I've been thinking of this, especially since my friends and I are nearing graduation. My one friend said he would spend 33% of gross income on housing, which I think is way too high. On the other hand, my dad has gotten me into Dave Ramsey lately, who claims that you should spend max 25% of net income on rent/house (on a 15 year mortgage if you're buying). This seems awfully tight considering how high rent is in major cities, and how expensive housing is in the suburbs these days. What do you guys think?
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The general rule is 40x, so $2000 month in rent should be $80,000 minimum salary.
Isn't this rule just something that is used to determine if a guarantor is needed/if a landlord would even want to rent to someone? Additionally, because of this I feel like people in NYC also use this as a way to determine rent to income ratio which is ridiculously high. 2,000 per month on 80k (about 55k net annually) for example is ridiculously high assuming you dont get any bonuses.
Just work backwards from your comp and expenses (student loans? Family support? How many nights out? Etc). As you start off your career the percentage will be pretty high, especially if in a HCOL area. When I first started off I followed the 40x rule in nyc but just using my base. This allowed a decent cushion, but pre bonus was a bit tight and I definitely had to manage my expenses.
As you become more senior those percentages don’t really make as much sense (would be a lot of apt for that much money). I ended up buying a place once I got more senior, but I would recommend doing that once you think you can afford a place long term and know that’s the area you want to be in.
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