Think you’re paying too much for rent? This easy rule can tell you how much you should spend on rent when budgeting.

Here’s how to use it.

Understanding the 30% rule for rent

The 30% rule has become something of a standard when it comes to budgeting. The idea is that you shouldn’t spend more than 30% of your income on your rent and utilities combined.

Here’s how it works: 

Start with your monthly take-home pay — the cash you bring in each month after taxes and other deductions are taken out of your paychecks.

Then, multiply that monthly amount by 0.3. 

The 30% rule says that when you add up your monthly rent and utilities, the total should be below that number.

Other considerations

The 30% rule is a great starting point, but it doesn’t take your unique situation into account. If you have a few kids, you might want some extra room in your budget for other necessities like food and clothing. If you live in a major metropolitan area, your rent may be higher than average, but you might not need a car.

Budgets lend themselves to tweaking and adjustments so you can get where you need — or want — to be. If 30 to 35 percent of your income won’t provide suitable accommodations, you can try moving money from one category to another. The 30-percent figure for rent is predicated on the assumption that you’re going to spend another big chunk of money on things such as car payments and groceries. If you don’t have an auto loan because your car is paid for, you might be able to spend more on rent. 

Another budgeting system to consider is the 50/30/20 rule:

  • 50% of your after-tax income should go toward needs — essential expenses like housing, food, and transportation
  • 30% is allocated to wants — non-essential items that enhance your lifestyle
  • 20% is dedicated to savings and debt repayment

Making the numbers work

People living in cities where rents are steep might dedicate as much as 50% to rent payments but must typically give up something else to do so. The 50/30/20 rule allows for flexibility by shifting funds from discretionary spending to necessities.

In theory, this too can increase what you can comfortably spend on rent if you move some of that discretionary 30 percent over to the necessities column.

Evaluating location and commute costs

The next thing you should consider is that, sometimes, paying a little more for rent in a convenient location will actually save you more time and money in the long run. It affects your overall expenses and quality of life.

If you live closer to where you work, it reduces transportation costs, like gas for your car or bus fare, and wear and tear on your vehicle. You can also save valuable time that could be spent with your family, or working on your favorite hobby. 

You have to consider the things most important to you and make decisions accordingly. If you want a shorter commute and the convenience of city living, it might be worth adding some money to the rent fund. If you don’t mind the commute and will exchange it for lower rent, make sure you factor in those additional costs so you aren’t surprised at the end of the month.

Explore your options

The more wage-earners you put in a rental, the nicer and more spacious that rental is bound to be. Rent on a three- or four-bedroom dwelling sometimes comes out to less per person than a single individual would have to pay for a one-bedroom place. 

If sharing your living space seems uncomfortable, consider some other creative options. You might offer to perform maintenance or managerial services for your landlord in exchange for a break on the rent. If you don’t find the process of moving all that appalling, consider subletting a place — renting from an existing tenant who is no longer living there for one reason or another. You’ll need approval from the landlord and you may have to pack up and leave when and if the original tenant wants to come home, but these situations are often more affordable than signing your own lease. 

If nothing else, it might buy you time to get your financial ducks in a row so you can afford a little more toward your own place somewhere down the line.