![]() Unfortunately, you won't get the broker's fee back. These things can add up, so it's important to know what they are and how much everything will cost.ĭepending on what city you live in, you might have to pay a broker's fee. There was a broker's fee and a security deposit, plus I had to purchase new furniture. When I moved to New York earlier this summer, I was surprised to learn how many lesser-known costs were associated with renting and moving. What about the other costs associated with renting? "I think it's fine for that, but I think it's also important for folks to dig down deep into their own personal situation because personal finances may be personal," says John Madison, a CPA at Dayspring Financial Ministry. The 30% rule should be taken with a grain of salt: It's a rough guide for how you should spend your money, but it's not necessarily specific to you and your current financial situation. This means that low-income individuals and families typically have to spend a higher percentage of their income to cover the cost of rent, especially if they're living in urban areas. A 2018 study done by the NYU Furman Center found that more than half of New York City renter households making less than $30,000 a year were considered severely rent burdened (spending more than 50% of their household income on rent). How much you can spend on rent also depends on what your income level. What percentage of your income you're able to spend on rent also depends on your annual income and the size of your household.įor example, a young single person making $50,000 a year with no dependents can likely spend 50% of their income and have enough money to cover their other essential costs, whereas a one-parent household with two children making the same amount of money and spending 50% of their income on rent might not have enough money leftover other expenses. It might not be feasible to spend less than 30% of your income on housing in a major city or a suburb. For example, the average rent in San Francisco is more than 3 times the national average. If you're living in a major metropolitan area like Los Angeles, Boston, Portland or New York City, you'll be shelling out more money for housing because the average cost of rent in these cities or suburbs is much higher than the national average. But money advice can be oversimplified and doesn't account for every individual's unique financial status such as where someone is living, how much money they're making, how many dependents they have or how much debt they carry. General personal finance guidelines can be helpful because they can give people an idea of how much they should be spending. The rule is based on a 1969 law, known as the Brooke Amendment, that capped public housing rent at 25% of someone's income (the cap would be raised to 30% a few years later).īut does the 30% rule still hold true for most people? Does this simple rule of thumb work even when median rent is increasing at a rate that outpaces the growth rate of median renter household income? The conventional wisdom is that you should spend no more than 30% of your annual before-tax income on rent and utilities like heat, water and electricity. You'll also have less money to put into an emergency fund, invest for retirement or pay off your student loan and/or credit card debt. ![]() Therefore, the more you spend on housing, the less you'll have to spend on your other essential costs. They are expenses that you must be able to cover each month. Housing - along with food, transportation and medical care - are considered essential costs. First off, one of the largest expenses you'll have is your rent bill. ![]()
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