Is anything more exciting than the prospect of renting your own place? Getting excited is one thing—making it a financial reality is another. Before browsing listings, ask yourself, “How much rent can I really afford?” Don’t know the answer? Here’s a great place to start: When it comes to finding the right home, separating dreams from reality will make all the difference.

Five Tips to Determine How Much Rent You Can Afford

Do a little budgeting.
This is a tricky tip because everyone’s budget is different, and there are many different budgeting methods. To simplify, Kelley Long of Financial Finesse suggests you try what’s known as the 50/30/20 Rule. In a nutshell, according to Long, “Fifty percent of your income should go towards fixed costs and needs like rent, transportation, utilities, groceries, etc., 30 percent toward wants like dining out, entertainment, shopping, Netflix/SoulCycle/Uber/Spotify/Instacart fees, etc, and 20 percent should go toward your goals, like paying down debt and saving for the future.”

Keep the number 30 at the top of your mind.
Why does this help you answer the question, “How much rent can I afford?” Great question! The common recommendation is that housing expenses should not exceed 30 percent of your gross income. So, for example, if you make $60,000 per year, your rent and insurance shouldn’t go higher than $18,000 or $1,500 per month.

According to Ryan Coons, CEO of Rentulations, it’s possible to incorporate the 40 Percent Rule. Under this approach, “the asking rent should be no more than 40 percent of the tenant’s monthly income, minus all other monthly bills such as utility payments, renters insurance, and loans.”

That said, there is one other factor to consider: the market norm where you live. For instance, if you are in a high-demand market such as New York, Los Angeles, or anywhere near Google headquarters, you might find the rent far exceeds both the rules of 30 and 40. This means your potential landlord will probably expect their tenants to prove their income (single or combined) is 40 to 50 times the monthly rent.

Keep backup resources out of the equation.
You might have a few accounts that could serve as your ticket to ride, or in this case, rent your dream place—but don’t take the bait. It’s a no-brainer that you shouldn’t dip into your retirement fund, but some people might be tempted to grab some cash from savings and emergency accounts. Resist it. Once you start draining these funds to cover rent, you’ll be without a safety net in no time.
You should also avoid using credit cards or taking out personal loans in order to cover your expenses. Similarly, if you find yourself charging groceries in order to pay your rent on time, it might be time to rethink your living space.

Stay realistic about your expenses.
It’s easy to be dazzled by a beautiful space with the latest amenities and think that if you stretch yourself financially just a little, you can make ends meet. When asking “How much rent can I afford?” don’t fall for the trap! One mistake Long made was justifying a place she couldn’t afford because eventually, she would have her car paid off and could put that money toward the rent. “What I should have done was rented a less expensive place and then started saving my car payment toward a down payment on a house,” she said. “I would have been able to afford to buy a LOT sooner in life if I’d just sacrificed a couple years in a cheaper place.”

Remember: A living space will probably require furnishing.
Nothing is sadder than a beautiful apartment furnished with an air mattress and a coffee table made of milk crates. What good is a spacious view if there’s nowhere to sit and enjoy it, right?

It might seem easy to solve a furnishing dilemma by plunking down plastic and charging the costs to defer the price tags. But this can get you into a lot of hot water if trying to pay off those expenses makes covering your rent difficult. Instead of buying things you can’t afford, check your local message boards to see if other people might be selling or giving away items you can snag and re-purpose.

Know what your landlord expects.
It’s amazing what asking a few questions can do. Don’t be afraid to pepper the landlord, leasing agent, or broker about what the expectations are in terms of your income-to-rent ratio, if someone can cosign along with you, and if you’re allowed to have roommates to defray rental costs. If their expectations are different than the market norms or standard rules, you’ll save a lot of time applying to places your budget isn’t a good fit for anyway.

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