Current Events > Any finance people here? Whats the rule of thumb on how much to spend on rent?

(+) Yeah! (+)

/ mortgage?

Like what % of your after-tax income should go towards rent?
What % should go to savings?
What % should go towards car payments?
What % should be leisure spending?

Thanks.
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30-50%
10-15%
0-10%
The rest of it

It can vary a lot though depending on your situation
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rule of thumb always given to me was "you want to make 3-4x as much as your rent"

but im no finance guy
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31% or less of gross income on where you livE.

up to 50% on rent? Seems like too much?
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Basically I'm trying to decide what cost of house and in what location is reasonable. Ideally I want to move back to the bay area, so I'm trying to target a price range and location and see whats reasonable with my income.
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Definitely would pay less than 50% on rent. My wife and I are only paying 25% of our monthly income on rent, I can't imagine paying higher tbh.

Naturally that amount will probably go up when we have a mortgage, but at least it's not being thrown away on rent.
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depends where you live & your income honestly. the whole X% thing is kind of dumb because someone in Arkansas is not going to be putting the same amount towards rent as someone in NYC
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31% of before tax income for where you live. Some of where you live, its taxes, insurance, etc and any loans should be less than 43%

@Darkman124
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In my apartment I spent about 12% on my rent.
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Romulox28 posted...

depends where you live & your income honestly. the whole X% thing is kind of dumb because someone in Arkansas is not going to be putting the same amount towards rent as someone in NYC

Agreed. Stuff isn't magically going to be cheaper because you make less, and you shouldn't be spending more just because you make more.
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Squall28 posted...

Romulox28 posted...

depends where you live & your income honestly. the whole X% thing is kind of dumb because someone in Arkansas is not going to be putting the same amount towards rent as someone in NYC

Agreed. Stuff isn't magically going to be cheaper because you make less, and you shouldn't be spending more just because you make more.

This is true. However their are certain affordability metrics that are proposed by people such as loan officers that I presented in my post. Usually you have to follow the 31/43 rule if you are doing to get a government backed loan.

I spend around 20% of my take home pay on rent
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DanHarenChamp posted...

Like what % of your after-tax income should go towards rent? / mortgage

Mortgage lenders don't want to even give you a loan with principal+interest exceeding 1/3 of your after-tax income and 25% is preferred. Aim for less than these for rent since there are no tax/income benefits to renting.

What % should go to savings?

As much as possible until you have 6 months' savings in cash, and 5,500 per year in a ROTH IRA. You can't save 'too much' for long term goals. I save about a third of my pre-tax income, personally, and am trying to get that higher.

What % should go towards car payments?

Cars are depreciating assets. Ideally, none, except for no-interest loans you're paying off in full before they accrue.

What % should be leisure spending?

It's not really so much a percent you want to focus on here. You want to focus on finding hobbies with a set cost you can hold to when your income rises, so as to minimize the effect of hedonic adaptation when your income rises. If you're always spending 20% of your income on fun, then a 20% raise won't help you have more financial security, but rather it'll mean you do more expensive things--and likely have no more fun.
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Income divided by 40