![]() It might not be feasible to spend less than 30% of your income on housing in a major city or a suburb. For example, the average rent in San Francisco is more than 3 times the national average. If you're living in a major metropolitan area like Los Angeles, Boston, Portland or New York City, you'll be shelling out more money for housing because the average cost of rent in these cities or suburbs is much higher than the national average. But money advice can be oversimplified and doesn't account for every individual's unique financial status such as where someone is living, how much money they're making, how many dependents they have or how much debt they carry. General personal finance guidelines can be helpful because they can give people an idea of how much they should be spending. The rule is based on a 1969 law, known as the Brooke Amendment, that capped public housing rent at 25% of someone's income (the cap would be raised to 30% a few years later).īut does the 30% rule still hold true for most people? Does this simple rule of thumb work even when median rent is increasing at a rate that outpaces the growth rate of median renter household income? ![]() The conventional wisdom is that you should spend no more than 30% of your annual before-tax income on rent and utilities like heat, water and electricity. You'll also have less money to put into an emergency fund, invest for retirement or pay off your student loan and/or credit card debt. Therefore, the more you spend on housing, the less you'll have to spend on your other essential costs. ![]() They are expenses that you must be able to cover each month. Housing - along with food, transportation and medical care - are considered essential costs. First off, one of the largest expenses you'll have is your rent bill.
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