Looking for an apartment can be a fun experience. After all, it could be the beginning of a new chapter of your life! Sometimes, people get a little excited when it comes to thinking about how much rent they can afford. It is actually very easy to figure out! You can calculate how much rent you can afford by using either of the methods below:
- Figure out how much 30% of your annual income is, then divide that by 12 (12 months in a year).
- Take your annual income and just divide it by 40.
A lot of the time, we think we can afford more in rent than we actually can because we do not take other factors into consideration. It is imperative to be sure that when calculating how much rent you can afford, you don’t make these 3 crucial mistakes.
- Calculating using your annual income BEFORE taxes. If you calculate how much rent you can afford using your annual income before taxes, this will not yield an accurate result. Taxes are taken out of each paycheck, and you’re left with less on-hand to spend per month than what your salary states. Sure, you will probably get a tax refund, but this will not help you pay your rent throughout the rest of the year.
- Not considering other bills and expenses not included in the rent. It can be easy to forget that rent is not the only thing you will need to pay. You’ll also have bills such as car insurance, health insurance, and your cell phone, along with other expenses, such as groceries, gas, and more. Try to calculate these projected expenses as best as you can, and subtract them from your monthly income.
- Leaving nothing left over to save. The biggest mistake you can make is allotting all of your money to go towards rent and bills, and not having anything left to save each month. Saving up money is extremely important because you never know when you may need it.
Remember these tips when you’re figuring how much rent you can afford, and you’ll be left with a much more accurate result!