A comfortable home to dwell in is an essential need. When deciding on your home, there are a lot of factors to take into account. If you are a planner who diligently notes down all his expenses, planning your rent on house is easily achievable. But if you splurge and end up renting a home out of your budget it can impinge on your savings.
Whether we reside in an expensive city or a serene suburb, we have to plan our rent management with care. Spending too much of our income on the house rent can be quite insidious, which is a common hazard among metropolitan citizens. You should keep in mind that the rent should not only be affordable but also adaptable to your budgeting.
Some of the valuable insight to note when considering the question ‘How much rent can I afford?’ are listed below. Look through them to form an informed decision about your home rent.
The rule of 30
It is a very popular rule, concurred by many, to spend up to only 30% of the salary on the rent of the house.
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Although we aspire to follow the rule it is rarely possible. People who spend more than 30% of their principle income on house rent are considered to be burdened by money woes. Many people fall under this bracket as they turn a blind eye to this important rule.
The income growth in the recent years is slowly becoming stagnant, whereas the house market is flourishing. As they are not proportional, people often end up overspending on their rent payment. You need to consider renting a house that falls under the limit of 30% of your income. One crucial detail to remember is to not exceed the 50% of your income, as that would be fatal to your financial safety.
Sources of Income
If you are fresh out of college, looking for your first home then you may have only one source of income. But if you are a seasoned professional, there are chances of you having multiple sources of earning bread.
List all these sources and meticulously plan the expenditure based on them. Keep in mind that some secondary sources of income can be fickle, deeming them undependable. It is better to not account them when factoring rent payment. After listing the source of income, you can now decide the suitable amount to spend on house rent that won’t dent your reserves. Keep the 30% rule in mind while deciding the rent budget.
It may be difficult to obtain the house you desire within the range of your budget. In such a case, diversify your search and look for other options. Do you need a home with a parking space, with terrace access or with a swimming pool? You may decide to forego all these attributes. Make a list of amenities that are absolutely necessary and anything outside that list can be omitted.
Also, if you are not planning a family anytime soon it can be cost effective to have housemates. The rent divided by two or more people can well fit into your budget and will place you in a nice neighbourhood.
Whether it is an apartment mid-town or a house with picket fence in the suburb, it is important to ask the question ‘How much rent can I afford?’ in the initial stages of your financial planning. Craft a clever plan to manage your rent and financial security hand-in-hand.