Many aspects of your life revolve around finances, especially when it comes to your living arrangements. Sometimes it can be difficult to figure out how much you should spend on your home and still have money left over to support other costs such as transportation, food, and bills. All you need to figure out how much rent you can afford are your budget and these four tips!
The first thing of any financial plan is a budget. Laying out all of your monthly expenses gives you a visual and idea about how much you are spending per month. It also shows you if you are overspending with the amount of income you have and if that is so, to readjust and see what you need to cut back on.
In your budget, more than half of your income should be set aside for housing, food, and transportation. Keep this reasonable as you should also set aside emergency funds for unexpected events such as a vehicle repair or medical emergencies.
Financial experts suggest that your rent should cost no more than 30% of your income. You can figure this out quickly by taking 30% of your revenue and then divide that by 12 (number of months in the year). For example, let’s say you make $100,000 a year, take 30%, and that gives you $30,000. Divide that by 12 and you get a final total of $2,500, and that is an estimated range of rent you can afford per month.
Another way of figuring out a budget and an idea of how much you want to spend is setting up your finances in proportions.
50% of your income should be used for fixed, monthly costs such as your rent, bills, and transportation. 30% can be spent on daily costs like eating out, entertainment, and shopping. Then the remaining 20% should be set aside for emergency expenses, paying off debt, and retirement, because you never know if life is going to take an unexpected turn!
Following these guidelines will help you in figuring out what is best for you and your future. Remember to do what you are comfortable with and to stick with the budget you set as tightly as you can!