It’s almost time to bid goodbye to the dorms and start planning your next move. If you already have a job lined up, you are ready to start looking for your first apartment. But even if you don’t, you can use the chart below to get a rough idea of what types of expenses you need to cover from your salary when you are living on your own.
How much rent can you afford?
In New York City, the landlords require that you must have an annual salary (before taxes are taken out) of 40 times your monthly rent. The chart below is based on NYC rent guidelines. Landlords in some other cities are more lenient and use a smaller multiplier, for example 36 in Boston. Someone making $30,000 in Boston would qualify for an $833/month rental vs. $750/month in NYC.
We get many comments and emails from readers who do not have an annual salary but work on an hourly basis, and have an income that fluctuates paycheck to paycheck. In those cases it’s harder to estimate how much rent you can afford, and you need to be more conservative. Our advice is to average your after-tax paychecks for a couple of months and plan to spend no more than 35% of that monthly average on rent.
The budgeting guidelines below only cover expenses that pretty much everyone living on their own will have. They assume that your rent includes water and heat. They do not include monthly payments on student loans, car loans or credit card debt. If you are a typical 2015 college grad you probably have close to $30,000 in student loan debt, and if you have a 10-year payment plan then your monthly payments, including interest, will exceed $300. The bottom line is, you must budget for all your monthly financial obligations before you sign on the dotted line.
How much cash do you need to save?
You will need a hefty amount of cash in your bank account when you are ready to sign the lease. A quick rule-of-thumb is to have at least 3 times your expected monthly rent in bank before moving out on your own. Many MFA readers save that money by moving back home after college for several months to a year.
Additional resources for planning:
Monthly Expenses Checklist
How Much You Need to Save to Move Out
How to Keep Track of Expenses
Obamacare Premium Calculator
Budgeting for Utilities
Making 40 times month rent? Where are you renting in NYC that is 500 or 750? Obamacare as a monthly expense? What? This was incredibly, ignorantly written.
Hi Like What,
We agree that you will not find places renting for $500-750 in NYC, unless you go to pretty far into the outer boroughs (think Staten Island, North Bronx or the Easternmost areas of Queens). At that level you’ll be looking for a roommate share and even that could be hard to find. However, you would be surprised what $500-750 can get you elsewhere in the country, where most of our readers live.
As to Obamacare as an expense, since health insurance costs vary so much we just used the Obamacare amounts because they are more uniform around the country. Obviously, you’ll know how much your employer deducts from each paycheck for your health insurance premiums and you can budget accordingly.
Good luck for your apartment hunt from the MFA Team!
It’d be great if you could provide the sheet as an attachment since some of us make more than 50k out of college and in that case, screenshots aren’t very helpful (unless I was going to go through and estimate each of the equations).
I think this is an amazing and very thorough description on what needs to be done to secure a great financial plan and be able to supply ones self with enough money to make it through the lease at their new apartment. The thing is that not most people care enough to sit and go through all of this and then the apartment managers suffer by running after irresponsible tenants. I know that if someone had the time to sit and really read this they most likely have the type of personality that will lead them to making their budgeting sheet next. Awesome post.