My sister is moving into her first apartment next month in Chicago and was planning her budget over the long Thanksgiving weekend while I sat next to her reading the paper.
“So, Ms. First Apartment Expert,” she smirked at me, “how much should I be spending on rent?”
“A quarter,” I said without looking up “…unless you live in New York City where 401K accounts lay barren and die. But, you could spend up to a third if you have to.”
Lil sis is a teller at Chase and makes $11/hour. She works approximately 32 hours/week for a total monthly budget of $1479(to calculate monthly budget, always multiply by 4.2) One quarter of her monthly take is approximately $370. Chicago is far cheaper than New York, but you’d be hard-pressed to find an apartment that thrifty.
Calculating one-third of her paycheck, however, is close to $500; there’s plenty of nice apartments for $1500 or less(she’s sharing with two gal pals).
So, when you’re looking at paycheck and comparing it with rent prices, know that there is no absolute percentage that you need, but that a quarter to a third of monthly salary is a good number to shoot for — if only because rent doesn’t include the extras a la cable, electric, wireless, gas, and, in some cases, heat. And, ya know, extra money to live on and save on.
But, if you’re just starting out don’t be too hard on yourself. While economists may disagree, you probably have until you’re at least 25 to start saving for retirement. Didn’t Obama also promise to fix social security…?
For more info on this topic, check out one of our older posts with extended details.