how many people are even actually following this rule?
i’m confused at how this 30% income rule is even remotely applicable anymore. it’s literally impossible in most us cities with average middle class income to manage this.
if you make 50,000 that’s really 33,000 after taxes. and that makes your available rent price to be $825. which doesn’t exist in any cities
your only options is to have roommates or live in a sketchy area. which like when you’re moving to a completely new area is hard to find. and i also don’t want roommates i just lived with other people for 4 years i thought i was supposed to be done with this
a year ago i ran my own business online. and i was making 71,000 on my own. and was able to easily afford rent in my one bedroom Houston apartment for $980. i always made sure i was within 30%
this business proved to be unstable and i’ve begun applying for entry level jobs with my degree. and i’m shocked at how this 30% rule is even possible. it’s impossible to find rent in any major city that wouldn’t at least be 45% of your income.
wouldn’t it make more sense for the rule to be like 40% instead?
Its not a rule. Its a guideline to determine if you’re rent burdened, as set by HUD.
You can certainly spend more. You’ll just be unable to meet other financial goals.
That rule of thumb is gross not net. So $1250 for $50,000 annual income. That leaves a little over $1500 a month for utilities, saving, transportation and living after taxes.
I mean, someone making $50k living in a major HCOL city really probably does need to have roommates if they want to be able to afford anything else.
But if you can make a budget that works for you, do what makes sense. Just realize you are going to have to cut back elsewhere.
It’s just a recommendation, and a lot of it is based on dual-income households. If you are single making 50k in an HCOL area, then unfortunately you will have to get roommates or a longer commute. Or just add up your expenses and see what you can afford while still being able to save a little. When I was entry-level making 50k I was able to afford a $1,500 apt on my own because i had no debt or car payment and very little loans. It was like 50% of my net, but I had barely any other expenses so it was doable.
It’s 30% of gross, not net income.
Couple things. A “rule of thumb” is not a “rule”. Just a general guideline. What other expenses you have, whether you own a vehicle or not, other debt, all that matters too. What’s acceptable for you could be more or less than 30%.
You also mentioned taxes and take home. Know that particular rule of thumb is based on gross, not net. So your percentage of net is expected to be higher.
All of that said, don’t make yourself housing poor. Having fewer roommates or a nicer apartment is great and all only if you still have enough money to live the rest of your life how you want. So be mindful.
The “rule” isn’t a rule, the idea is that if you keep it to under 30 you’ll have enough disposable income
It *is* hard to keep it under 30 these days for many, hence why many don’t and just have less extra to make ends meet. Making the “rule” 40% instead just means we accept that more have less remaining and struggle
> wouldn’t it make more sense for the rule to be like 40% instead?
where is that extra 10% going to come from?
cut down on other necessary expenses?
cut down on “frivilious” wants?
cut down on savings?
it’s gotta come from somewhere.
Making 50K in a large city is not a lot of money. I work a fairly low level job in a small town for $55k/yr. Rent on average is $700 for a 3 bedroom, $500 for 1 bedroom. If you are in a higher cost of living area, you need to make more money
It’s a guideline. It’s also gross income, not net. And, in many cases for major cities, it would require dual incomes/roommates/etc.
I’ve lived in NYC and it’s possible. lots of people just want to only live in Manhattan or some of the expensive hoods in Brooklyn. Lots of other places there you can rent for a lot less with a slightly longer commute
You answered it yourself – roommates or live somewhere cheaper.
It’s not fair to compare an average income to a HCOL area. It’s similar to asking why someone making minimum wage can’t afford to live in midtown Manhattan.
You need to ensure that you’re looking at average income in the city, not average income in the state/country overall.
Anything under 70k will not be feasible in most of the coast major cities to live on your own in a decent area. Most people have either roommates or dual income households. That’s just the reality.
In my entire life of 40-something years, I’ve never lived alone.
Had roommates in college. At one point had 6 guys living in a two bedroom apartment. That was glorious. My rent was less than $100 per month.
Then I got married and have had that same “roommate” for 25 years.
Living right in the city is a big luxury.
>if you make 50,000 that’s really 33,000 after taxes. and that makes your available rent price to be $825. which doesn’t exist in any cities
If you’re going to arbitrarily throw bales of cash out the window when figuring your “available rent price” then, yeah you can easily construct a self-fulfilling scenario where nothing is affordable.
30% of $50,000 is $1,250 per month. The only “rule” is used by HUD to determine if a family is “cost burdened” by their housing and that is based on **gross** income. Anything else is just a rule of thumb which may not fit your personal budget and you can always invent a rule which is more frugal.
Not only that, but even in the highest income tax state (Oregon), a $50,000 salary is still $38,000 after all income and payroll taxes are paid.
This isn’t an accurate reflection of the real tax liability for someone making $50,000. You still need to apply the standard deduction and exemptions which reduce tax liability significantly. There would likely be many other deductions as well. Probably someone making $50,000 will pay maybe $4-5 thousand in taxes, and accordingly would have a net of about $45,000.
This leaves a bit over $1,200 for monthly rent.
Why do you think you’re entitled to your own place without roommates in a hcol city?
You said it yourself. Roommates.
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It is not impossible. You just have to be willing to live with others, or further from your city center.
Get a roommate. Sounds harsh but at this point living alone is more of a luxury unfortunately.
$50K gross minus $3,825 FICA minus federal income tax of $4,241 (assumes single filer with no dependents and no income adjustments) is take-home income of $41,934 in TX, where there is no state income tax. Need to also subtract mandatory payroll deductions (health insurance cost-sharing would be the most major and likely one). 30% of this gives ~$1,050 per month to spend on rent.
Your frustration seems to come from some theory that you are entitled to be able to comfortably afford your own apartment in a good part of town on an entry-level salary. I don’t think this is a reasonable expectation.
1) How are you only taking home 66% of your income?
2) $50k is not a ton of money, I would expect most people to have to have a roommate at that income level.
>i also don’t want roommates
It’s nice to want things, but we can’t always get what we want.
The fact is living alone is a luxury. A luxury not everyone can afford. Living with a roommate or a partner will nearly halve your rent and utilities. Living alone, while nice, is a large additional expense, and a luxury.
Because your example is featuring MCOL wages against HCOL rents. If you have corresponding income and rents, then the “rule” (it’s more of a guideline) is actually still rather sound.
It’s frustrating; but roomates are a fact of life for most people. It significantly reduces housing expenses.
The only way I could make it work in one of the new places I moved to (where I didn’t know anyone) was to rent a room in a strangers house I found on Craigslist, until I eventually made some connections and got a rental with some roomates.
Now the wife is the permanent roomate; and with us both having decent jobs we can afford a decent place together.
Dude where in Houston did you live for under $1k/month?
I moved here in 2020 and haven’t seen anywhere decent for less than $1200
I agree that rent is astronomical right now but “$825 isn’t available in any cities” is not really accurate. LARGE cities, yes. Midsized and small cities, especially on the east coast, still have studios in this range. It’s definitely a bad situation but if one has the means to move somewhere cheaper, it might be a good time to do so.
I did computer work for an older couple who had lost their son about a year prior. The lease on my apartment had run up, which I also shared with roommates, and the lady I did the work offered to rent a room in her house.
I checked it out and it was nice, close to my work, and I got along with the couple. This is in a high cost of living area in California, but because I’m renting a room I’ve been paying $500/month since the day I moved in, all inclusive, and this living arrangement has allowed me to save quite a lot of money that I wouldn’t have been able to otherwise.
If you don’t want to find roommates then I recommend trying to move somewhere you can find a reasonable rent.
I was confused by this statement bc I decided to check my math since I have recently purchased a home, and wanted to see if I was abiding by that rule. I live in a small rural town in the Midwest and make slightly more than average for my trade (hairstylist) and am easily under the 30% rule even after taxes.
It really depends on WHERE you live, and if you’re making a fair wage at your job. I also have a 45min commute in and out of the closest big city for work so I pay more for travel and upkeep of vehicles.
I mean HCOL cities are expensive because of the abundance of high paying jobs. If you aren’t on a career track where you expect to have one of those jobs, its probably worth considering your location. There are lots of low and med cost of living cities around where the math might make more sense.
I think you’ve just stumbled upon the American housing crisis lol
And it’s 30% gross not net from what I understand. And it’s a guideline not a rule. And housing/rent has increased so much in the last couple years that a lot of the older rules of thumb don’t apply anymore.
All that being said, it’s still critically important to control your housing costs if you want long term financial security. If I was facing paying 40-50% for housing, I’d be moving ASAP. There are so many remote work opportunities and cheaper up and coming cities across the country. This is especially applicable if you are entry-level or service/retail. You aren’t locked into any particular area of the country with those jobs. It’s expensive to move but it’s more expensive to pay 40% of your income to housing.
It doesn’t anymore. Its the further squeeze of the middle class.
At least that’s how it seems here in Canada.
Your example doesn’t account for 401k, savings, health insurance pretax etc.
Well I think an overlooked thing is – not all cities are affordable and realistic to live in. If your career field is not a high paying one, don’t expect to be able to live solo in LA for example, it’s not realistic. If you can’t make 30% of your income cover rent, then you need to move somewhere that fits your income level. Or, deal with paying more than 30%, there’s no other option besides getting roommates or getting a raise. Popular places to live come with a price, and you will be quickly priced out if you can’t keep up with the highest earners in an area
We’re at 10.8%. 30% is crazy. South Central PA.
Yeah. 50k is the new 30k it fucking sucks and businesses need to pay people more money. But this is also why there is the “great resignation” which I think is more out of necessity due to inflation rather than what media says is just “burnout”
No, it would make more sense to have rent control or better salaries
Yes. If you live in a city and make 50k, you will not be able to live alone.
Living in a fairly low COL place my house payment is just over 1400, and between my and my SO combined income of 119,000 gross which is about 82000 net after taxes and deductions we spend just about 20% on our mortgage payment for the year. Granted that’s the minimum we pay since that doesn’t cover utilities or repairs or improvements, but it’s doable. Our incomes are not exceptionally above the median. we just have dual income. DINK
30% I think is crazy high. That is telling you what you can afford for rent but you wont have any money left over for anything else. I shoot for 15-20%
Idk, I live in a decent town in Michigan and I pay less than 25% of my income for rent and I would consider myself lower middle class at most.
I remember back when it was closer to 25% – one weekly paycheck/month. I could afford (barely but I did) my first apartment (one bedroom place by myself) on a minimum wage job.
While this is a problem with rents increasing – it’s really a problem of wages not increasing.
Midwest city, 1 bedroom with an office. 625 rent. Probably below a lot people’s standards not bad imo 🤷♂️
My rent is reaching close to 45% of my take home pay and it’s really bothering me.
Unfortunately it’s the cheapest offer around my city
I make 30 and my rent is 2k… If I didn’t have a roommate I literally wouldn’t be able to afford my place.
It would make the most sense for wages to be higher and housing to be more affordable.
Ridiculous story there. What occurred after?
Thanks!