There’s a long-standing rule of thumb that rent and other housing costs like utilities should absorb at most 30 percent of your income. That means if you bring home $4,000 per month, you should spend no more than $1,200 on housing.
But remember, rules of thumb are only general guidelines. What you pay can vary widely based on your location, needs for space and amenities and other factors. In notoriously pricey cities like New York and San Francisco—where rent for one-bedroom apartments top $2,000 a month—following this rule might seem impossible.
On the flip side, in more affordable areas—like Wichita, Kansas, where one bedrooms run just $562 a month—you wouldn’t want to spend more than necessary. Also if you’re rolling solo, your living needs will be different than someone who has a spouse and kid.
So instead of aiming for a specific target percentage, focus on keeping your rent low enough to fit comfortably in your budget, so that you can afford all your other needs—and some of your wants, too. If a line item as essential as housing is eating up too much of your income, you’re bound to feel stretched and at risk of financial disaster.
If that’s the case, you can potentially save hundreds on your housing costs by getting a roommate (or, you know, four), opting for a more affordable neighborhood, negotiating your lease or skimping on amenities.