How much should I spend on rent?

How much should I spend on rent?

For many people, renting is the best option because the biggest advantage of this option is flexibility. When you rent, you can easily move when necessary. For example, if you get a new job opportunity elsewhere, you can easily find a new apartment to rent without having to worry about selling your home.

However, not everyone knows how much money to spend on renting a house is the most optimal.

Ramsey Solutions financial advisors recommend that you spend no more than 25% of your net income on rent.

Assuming your monthly net income after tax is about 40 million VND, you should not only pay a maximum of 10 million VND in rent.

Many people think that 25% is too low and that more money should be spent on rent. However, if you spend more than 25% of your income on rent, your budget for spending, investing, and saving will decrease.

This number is consistent with the "6 jars" rule proposed by author Harv Eker on personal financial management. He suggests that 55% of income should be spent on the essential needs fund (including accommodation, transportation, and bill payments), 10% on the financial freedom fund, 10% on the education fund, 10% on the long-term savings fund, and 10% on the entertainment fund.

If you spend more than 25% of your budget on necessities, you will have to cut back on other things, reduce your quality of life, or reduce your savings for the future.

An apartment project in Hanoi (Photo: Tran Khang).

How to pay only 25% of your income on rent?

Many people, after learning about the 25% rule, think that they cannot meet it. However, Ramsey Solutions also suggests some ways to help you ensure this budget ratio.

The first is to find a roommate. If you don’t want to pay a large sum of money for rent every month, then finding a roommate and sharing the expenses is a suitable option. Of course, you also have to accept the loss of comfort from living with others. Consider this a period when you sacrifice comfort for a better future.

Second, rent a room instead of an apartment. If you live alone and rent a large apartment with many rooms, this can be a sign of waste. To keep your housing payment within 25% of your income, you can switch to renting a single room with a smaller area.

Third, increase your income. To achieve a level of rent below 25% of your income but still live comfortably and spaciously, the best way is to increase your income. There are many ways to increase your income, depending on your ability, skills, interests and financial goals. You can consider finding a part-time job, starting a small business or selling old things.

Fourth, look for cheaper places. Rents are largely dependent on location. If you can’t afford a house in the city center, you can start looking in the suburbs or further out. Of course, you will have to consider moving further away.

Fifth is to look for policies to support social housing rentals. Localities currently have many policies to support social housing for low-income people. For example, Da Nang City rents social housing apartments in a social housing apartment project for more than 70,000 VND/m2/month.

Source: https://dantri.com.vn/bat-dong-san/nen-chi-bao-nhieu-tien-de-thue-nha-o-20240626132747740.htm