What Percentage of Expenses should go to Rent?

How to avoid signing your life over to a mortgage
2Birds1Stone
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Re: What Percentage of Expenses should go to Rent?

Post by 2Birds1Stone »

I don't know about "should", because in my mind "should" means "spend as little as reasonably possible".

Our rent, which includes electric, internet, water, heat, lawn care, maintenance, and Wifi is 11% of gross income
.

Solvent
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Re: What Percentage of Expenses should go to Rent?

Post by Solvent »

I was asking after this in the ERE chatroom this week... That is, rent as a proportion of expenses. Rent as a proportion of income is much less interesting to me.

Reason being, looking at my expenditures, I was marvelling at how 60% of my total expenditure is rent/power/water. It seemed high to me. But I guessed that perhaps for the ERE crowd (at least those who are urban and non-homeowners) this may not be unusual. It really does depend a lot on your city, though... I seem to tend towards inhabiting places with f'ed up real estate markets.

7Wannabe5
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Re: What Percentage of Expenses should go to Rent?

Post by 7Wannabe5 »

Thanks for bumping this thread. I listed some good ideas which I forgot about above. I would note for the record that 4 of my 8 sub $100/month shelter expense ideas were subsequently deemed to be illegal by the authorities, and another 3 of the 8 were rendered temporarily impossible due to mental illness of my housemate/sister. So, I have been stuck in Option 5 for almost a year now. However, I would say that Social Capital has been gained, rather than lost, as the result of choosing this option, but at some cost to my personal fund of Mental Health and Good Cheer.

jacob
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Re: What Percentage of Expenses should go to Rent?

Post by jacob »

If you wanna get/be wealthy, the cost of your home should be <10% of your assets/the expense of rent should be <10% of your income.

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Bankai
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Re: What Percentage of Expenses should go to Rent?

Post by Bankai »

@Jacob

Does this apply to mortgage as well? Also, is it 10% for mortgage/rent alone or does it include all other housing related fixed expenses, i.e energy, taxes, home insurance etc.?

jacob
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Re: What Percentage of Expenses should go to Rent?

Post by jacob »

Nitpicking ... think of being #wealthy guidelines as spending 1/3 of being #consumer guidelines. So 10% instead of 30%.

2Birds1Stone
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Re: What Percentage of Expenses should go to Rent?

Post by 2Birds1Stone »

Solvent wrote:
Sun Apr 08, 2018 12:50 am
I was asking after this in the ERE chatroom this week... That is, rent as a proportion of expenses. Rent as a proportion of income is much less interesting to me.
Whoops, I misread the original question.

Last year I spent $6,600 on rent + utilities, and total spending came in just under $24,000

So 27% of expenses, and since my utilities are included in my rent, there really is no accurate way to separate it.

Jean
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Re: What Percentage of Expenses should go to Rent?

Post by Jean »

I moved in my propertie's garage, and reduce the rent by 50.- and offered to pay 50.- from the utility bill in exchange.
The total rent was 750.- But In only allow myself to spend 500.- out of it.
$o 10% on rent and 10% on utilities

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Stahlmann
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Re: What Percentage of Expenses should go to Rent?

Post by Stahlmann »

jacob wrote: Nitpicking ... think of being #wealthy guidelines as spending 1/3 of being #consumer guidelines. So 10% instead of 30%.
Quoting this post as personal penance.

Let's make ERE extreme again!

Seppia
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Re: What Percentage of Expenses should go to Rent?

Post by Seppia »

I would say as little as needed.
Currently 5% for me, but it's just that I make good money in a place where rents are fairly low (and we split 50/50 with DW).
Back when I was just starting my career and lived in Paris it was 35% of my salary and with almost no respectable way to make it lower than30%

Demosthenes
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Re: What Percentage of Expenses should go to Rent?

Post by Demosthenes »

jacob wrote:
Sun Apr 08, 2018 5:59 pm
Nitpicking ... think of being #wealthy guidelines as spending 1/3 of being #consumer guidelines. So 10% instead of 30%.
@Jacob Interesting how your ERE performance metrics have changed over time. In 2016 it was 15% and now it's 10%. Why the change? I suppose half of consumer guidelines wasn't extreme enough?

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Re: What Percentage of Expenses should go to Rent?

Post by jacob »

Don't read too much into it. It's not like I keep a list of metrics. The 10% number was derived off of what I paid for this house relative to my NW as well as what I've typically paid in rent (NAV-equivalent) relative to my NW. Maybe I was rounding up in 2016 and rounding down in 2018?

Douglas
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Re: What Percentage of Expenses should go to Rent?

Post by Douglas »

My family spends $27,000 / year to live in our house including maintanence, utilities, mortgage payment, taxes, etc. In my mind this accounting is equivalent to renting and living in an apartment for the same price. Not included in this assumption is that I am building home equity.

If our net worth is $100,000 (not including home equity) we are at 27% as a percentage of net worth just to live. This percentage is dropping rapidly and of course will be a new metric that I track.

For me thinking of mortgage payment as rent payment makes these sorts of calculations easier to understand and compare. Not sure if other people see it the same way though.

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