Okay, so you’ve looked at the numbers and decided that for now, buying a house isn’t going to happen. That’s no biggie—it’s okay to rent! Sometimes renting really is the best option. You might just be starting out after leaving your parents’ house or you might be 20 years into this whole adult thing and working hard to get out of debt. Whatever your reason for renting, know that you’re in good company—more than 107 million people in America are renters.¹

Once you know you’re going the renting route, the big question is, “How much rent can I afford?” Let’s dig into how much you should spend on rent, plus why you shouldn’t feel shame about being a renter.

How Much Rent Can I Afford?

Your rent payment should total up to no more than 25% of your take-home pay. So if you’re bringing home $4,000 a month, your monthly rent should be costing you $1,000 or less. And remember, that’s 25% of your take-home pay—meaning what you bring in after taxes. We know, 25% might seem like a low number to you. But the truth is, most people are spending a lot more than that on their housing costs. We’re talking more like 36% on average.²

So, why in the world is 25% the magic number we recommend when you’re figuring out how much rent you can afford? Honestly, it’s because you don’t want too much of your take-home pay tied up in rent. You’ve got big things to do! And you need room in your budget for food, gas, car maintenance and paying off your debts. If rent eats up all your money, it’s that much harder to save for emergencies. Plus, once you’re debt-free and have your emergency fund, you can start saving money for a down payment to buy a house of your own. If you’re spending more than 25% of your income on rent, it’ll take you a lot longer to get there.

When Is It a Good Idea to Rent? 

Renting is your best bet when you’re working on Baby Steps 1–3. When you’re in the middle of paying off debt and saving an emergency fund, you don’t need a mortgage hanging around your neck too. We know that might not be what you want to hear, but remember that renting is just for a season—it’s not forever (unless you want it to be). Renting isn’t meant to be a long-term solution. And if you really want to buy a house, then use that drive to help you tackle your goals even faster.

That means that while you’re renting, your biggest priority is one of these:

1. Building your starter emergency fund of $1,000
2. Paying off all of your debt
3. Saving up a fully funded emergency fund of 3–6 months of expenses

Sure, you might have other reasons to rent instead of buy right now. Maybe you’re in a transitional period of life. Maybe you’ve just graduated from college and you’re not sure where to settle down. Or maybe you’re a newlywed and need time to figure out which neighborhood you and your spouse want to live in. If you’re doing any of those things, renting is probably a good call for you right now. In fact, it’s smart.

What Are the Advantages of Renting? 

For some people, renting isn’t always an easy choice. House fever can come on strong when you see your friends buying their first homes. And our society basically yells at you if you don’t buy a home, like, yesterday. But there are plenty of pros for renting. So be sure to remind yourself of these big advantages to renting while you’re asking yourself, How much rent can I afford?   

• There’s less commitment. Not sure if you like the area where you’re renting? Hey, you’re out of there as soon as your lease is up. If you’ve got a job that has you moving around a lot (like serving in the military or in ministry), it’s easier to get out of a lease than to sell a house.

• It gives you a solid foundation. Renting for a short time teaches patience and lets you work toward something. After all, there’s no rule that says you have to be a homeowner to prove you’re an adult. Renting for a while lets you build a solid foundation so you’re set up for success once you’re a homeowner. And when that day comes, you’ll own your house, and your house won’t own you.

• You don’t have to worry about maintenance. If something breaks, you can call your landlord and ask them to fix it. This is probably the coolest thing about renting: You don’t have to pay out of pocket for a surprise repair cost. That’s on someone else’s dime.

What Can I Afford to Rent? 

Remember—when you’re trying to figure out what you can afford to rent, you’ve got to keep that 25% number at the top of your mind. And depending on your income, that could impact whether you’re able to rent a house or an apartment.

Can I Afford to Rent a House? 

Most of the time, houses are going to cost more to rent than an apartment (depending on the cost of living in your area). But if you’re looking to split your rent costs by having roommates, then renting a house could be a great option. A three-bedroom house with a monthly rent of $1,900 will only run you about $630—if it’s split three ways. That’s honestly going to be cheaper than a one-bedroom apartment in most cities.

Can I Afford to Rent an Apartment? 

If apartment living is for you, you’re not alone—37% of all renters live in apartments.³ Yep, probably because they cost less. But even though apartments are thought of as the cheaper rental alternative, that’s not always the case. The average price for a one-bedroom apartment in the U.S. is $1,711.⁴ One bedroom! If you live in small-town America, though, that number is probably way less. And of course, if you live in the heart of NYC, that number could be much higher. Still, apartments usually have fewer hoops to jump through and fewer up-front costs for getting your couch in the front door.

Whether you decide to rent a house or an apartment, just keep in mind that both are hard to come by these days. In fact, most apartments are about 97% full.⁵ Why? With the hot home-buying market, a lot of folks have been scared away from buying home, priced out completely, or can’t find any to buy to begin with. In March 2021, there were less than 700,000 houses available across America—that’s a 48% drop in home inventory compared to March 2020.⁶

All those people need somewhere to live while they’re house hunting, and that has sent more people flocking to rentals. Aka—be prepared to compete with a lot more people looking for rental properties these days.

What Can I Do to Afford My Monthly Rent? 

Did you hear the 25% rule and think, Rent here is so expensive! There’s no way I can keep my rent that low. Don’t worry—there are ways to help you offset crazy high rent prices. Here are some tips to help you figure out how to afford rent and keep it from eating away at your budget.

Get Roommates

If you’re not making a lot of money (or you just don’t want to pay through the nose for rent each month), it’s time to get a roommate. That might remind you of your college dorm room days, but it doesn’t have to be that way. Think of it as like-minded people in the same phase of life wanting to save money by sharing a living space. No lava lamps, week-old pizza boxes or Return of the Jedi movie posters allowed—unless you want it that way.

Rent a Room 

Believe it or not, a lot of homeowners are looking to rent out rooms over the garage or a spare bedroom in their home. Sure, you might not have free rein to kick off your shoes and put your feet up on the living room table. But you’d still have your own bedroom and (maybe) bathroom. And if the rent is super cheap, like $300—who can complain, really?

Start a Side Hustle 

It turns out that the question “How much rent can I afford?” will have a different answer if you’re making more money. It’s a pretty simple formula. Up your income and you should be able to afford more, right? The good news is, you can start a side hustle super easily these days, and that’s a quick way to give your income a big jolt. There are pizzas that need delivering and folks that need to be driven all around town. So what are you waiting for?

Find a Cheaper Location 

The cost of rent really depends on where you live. If you live in San Francisco, you can count on your rent being crazy expensive compared to cities in the Midwest. If you can’t afford rent in the heart of the city, start looking in the suburbs or farther out from the big metro hubs. You might have a longer commute, but the savings for living 30 miles south could be huge.

Get a Higher-Paying Job

Keep in mind that the cost of rent is only going to go in one direction: up. To stay on top of it, your income should be going in the same direction too. If you know you can count on a pay raise each year—great. But the truth is, you might need a higher-paying job altogether to make things work. Get out your budget and take a look at how a higher income would change things.

Don’t Forget About Renters Insurance 

As a renter, you don’t have to worry about paying for things that go wrong with your rental. That’s the beauty of not owning the place! But there’s one extra cost you should opt for when renting—renters insurance. Having a rental insurance policy will protect you from unexpected events that happen. Don’t count on your landlord’s insurance here. That usually only protects them. The good news is that renters insurance is pretty cheap, so there’s really no excuse not to have it. If you need coverage, reach out to a trusted agent for advice.

How to Save Up for a Down Payment

So you’ve been renting—for a while now. You’ve paid off all your debt, gotten your emergency fund together, and now it’s time to work on saving up that down payment on a house (some people call this Baby Step 3b). If you’re renting while saving up that down payment—congratulations! The end of renting is in sight.

Now the big question is—how much should you save up for that down payment? We recommend a 20% down payment so that you avoid the extra costs of paying something called private mortgage insurance (PMI). If you can’t swing the full 20%, that’s okay—just don’t go below a 10% down payment. The more you can put down, then less your monthly mortgage payments will be.

And speaking of your monthly mortgage—how much should you be paying there? Well, just like with renting, we recommend that your mortgage payment be no more than 25% of your take-home pay. So keep that in mind when you’re thinking about how much you’ll spend on the full price tag of your house.

Let’s say your budget for a house is $200,000 and you want to put down the full 20% for a down payment. This means you need to save up a down payment of $40,000—and guess what? Saving up for it doesn’t need to take you eight years. Nope! You can do it in as little as two. You’ve just got to save up some more cash to get there. Here’s how to do it:

1. Cut back on your expenses.

2. Pause retirement contributions (not forever—just for these two years).

3. Bring in extra income from a side hustle.

4. Sell stuff and skip the splurges.

Believe it or not, by making just a few tweaks to your budget, you can save up a pretty big down payment in only two years. Here’s an example of what it might look like to save up that $40,000 down payment:

Cut back on your expenses	$7,000 a year ($583 a month)
Pause retirement contributions	$5,000 a year ($416 a month)
Bring in extra income from a side hustle	$6,000 a year ($500 a month)
Sell stuff and skip the splurges	$2,000 a year ($166 a month)
Total savings	$20,000 x 2 years = $40,000