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Should have put in the OP whether or not household is a single income or double income (or more). See a lot of "our" in regards to this and then a lot of "my". My rent is 26.5% of my net, double income would put it at under 20% and maybe even under 15%. It's all relative.
Gross is a better measure, as people may have deductions in the form of 401k
and pension contributions that aren't really expenses.
Nope. Those deduction and contribution choices are exactly why gross is NOT the better measure.
Choose wisely, contribute what you can afford to them, live off the rest. The net.
I was using the same definition of net so this makes sense.
Does the amount you pay in rent (23% of your net) feel 'comfortable' for you? Do you feel you are able to meet your savings/investment goals?
I just calculated ours, and we're also right at 23% (mortgage payment/total monthly income). I feel like we live very comfortably, and we often make semi-large purchases of things we want. We max out two Roth IRA's every year, and my wife contibutes 6% (company match) to her work 401k.
Disclaimer: We don't have any kids, but my friends tell me kids aren't as expensive as everyone makes them out to be.
I'm currently paying 26% for my mortgage, I could have paid less, but wanted home with land so it was more than similar home on a city lot. This is also calculated off only my income, so I know it's less than that for total household income. Though after taxes, 401k, child support, insurance with dependants, ect nearly half the gross is gone therefore SO doesn't have as much as could be mainly without support and another dependant on insurance.
I think I live comfortably. Sometimes I don't have as much as I would like. I am able to do many of the things I want and afford what I need, pay bills, travel, enjoy entertainment, ect. Also have money in savings.
Oh my goodness, this is the cheapest rent I've paid in my lifetime! I rented in California for 26 years and my rent was always at least 50% of my income. Always. As soon as I got a better job or a raise, it seems like my rent went up at the same time. I can't even imagine making so much money that I'd only pay 20% or 25% of my income on rent.
I currently have subsidized housing and that rent is always 30% of income. That's what the standard is.
But for the record, next June I should receive the balance of my money from back pay from disability, so I will be planning on buying some land with it. I will have to live on the land in my car or a shed for a couple of years until I can afford to put a trailer or manufactured home on the land, but the only thing I should be paying then is property taxes.
But remember everyone, it's not really how much you pay for housing that's important. It's what you have left over to live on. You could be paying 80% of your income for rent, but if your income is $500,000 a year, you still have $8333/month to live on. If you're only making $30,000 a year and paying 20% of that on rent, you only have $2000/month left over to live on. Big, huge difference.
Last edited by rodentraiser; 07-28-2017 at 09:19 PM..
What percentage of your net do you spend on rent (or your mortgage)?
Background behind this question:
I'd lived in Atlanta for over a decade and moved away to Chicago from 2012-early 2017. When I left Atlanta in 2012 I was spending 21% of my net on rent. I had a grand plan/hope to gain more experience and earn a higher income...then within 5 years return to Atlanta for the lower cost of living so that since I'd be making more, I could pay less of my income to housing. Long story short, I returned to rental prices as much as 30-70% higher than when I left. I am looking at an apartment that is indeed nicer than the one I used to live in in 2012, but it means I'd be paying 6% more in rent (27% of my net) than when I left. (I'm not really willing to compromise 'much' on the place as I'm living without a car so there is some additional savings transportation-wise whereas before I had a car and related expenses. I also now am working from home 100% of the time so I really need an appropriate space that I like since I'm home 'all' the time.) Spending 21% of what I earn (net) now puts me in the $900s 'max' for rent which wasn't too hard to do in 2012 but I find is much harder to do now.
So long story short I'm wondering where others are at as I know there are many wise people in this section of the forum. I'm going to be willing to bet that many of you who have made great financial strides aren't paying more than 15%-ish in rent (or mortgage) each month. Let's see what it pans out to be. I'm 38 and have always rented and now am finally actually starting to feel like I would come out better trying to find a super cheap place (one bedroom condo?) to buy next year. I've always liked renting and never really felt like it was a 'waste' like some do, but the rising rent amounts are starting to make me feel different fast.
Mine is 22.5% of my gross and probably about 29%-30% of my net (I subtract out mandatory pension contribution, and Medicare, but not healthcare, and a rough estimate of income taxes). I have a car, but also have very low transportation costs because I live within walking distance to work.
I still manage to save about 30% of my gross (a slightly conservative estimate). The tax break I get from putting almost all of it in retirement accounts obviously helps a lot. So you can still save a lot by paying that much in rent. It really depends on what's important to you. When rents are escalating, I can see why you would be concerned. But I also don't think you should automatically rush out and buy a condo. It may or may not be worth it. You have to take a hard look at the math, but also your personal values and weigh all of those factors.
I do think it's important to have a Plan B if you get priced out of the rental market--or at least priced out of the type of apartment that you want. Are you willing to step down to something smaller or not as nice? Are you willing or able to move to a cheaper area? Are you willing or able to buy a place? Those are all questions you need to ask yourself. I know if I get priced out of my area, I'm taking drastic action and moving somewhere cheaper. Almost anywhere is cheaper than where I live. But that may not be possible or desirable for you in your situation.
Should have put in the OP whether or not household is a single income or double income (or more). See a lot of "our" in regards to this and then a lot of "my". My rent is 26.5% of my net, double income would put it at under 20% and maybe even under 15%. It's all relative.
You guys really over- think simple questions. Mine was 13% in 2015 and has gone up a few percent since I have made less money.
You guys really over- think simple questions. Mine was 13% in 2015 and has gone up a few percent since I have made less money.
Problem is people are trying to make comparisons but using different definitions. "Net Income" means different things to different people, and some people aren't including taxes and insurance in their housing cost.
But remember everyone, it's not really how much you pay for housing that's important. It's what you have left over to live on. You could be paying 80% of your income for rent, but if your income is $500,000 a year, you still have $8333/month to live on. If you're only making $30,000 a year and paying 20% of that on rent, you only have $2000/month left over to live on. Big, huge difference.
That's true, but typically, the person earning $500,000 isn't going to put 80% or even 50% of their income toward housing costs.
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