Our Budgeting Boot Camp continues.
We are getting a high volume of comments from our readers to our budgeting-related posts Rent Calculator, How Much Rent Can I Afford on My Hourly Pay, How Much Money Do You Need to Save to Move Out, and others, asking for help with estimating first apartment living expenses. In order to help our readers to start planning their own expenses, we have developed a simple, printable worksheet that covers typical essential expenses for someone living in a rental apartment. These expenses include rent and utilities, transportation to work, food and other groceries, health insurance and phone, plus any other monthly bills you may have, for example, student loan and credit card payments or childcare.
We also recommend setting a minimum savings goal at 10% of your take-home income. If you have a 401K plan at work, especially if the plan offers a match, you should start by saving at least enough to get the full match. A typical match is 50 cents on a dollar, so every dollar you save adds $1.50 to your account — you cannot beat that return on investment! And we’d like you to end up with about $100 a week after the “musts” have been paid, for such fun discretionary items as vacations, going out with friends and picking up a new outfit now and then.
So, take out your pencil and your calculator (there’s one already on your cell phone), and start budgeting!
Note: If you are already working and know your monthly take-home number, you can ignore the top part of the worksheet and start on the Monthly Take-Home Pay Line.
Download PDF [237kb]: MFA Budgeting Worksheet
MFA Budgeting Worksheet (PDF – 237kb)
Let us know in the comments if this worksheet is helpful.
I make 17.01/hour With about 25-30 hours of OT a week.
Can I afford rent at $1050 ?
I have $15k saved up
And my only expenses are
Phone bill $90
Car Insurance $100
Child support $80/weekly
Food varies I don’t have a budget
With Ot it’s inconsistent.
So based on 40hrs what would be an ideal rent?
Why not Debt-To-Income Front End Ratio: 28% of Gross Income
Example 50k salary:
($50,000 divided by 12 months) = $4,166.66 per month
For our $50,000/year ($4,166.66/month) example:
$4,166.66/month times 0.28 = $1166.66 per month total rental costs
$1166.66/month minus $12.50/month renters insurance = $1145.16 per month in rent, maximum.
Hi Dan,
Thanks for another good formula. If you add utilities, you’ll be at about third of your gross income on housing. Unfortunately, the hard fact is that in many markets the balance between starting salaries and first apartment rents is such that first time renters often pay 50% or more of their income for housing. We start with the typical landlord formula maximum of annual salary divided by 40 = 30% of monthly gross income or use 35% of take-home for those who are not salaried but are paid hourly.
I’m confused why you used 35% of your after-taxes monthly pay to determine max rent. The other articles you linked used 30% of your before-taxes monthly income for max rent (ex: the hourly pay article said that someone earning $20 an hour and working 40 hours a week (equivalent to the $40000 annual pay you use above) could afford a max rent of $1000, not $875). Have you guys changed your recommendations for calculating max rent?
Hi Kaitlyn,
Here’s the pre-tax rent math:
Basic formula calculated from annual pre-tax income. Annual income divided by 40 so $40,000 /40 = $1,000 or $12,000 a year. Annual rent $12,000 divided by annual income $40,000 is 30%. What this says is that looking at your monthly pretax income, your rent should not be more than 30%.
Let’s now look at the formula after-tax:
The reason we use both formulas is that it is difficult for many hourly earners with income from various jobs to try to estimate annual pre-tax, but they can easier figure out their typical after-tax income.
Let’s again start with $40,000 annual income, less estimated 25% or $10,000 for taxes/deductions, leaving $30,000 or $2,500 a month after tax. $1,000 rent as percentage of $2,500 after-tax income is 40%. But because we use a very rough estimate for taxes/deductions, we recommend estimating max.rent of 35% of take-home pay. And if utilities are 20% of rent, then total max. housing cost (rent + utilities) is 42% of take-home.
Hope this explains it.
This is what HUD says about rent:”Families who pay more than 30 percent of their (pre-tax) income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care.”