How much should you spend on rent? Everyone’s situation is unique and depends on your personal income and cash commitments. RenterInsights provides a general explanation on how much someone typically spends on rent and how you compare to the average renters in your city.
Determining the correct rent payment for you depends on a variety of factors including what city you live in, how much you make, how much you spend traveling, what your monthly living expenses are, etc… A general rule of thumb is to strive to spend no more than 30% of your gross income on rent. If you stay at or below this level, it should leave you with enough to spend on monthly expenses and even leave some money left over to save for the future. Housing is, for most people, the largest recurring expenses people have so it’s smart to take a little time up front to budget out your monthly spending. There is nothing worse than feeling overwhelmed by monthly rent payments and wish you were paying less for rent.
As an example, in Los Angeles, the median gross rent is $1,376 per month and the median household income is $58,385 or $4,865. At $4,865, your rent to income ratio would be 28% ($1,376/$4,865). In San Diego, the average rent is $1,611 and the median household income is $75,456 (or $6,288/month) for a rent to income ratio of 25% ($1,611/$6,288). In Seattle, the average rent is $1,496 and the median household income is $85,562 (or $7,130/month) for a rent to income ratio of 21% ($1,496/$7,130).
Is renting a waste of money? We answer that question for you also in our blog post on tradeoffs between renting and owning.