How to Determine Your Rent Budget | Post-Grad Tips
Congratulations! If you are reading this post, you seem to be thinking of moving and that is HUGE!
When I was graduating from college, I remember stressing out as I compared job offers, wondering what I would be able to afford and determining how much value to place on slight differences in salary options.
Fortunately for you, I will be doing a whole series on planning out your budget and adjusting to life in the so-called "real world".
Steps to Determine What You Can Spend on Rent
Identify Your Overall Annual Income
Subtract for Taxes (roughly 30% or use this site for a better estimate)
Divide by 12
Divide by 3
Confirm this will work with all your other expenses!
The overall financial advisors of the world agree that your rent should be 30% of your pre-tax salary. I believe that in your 20s it is better to base it off a maximum of 30% post-taxes - that way you can save even more!
I have found using a maximum of 30% post-taxes is completely reasonable. If you are lucky enough to live in a city that isn't as expensive as New York City - so pretty much anywhere else - I challenge you to try to spend even less on rent. Saving an extra $200 a month adds up to a full fledge trip to Greece quite quickly!
At age 22 to 30, saving whatever you can - or laying aside money to pay off loans - is so important. By doing roughly a third of your post-tax salary on rent, you will have that much more room to save money and contribute to that good old 401k.
Plus - who needs the nicest apartment in their early 20s? Leave something to be desired! My first year out of undergrad, I lived in a flex room that used to be part of the living room to the apartment.
It was a nice room, but had one problem...the heater was made to heat a room three times the size. I couldn't turn on the heat in the winter without it being over 100 degrees! Now I will be oh-so-appreciative when I have a nicer apartment - and central air. Let's be honest, mostly central air.
Wondering what rent is in the city your moving to? Check out this cool site I found to see what average rents are around the county. It is very accurate to what I have friends paying from New York to Chicago to LA to Dallas (and everything in between). If you are moving to New York, StreetEasy is a great place to scroll and see what is available too.
Please remember everyone's finances are different and there is not a one-size-fits-all answer. My goal is to help you guesstimate and have a good idea of what will work, but of course consider any unique circumstances you have before you sign a lease!