The average American spends just over $1,600 a month on rent. That’s interesting given the fact that the median weekly salary is about $990. So, you’re basically going to have to work half the month just to cover the average cost of rent. And that’s not factoring in everything else you have to pay for, like health and auto insurance, gas, student loans, and oh yeah, the basic necessities to live.

If you don’t make that much (or even if you make way more), that’s okay. Remember that the average price of rent varies greatly from city to city. Figuring out how much you should spend on rent depends on where you live, first of all, but also how much you earn and what your financial goals are.

Even if you’re pullin’ in $10k a month at a cushy job, you don’t have to pay rent that’s equal to a certain percentage of that. You can live below your means (and should, honestly). Here’s what to know about what others are paying on rent and how much you should ideally spend on rent each month.

Already have your basic financial foundation built? Great. Now, start putting your money to work for you. Download the Wealth Stack app for free on the App Store or on Google Play to get started.

What is the Average Cost of Rent in the US?

As mentioned above, the current average cost of rent in the US is around $1,600. However, as you know if you’ve done even the slightest bit of traveling within the country, rent varies greatly from state to state and even city to city.

For example, the average monthly rent in Los Angeles is currently just over $2,500. Now, compare that to the average monthly rent in Charlotte, North Carolina, which comes in just over $1,400. 

And, it’s not like Charlotte is Small Town, America, either. It’s a modern, popular, and buzzing big city filled with lots to do and see, similar to Los Angeles. So, you can see just how much average rent varies depending on which state and city you’re in.

Really, the only reason you should be comparing the average cost of rent is to make sure that you’re not overpaying in our own city. Aside from that, comparing your rent in NYC to your friend’s rent in Atlanta isn’t going to do much good. It’s apples to oranges there.

What is the 30% Rule for Rent?

Now, we’ve previously talked about the 50/30/30 rule when it comes to budgeting. The budgeting method or “rule” was made popular by Elizabeth Warren and is now widely used as a benchmark for regular household budgets. The idea is that you take your post-tax income, and you use 50% of it to pay for your necessities, 30% of it for things you want, and put 20% back into savings.

While that’s a good rule of thumb to follow, it doesn’t necessarily tell you how much you should spend on rent as part of your 50% for necessities. Financial experts previously preached that you shouldn’t spend more than 30% of your gross income on rent or other housing costs (mortgage, property taxes, etc.).

However, they’re now finding that the 30% rule for rent is a bit outdated. Why’s it not relevant in today’s world? Well, for starters, it comes from 1960s era public housing regulations. Back then, public housing rent was capped at 25% of a tenant’s annual income. In the 80s, that slowly started creeping up to about 30%.

So, not only is 30% somewhat unrealistic for average earners in today’s economy, it’s just not at all relevant to most people’s financial situations. For example, super high earners won’t find the 30% rule that helpful. And, those with high amounts of debt, large credit card bills, and other financial strains can’t simply slap a 30% rent rule on their own budget and make it work.

That’s why it’s important to calculate how much you should pay on rent using your own personal numbers.

How Much Should You Spend on Rent?

Calculate Based on Net Pay

One of the easiest ways to calculate how much you should pay on rent is to first make sure you’re using a budget that works off your net pay. Net pay is how much you take home after all taxes have been deducted from your paycheck. 

You want to use this number when creating budgets for yourself because it shows you how much you actually have to spend on things in any given month. So, when creating a housing budget, be sure to look at your monthly net pay.

Consider & Pay Off Loans & Debts

Now that you know how much you have each month to work with, it’s important to consider any debts you have to pay off. If you know that you have to make a minimum student loan payment of $350 each month then make sure you account for that first. Or, if you know that your main goal right now is to increase your credit score, focus on paying off your credit card debt and calculate how much you need to pay each month to pay the loan off in X amount of time.

Whatever your debts and priorities are, it’s just important to be aware of them. Identifying them can help you understand where you should put your financial focus. If you want to pay off all your debts in the next five years, for example, make sure you understand how much you need to pay each month so that you can adjust your housing budget accordingly. That brings us to our next point...

Think About Location

Do you really need to live in the middle of Austin’s hottest neighborhood? Or, could you move 25 minutes outside the city center and save $500 per month in rent? There’s no “right” answer to these types of questions. Really, it’s just about making sure you’ve got your priorities straight.

After calculating your net pay and then figuring out how much of that goes towards paying off debt and paying for the necessities, you’ll have a pretty good idea of how much cash you’ve got leftover to pay for rent. When you calculate it like that, you realize just how important it is to be mindful about where you’re living.

If your budget only allows you to spend $1,300 a month maximum on rent, think about the location! Moving a little further away from the hotspots you frequent in the city might be worth it. Likewise, if you have $3,000 a month to spend on rent but know that you really need to pay off debt and get your credit score right, think about scaling down a bit! Pay less in rent, pay off your debts, and then move into your dream home with the money you’ve saved.

Earn More with Wealth Stack

If you’re sat there thinking about how this is nice and all but you really wanna be livin’ the high life in that Beverly Hills mansion or Chicago highrise, then we’ve got something for you. 

Budgeting correctly to figure out how much you should spend on rent is an important skill to master. However, you can also just work to invest and grow your money so that you don’t have to think twice about how much you spend every month on, well, anything.

Wealth Stack supports the American Dream through our efforts to empower diverse communities by providing access to hours of free videos, lessons taught by hand-selected finance experts, as well as a trading platform and guidance on how to use the trading platform to create long-term wealth.

Download the app for free on the App Store or on Google Play. There, you can start learning through our helpful video courses and through the content that our professional, expert Speakers upload.