Rethinking Your Living Expenses: How Much Rent Can You Actually Afford?

It’s no secret that rent costs are on the rise across the country. With skyrocketing costs in some of Australia’s biggest cities, it’s become harder than ever to find rent you can actually afford. 

The median rent in Australia is currently $436 per week or $1,744 per month. For many families, this makes it even more challenging to make ends meet. With luxury apartments and new buildings popping up every which way, it seems like more rental companies and landlords are raising prices to meet demand. 

In reality, do you need to rethink your living expenses? How much rent can you actually afford without getting in over your head? In this guide, we’ll share the best way to calculate just how much rent you can afford each month. 

The Budgeting Rule for Living Expenses

When it comes to calculating your living expenses, it’s common to follow the 50-20-30 rule. There’s no complicated math needed here. A simple breakdown is:

  • The 50 – You should pay no more than 50% of your income on your monthly necessities. This includes housing, groceries, utilities, transportation, etc. 
  • The 20 – Spend around 20% on your financial goals, whether that’s debt payoff or saving towards an emergency fund.
  • The 30 – Finally, you should pay no more than 30% on your discretionary spending. This is entertainment, dining, gas, hobbies, and so on. 

With this in mind, your monthly expenses should fit comfortably within that 50% mentioned above. If you’re spending above 50% of your income each month on all of your necessities, it’s time to rethink your living expenses and your budget. 

Within that 50%, most believe you shouldn’t spend more than one-third of your income on rent. This is sometimes even a rule enforced by landlords or rental companies who use this one-third to ensure you can afford your monthly payment. With this in mind, if you take home $4,000 a month, you will want your rent to be around $1,333 and your total monthly necessities to not exceed $2,000 (or around $667 after rent). 

How to Reduce the Cost of Rent

Because this can be a hard rule to meet, especially in high cost-of-living cities, how can you stretch your month further? One way to do this is by taking steps to reduce your overall cost of rent. 

While some might argue it’s always better to buy a home, there are situations where that’s simply not true. You might be young and still building your credit and saving funds for a down payment. It might be more affordable to rent in your area. Or, you simply might be moving in a few years so buying a home isn’t practical.

Luckily, there are a few things you can do to save on rent if you’re unable to afford your current payment. Here are some suggestions:

  • Shop around: The number one way to save on rent is to shop around. Always compare several rentals before deciding which is best for your budget. 
  • Trade work: If you live in a home or apartment that needs some work, offer to fix things up on your own in exchange for less rent. A landlord might cut you a good monthly discount for taking over the lawn maintenance, for example. 
  • Move outside of the city: If you have access to transportation, it might be less expensive to live outside of major cities than to try to compete with high rental areas downtown. 
  • Share your space: Moving in with a significant other or roommate greatly reduces how much you’ll owe each month if you split rent. 
  • Negotiate: If you’re familiar with the average cost of renting in your area, you might have some room for negotiation. This is especially true during off-seasons when more units are vacant. 
  • Relocate: Though not always possible, relocating to a lower cost-of-living city is one of the best ways to save big on rent. 

 Do you need to rethink your living expenses? Start by calculating just how much you pay in housing expenses each month. Does this fit into the one-third rule? What about the 50/20/30 rule? If not, it’s time to consider how much rent you can actually afford.

Find Housing Within Your Budget

You don’t want to break the bank just to find somewhere to live. While it’s true we’re experiencing an affordable housing crisis, that doesn’t mean it’s not possible to find rent you can afford. If you’re a renter, rethink your budget to determine how much rent is too much based on your income and location. 
If you’re struggling to create a budget that works for your financial goals, you’re not alone. Talk to a financial expert at Debt Busters today to determine just how much rent you can actually afford. No matter your situation, there’s a solution for you. Contact our team to get started today.

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