way in helping you understand your finances. In turn, you'll then be able to gauge how much to spend on rent.
Using the 50/30/20 rule to decide how much to spend on rent
Once you get a reasonable gauge of your monthly cashflow, you can start planning your monthly rent costs. In general, it's not advisable to spend more than 30% on your monthly income on rent, as this could make it difficult for you to cover other essential expenses while accumulating savings. One template you may wish to use is the 50/30/20 rule. This rule suggests that you allocate 50% of your monthly income to essential expenses, such as rent, groceries and bills. 30% of your income should then be set aside for "wants", including eating out, splurging on new clothes or subscribing to video streaming services. The last 20% of your salary should be set aside for savings purposes.
The 50/20/30 rule might not work for everyone. In fact, you should adapt it according to your personal financial situation. For example, if you live closer to the city centre, you might expect to allocate more of your monthly income to rent. In such a case, once you find yourself near the 30% threshold, you should consider allocating less money to non-essentials. Alternatively, you could try any of the tips below to minimise your rent costs.
Minimising your rent costs
If you're having trouble deciding how much to spend on rent, you could always try reducing your rent costs before coming to a decision. Here are some handy tips to consider.
- Sublet the rooms in your apartment. If you are living in an apartment with more rooms than you need, consider sharing it to split the rent.
- Work with your landlord to reduce the cost of rent. If you agree to a longer lease or reliably pay rent, your landlord may be open to deferring a few months of your rent.
- Try downsizing. Consider downsizing your apartment or renting a cheaper apartment further away from the city centre.
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