Key takeaways
- Know your income and set a clear rent limit upfront.
- Build a budget that reflects your actual lifestyle and obligations.
- Look beyond the listed rent to understand the full cost, including utilities and fees, before you sign.
Before you start hunting for apartments, it helps to get a clear idea of what you can realistically afford each month.
Taking a few minutes to crunch the numbers can help you avoid bigger problems later. You’ll want to avoid becoming “rent-poor,” where your rent expenses are so high that it becomes difficult to afford essentials. A common rule is to keep your rent and housing-related costs, such as utilities, renters insurance, parking and any building fees, to no more than 30% of your monthly take-home pay.
The 30% Rule traces back to 1969 public housing regulations, which capped rent at 25% of a tenant’s income before rising to 30% in the 1980s. It was based on what households were spending at the time — not necessarily what they should spend. Building a simple budget can help you figure out what actually works for your situation.
Here’s how to budget for an apartment:
Start with your gross monthly income. Because the 30% Rule is based on your gross income, start by looking at how much you earn before taxes. This gives you a benchmark for the maximum rent amount that should not be exceeded.
Look at your take-home pay. After taxes, use your monthly take-home pay to map out the rest of your spending. A common method could be the 50/30/20 rule:
- 50% of your income for essentials (rent, utilities, groceries, transportation costs)
- 30% for wants (dining out, entertainment, fun purchases)
- 20% for savings and debt repayment
Rent falls under the “necessities” bucket, along with things like:
- Groceries
- Utilities
- Transportation
- Childcare
- Insurance
- Loan payments
If keeping necessities to 50% isn’t realistic, that’s okay. Some people use a 70/20/10 split or even an 80/20 split. What matters most is finding a budget structure that you can stick to. It might be worth considering other options, such as living with roommates—a common way to lower housing costs—or exploring neighborhoods with lower rents. Just remember to factor in any added commuting costs, too.
Set a realistic budget. Housing will likely be the biggest expense in your budget. Costs vary depending on where you live — higher in big cities, lower in rural areas. If rent takes up most of your budget, you’ll need to adjust other categories to compensate.
Be honest with yourself: Cutting back on habits like dining out can be harder than it sounds. Before you sign a lease, consider a test run for a couple of months to see if your new budget feels sustainable, and use that time to build up some savings.
Let’s walk through an example:
Let’s say your gross monthly income is $7,000. Using the traditional guideline of spending no more than 30% of your gross income on rent, your maximum rent would be $2,100.
If you’re also following a budgeting framework like 50/30/20, which uses take-home income, your numbers can shift slightly once taxes come out — but the 30% rent benchmark remains the same.
Here’s how the rent portion breaks down:
- 30% of your gross income on rent: $2,100
- The remaining 70% would go toward necessities, discretionary spending and savings, depending on the budgeting method you choose
Potential costs to plan for:
- Application fee: One of the most common fees when it comes to renting, which landlords typically use to cover the background check. This fee is typically non-refundable and could range from $25 to $100.
- Security deposit: Typically, one to two months’ rent, refundable if the unit is left in good condition upon departure.
- Utilities: Electricity, water, gas and the internet can add hundreds to your monthly expenses. Some rentals include certain utilities — check before you sign. Other apartment complexes may offer technology packages that include fees for features such as video intercom systems, smart thermostats, mobile app access and internet. These fees can range from $20 to $150 a month.
- Renters insurance: A small cost that can save you big in case of theft or emergencies. According to insurance.com, the average cost of renters insurance is about $24 per month.
- Moving expenses: Whether you hire movers or rent a truck, moving isn’t free.
- Furniture and supplies: Setting up a new place often means buying essentials you didn’t think about, like pots and pans or cooking utensils.
- Commuting: A longer commute can mean higher gas, maintenance or transit costs.
- Total move-in cost: Many landlords require first month’s rent plus a security deposit — sometimes even more before handing over the keys.
Don’t forget an emergency fund
Life happens — car repairs, medical bills or unexpected work expenses can derail your budget. Build an emergency fund to cushion the blow. Start with at least one month’s rent, or three months is even better. If that feels out of reach, start small — every bit helps keep surprise costs from turning into credit card debt.
Budgeting for an apartment isn’t just about paying rent — it’s about making sure you can afford life beyond those four walls. Take the time to plan before signing a lease and consider using budgeting apps to help keep your finances on track. Budgeting apps can help you monitor spending, set savings goals and account for extra costs, such as utilities or moving expenses.
Having a clear picture of your cash flow can help avoid surprises and stay on track.