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WalletPrep worksheet · Housing

How much rent can you afford?

Name ____________________ Date __________

Key ideas

  1. Thirty percent of gross pay is a ceiling. HUD tracks households paying more than 30% of income for housing as cost burdened. Treat 30% as the top, not the target.
  2. Your take-home budget gets the final say. Subtract saving, debt payments and other bills from take-home pay. What is left, minus utilities, is the rent that fits.
  3. Count utilities as part of housing. Electric, gas, water, internet and renters insurance come with the apartment. Add them before you compare two places.

Vocabulary

Gross income
Your total pay before any taxes or deductions are taken out. Salary offers and loan applications usually ask for this number.
Take-home pay
The money that actually lands in your bank account after taxes and payroll deductions come out of your paycheck.
Emergency fund
Cash set aside only for surprises like a job loss, a car repair or a medical bill. A common goal is 3 to 6 months of essential costs.
Irregular income
Pay that changes in amount or timing from month to month, like gig work, freelancing, tips, commission or seasonal jobs.
Down payment
The cash you pay toward a home's price yourself at closing. A mortgage covers the rest.
Tenant screening report
A report landlords use to decide whether to rent to you. It can include your credit, rental history and eviction records.

Work it out

Jordan earns $60,000 a year, takes home $3,900 a month and pays $300 a month on a car loan. He wants to save $400 a month.

  1. 30% of $5,000 gross
  2. Take-home pay
  3. Saving
  4. Car loan
  5. Groceries, phone, gas, insurance
  6. Spending money
  7. Left for housing
  8. Utilities
  9. Rent that fits

Check yourself

  1. You earn $72,000 a year before taxes. What rent does the 30% rule give?

    • A. $1,500
    • B. $1,800
    • C. $2,160
    • D. $2,400

  2. The 30% rule says $1,800 and your take-home budget says $1,550. Which should you use?

    • A. $1,550, the lower one
    • B. $1,800, since the rule is standard
    • C. The average, $1,675

  3. Which cost should you add to rent when comparing two apartments?

    • A. Your phone plan
    • B. Groceries
    • C. Your car loan
    • D. Electric, gas and water

Your turn

Find your last paycheck. Multiply your gross monthly pay by 0.30, then run the take-home check in the calculator with your real debts and saving. Write down the lower number as your rent ceiling.

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Answer key

How much rent can you afford?

Work it out

  1. 30% of $5,000 gross$1,500
  2. Take-home pay$3,900
  3. Saving− $400
  4. Car loan− $300
  5. Groceries, phone, gas, insurance− $1,150
  6. Spending money− $500
  7. Left for housing= $1,550
  8. Utilities− $150
  9. Rent that fits= $1,400
  1. The 30% rule: $60,000 ÷ 12 = $5,000 gross a month, and $5,000 × 0.30 = $1,500.
  2. The take-home check: $3,900 − $400 − $300 − $1,150 − $500 = $1,550 left for housing.
  3. Utilities run about $150, so $1,550 − $150 = $1,400. Jordan uses the lower number and looks for rent at or under $1,400.

Check yourself

  1. B. $1,800 $72,000 ÷ 12 = $6,000 a month. $6,000 × 0.30 = $1,800.
  2. A. $1,550, the lower one The take-home check includes your taxes, debts and saving. When the two disagree, the lower number is the one your budget can carry.
  3. D. Electric, gas and water Utilities come with the apartment and vary from place to place, so they are part of what each apartment really costs.