2017 Update: You can download our new Printable Apartment Budgeting Worksheet and use it to estimate your rent and budget for all your expenses.
The basic target rent formula that landlord’s use is annual before-tax income divided by 40. When you are on a straight salary estimating the number is easy. However, if your are getting paid hourly, budgeting your maximum affordable rent is a bit more complicated and you have to factor in both your hours and hourly pay rate. We have built a simple chart below that does the calculation for you at various hourly pay rates and weekly hours. This rough tool is based on the same landlord’s affordability formula: annual before-tax income divided by 40. (Note: We used in our chart a 50-week year, instead of 52 weeks, to leave a little margin of safety.)
You can also use our Affordable Rent Calculator if you want to estimate your target rent from your salary or your after-tax income, even if your income varies week by week. That calculator also estimates your utilities and amount you need to save before move.
The yellow highlighted cells below show an example of how to use the chart for someone working 35 hours a week at $20 an hour. You can also use the chart to quickly estimate your target rent if you are looking with a roommate who works different hours at different rate, by adding up each person’s target rent numbers.
When you budget your actual expenses, keep in mind that you also need to plan for utilities (estimate at 20% of rent*, or $100 a month, whichever is higher) and all your other expenses (car loan, car insurance, student loan, cell phone, commuting, food, clothing, entertainment, etc.) In addition, you need to plan to save at least 3 times your target rent before your move, to cover first month’s rent, one month security deposit, other moving related costs and some furniture.
* If you live in a high-rent city (for example, NYC, Chicago, LA, SF) estimate utilities at 10% of rent.