There are many ways to calculate affordable rent. Some people use the 40x rule since many landlords require that your annual gross income be at least 40 times your monthly rent. To calculate, simply divide your annual gross income by 40. Another rule of thumb is the 30% rule, meaning that you can put 30% of your annual gross income in rent. If you make $90,000 a year, you can spend $27,000 on rent, and so your monthly rent should be $2,250.
While these rules are helpful, none of them factor in expenses. Renting an apartment can cost you more than you imagine. For instance, some buildings charge a pet fee for each pet you have. In New York City, your rent might go up by $35 for you to keep a pet. Other amenities also play a huge factor. Some buildings charge monthly gym fees and some others don't. If you live in a building that does not have a fitness center, you might spend more on gym memberships.
Nor do the rules mentioned above take into account your financial situation or lifestyle. For example, a newly graduated might be carrying a student loan and has to set aside $200 to $300 per month to repay the loan. An independent contractor might need to have a liability insurance policy in place and has to pay for health insurance himself/herself.
Our rent calculator gives you a more comprehensive view on how much you can afford by including monthly debt and estimated expenses.
