| budgeting for an apartment |
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doomzarolli
New Poster
Cash: $ 0.45
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Joined: 05 Jan 2014
Location: San Francisco
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| budgeting for an apartment |
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My wife and I are apartment hunting and debating on a reasonable range for the monthly rent. We want a nice place, but apartments aren't cheap in San Francisco. We know there's a rule about "one-third of your income" but does "income" in this case really mean raw salary, or does it mean take-home pay after taxes etc?
We have a combined salary around 200k, no debts, and no plans for kids. However we might be purchasing a car soon, and we want to be fairly conservative with our finances. What should a couple like us be spending on our monthly rent?
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Sun Jan 05, 2014 9:46 am |
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Wino
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Location: Dubai
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The rule of thumb is 30% of your gross pay as the affordable level. That having been said, your level of income dictates that you have more disposable income than someone making significantly less - still on a percentage basis. So the amount of house you can afford is actually higher than the rule of thumb.
As an explanation of the above, if you were making $50K per year, the 30% rule would be a ceiling; at $200K per year, 30% is a good working figure which you could conceivably exceed, but it might impact your social activities or savings potential. You could afford more, but why would you want to?
Anyway, your 30% is about $5K per month. Personally, I think that's an outrageous amount to pay for rent except in very high rent areas. Were I in your situation, I'd be looking for something in the $3K range or even lower. I live in Dubai (a very high rent area), and $5K per month is high for here, too, but not excessively high.
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Sun Jan 05, 2014 1:50 pm |
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doomzarolli
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Cash: $ 0.45
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Location: San Francisco
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Thank you both for the responses! We're 35 years old, and the main thing we're doing to save for the future is making contributions towards a 401k plan. (about 10% of our salary)
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Sun Jan 05, 2014 6:56 pm |
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littleroc02us
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I prefer to only spend 20% and under for my housing that way I have more disposable income for investing, giving and gaining wealth. I prefer the freedom it offers.
Risk comes from not knowing what you're doing. (Warren Buffet)
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Tue Jan 07, 2014 9:07 pm |
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clydewolf
Senior Member
Cash: $ 50.25
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Joined: 27 May 2012
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quote:
Originally posted by Wino
The rule of thumb is 30% of your gross pay as the affordable level. That having been said, your level of income dictates that you have more disposable income than someone making significantly less - still on a percentage basis. So the amount of house you can afford is actually higher than the rule of thumb.
As an explanation of the above, if you were making $50K per year, the 30% rule would be a ceiling; at $200K per year, 30% is a good working figure which you could conceivably exceed, but it might impact your social activities or savings potential. You could afford more, but why would you want to?
Anyway, your 30% is about $5K per month. Personally, I think that's an outrageous amount to pay for rent except in very high rent areas. Were I in your situation, I'd be looking for something in the $3K range or even lower. I live in Dubai (a very high rent area), and $5K per month is high for here, too, but not excessively high.
That 30% figure would include utilities, and replacement items, as things wear out and you see fit for your apartment. Also other expenses should you pay someone to do the cleaning or re decorating.
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Tue Jan 07, 2014 9:48 pm |
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