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My friend was curious. I tried answering but wasn't sure so I'll ask everyone. What income is not just required to lease, but what is financially prudent?
What kind of salary/income should one (single person, no roommates) have for a
$1500 mo/rent
$1400
$1300
$1200
$1100
$1000
Most of the rents in his area for a decent place range above $1000 and he has leeway, that is he could qualify for something more but he is wary to get a place that is too expensive. At the same time, a low rent place has it's drawbacks like poor location or poor building.
I know they say no more than 25-30% of one's income should be spent on housing but that's pre-tax, before retirement contributions and utilities.
My friend was curious. I tried answering but wasn't sure so I'll ask everyone. What income is not just required to lease, but what is financially prudent?
What kind of salary/income should one (single person, no roommates) have for a
$1500 mo/rent
$1400
$1300
$1200
$1100
$1000
Most of the rents in his area for a decent place range above $1000 and he has leeway, that is he could qualify for something more but he is wary to get a place that is too expensive. At the same time, a low rent place has it's drawbacks like poor location or poor building.
I know they say no more than 25-30% of one's income should be spent on housing but that's pre-tax, before retirement contributions and utilities.
If we were to suggest a number that was Pre Tax we would need to know what their retirement savings/utilities are in order to suggest the correct salary.
However, I tend to think that even 25% post tax is a good number. But there is varying amounts that each person could get away with. Do they have a car payment? How much is insurance? How much are their utilities per month?
Well. I say you should only spend 1/2 of your net monthly on necessities (Elizabeth warren style). So saying 1/3 of $5000 month, $1650 spent in renting an apartment in the city/close to work with no car, no bus card is to me equal as spending $1200 on a 3 bedroom on the outskirts, + 350 for car, insurance payment + $100 for bus pas into the city to work.
Me, too. However, 25% is the MAX...I recommend trying to keep it at 20% or less. I had my pay cut by about 15% at work and several months later, my rent went up 8%. Now my rent is 24.4% of my gross income....I'm really, really glad I tried to keep it at 20%. If I had done what a lot of people do, and paid 30% of my income in rent, I'd be really screwed right now. As it is, I haven't had to cut back on retirement saving or take a second job, although I don't save nearly as much outside my retirement plan now, unfortunately . I'm not happy about it, but it hasn't put me in a financial crisis like it would have for a lot of people.
But as emerald_octane pointed out...sometimes a cheaper place with a long commute will cost you the same or more than the place close to work when you factor in transportation costs. I am fortunate that I walk to work every day...That saves me a lot on gas and maintenance on my car and theoretically means I can afford to pay more in rent than most people...though I still think 25% of gross is as high as I ever want to go.
Me, too. However, 25% is the MAX...I recommend trying to keep it at 20% or less. I had my pay cut by about 15% at work and several months later, my rent went up 8%. Now my rent is 24.4% of my gross income....I'm really, really glad I tried to keep it at 20%. If I had done what a lot of people do, and paid 30% of my income in rent, I'd be really screwed right now. As it is, I haven't had to cut back on retirement saving or take a second job, although I don't save nearly as much outside my retirement plan now, unfortunately . I'm not happy about it, but it hasn't put me in a financial crisis like it would have for a lot of people.
But as emerald_octane pointed out...sometimes a cheaper place with a long commute will cost you the same or more than the place close to work when you factor in transportation costs. I am fortunate that I walk to work every day...That saves me a lot on gas and maintenance on my car and theoretically means I can afford to pay more in rent than most people...though I still think 25% of gross is as high as I ever want to go.
The gas costs of living in a cheaper apartment farther away from the job hits us hard. I drive 62 miles roundtrip to work and back in a 2001 mustang. I use all the gas in 5 days of working and if I want to drive to get a redbox on the way home or something I can barely make it home on that 5th day. We budget $100 a week for both cars. $50 each. My gf can get away with 7 working days and us driving around on our days off together. Plus she is closer to work.
Since I make more money we are looking to move very close to my job. I would easily save half of the gas budget on my car alone if not more. The $200 a month budget would drop to $100 or less along with less oil changes and wear and tear. It would also be a few miles closer to my gf's job.
We pay $729 now and make a little less than 3k take home so a little under the 25%. Were looking at townhome apartments with unfinished basements. Their usually around 900sqf or so but that doesn't include the 400sqf unfinished basement. Most are in the $800 range, but we can swing that with the gas savings alone.
I love my car and driving, but 62 miles a day (45minutes minimum commute each way) really sucks after awhile.
The gas costs of living in a cheaper apartment farther away from the job hits us hard. I drive 62 miles roundtrip to work and back in a 2001 mustang. I use all the gas in 5 days of working and if I want to drive to get a redbox on the way home or something I can barely make it home on that 5th day. We budget $100 a week for both cars. $50 each. My gf can get away with 7 working days and us driving around on our days off together. Plus she is closer to work.
Since I make more money we are looking to move very close to my job. I would easily save half of the gas budget on my car alone if not more. The $200 a month budget would drop to $100 or less along with less oil changes and wear and tear. It would also be a few miles closer to my gf's job.
We pay $729 now and make a little less than 3k take home so a little under the 25%. Were looking at townhome apartments with unfinished basements. They're usually around 900sqf or so but that doesn't include the 400sqf unfinished basement. Most are in the $800 range, but we can swing that with the gas savings alone.
I love my car and driving, but 62 miles a day (45minutes minimum commute each way) really sucks after awhile.
I have always hated commuting. I hate being dependent on a car 100%, which is what happens when you have long commutes. Something goes wrong with your car and you go into a panic! I accidentally crashed my car in 2011 (fender bender...the other truck not damaged..my economy car had $2000 worth of damage). I was lucky to have a friend who shopped my car around to several different places to get a good deal on the repairs (it's an old car, and I had dropped the collision on it). The place that fixed it did a good job a lot cheaper than other places (1/2 the price), but I had to wait 3 weeks before it was done. That was fine with me because I didn't NEED the car for my everyday life (I live in a walkable neighborhood in an otherwise suburban style city). So I went 2.5 months (although one month of that was spent procrastinating) without a car and was pretty much ok (I was feeling a little cagey after that length of time, but it was manageable).
If I had needed my car even for a fairly modest commute, I most likely would have spent 4K to fix my car (or bought another one). 4K is more than my car is worth (Heck, my car isn't even worth 2K). Living close to work is a dream come true if you can pull it off.
They are also finding that people with long commutes are more likely to be overweight, have high blood pressure, etc...and all the higher health care costs that go along with those things:
While the rule of thumb is probably 25-40% of one's net income (you can't spend tax dollars), other lifestyle considerations and costs will make a big difference. Your best bet is to take a serious look at your overall budget ... and then determine where you should land on the 'rule of thumb continuum.'
Something else you might consider is how much house you could buy for the same $1500 per month. A typical $1500 monthly mortgage, including principal and interest, hazard insurance, real estate taxes, mortgage insurance and HOA dues would likely get you a $150-$160K loan. --
While the market is still soft, all indications are that it has hit bottom ... yet, a turnaround is early and there is still plenty of inventory available in a 'buyer's market.' You may not feel ready for this type commitment yet, but, except for the 'big bubble burst' in 2005-2009, buying has always made better financial sense than renting.
1500k, AT LEAST 100k salary is necessary, at least in Cal
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. I'm not happy about it, but it hasn't put me in a financial crisis like it would have for a lot of people.
