Alongside food and clothing, shelter is the other basic need every human has. But being basic does not in any way mean there cannot be variations.

Indeed the kind of shelter you need, or desire, differs from that needed by someone else.

Apart from the size of the home, other factors also matter.

From the looks and location, to available amenities, there is certainly no limit as to what can be used to define a perfect home.

Some homes are cheap, others are affordable. Others are plain expensive.

Which one do you go for?

In most cases, the deciding factor is your financial muscle. Your income will determine how much you can pay every month for rent.

If you are wealthy you can easily go for the expensive homes. If not, then you go for alternatives.

But since rent is not the only living cost to take care of, how do you plan correctly?

The simple answer is using a budget. But before talking about budgets, you first need to understand some basics about expenses and income.

Rent is an expense and therefore, you have to plan for it.

For this to happen, you need to consider two things.

First, your fixed monthly expenses and second, your long-term financial goals.

Your fixed monthly expenses will determine, to a large extent, how much you can pay for rent.

On the other hand, your long-term financial goals will guide you in matters like savings, insurance etc.

These are some of the other things you need to keep in mind when budgeting.


Your fixed monthly expenses do not change.

Their constant nature helps you to easily plan for them.

Being constant may have made you see no need to keep the records.

But for success, it is important that you keep a record of your expenses.

Recording your expenses ensures that you keep track of them. When this happens, you instinctively learn how far you can go with some expenses.

This is especially the case when you realize that you often end up in debt.

So, what are your fixed monthly expenses?

These will usually be the amounts being used for current rent, food, entertainment, savings etc. the list can be long.

But some of the things which make up your monthly expenses may be unnecessary. To get a good idea of what might be unnecessary, there is a question you need to ask yourself.

“Are all the costs you incur really necessary?”

Needs vs Wants

Expenses are commonly divided into two categories: needs or wants.

Many do not differentiate these two categories and as such, they end up labeling their expenses wrongly.

If you label your expenses wrongly, you will have a budget which doesn’t serve you well.

Remember that your budget is meant to help you utilize the money you have.

This is the reason you need to understand the difference between needs and wants.

Needs are the things which you cannot do without. You simply need them for survival. Like we mentioned, the most basic needs are food, shelter and clothing.

With these confirmed as needs, you might still be wrong about some things. An example would be with food. Food is a need, but what food exactly do you buy or eat?

Do you crave for fries, burgers and chocolate and buy them? These are foods, but are they what you need for a healthy life?

Wants on the other hand are the things you can easily do without. As it happens however, habits and attitudes can make it difficult to avoid some wants. If you are unable to control your list of wants, you will soon have no want. Everything will be a need for you.

The above example of food shows this.

You do not need chocolates and burgers to live.

But if you give in to the desire for them long enough, you won’t be able to say “No” to them.

Continue that way for some time and you’ll be stuck.


Budgeting is not just about how you live your life in the current month. It is more than that.

Budgeting is a habit and as a habit, it has to be influenced by something else.

There has to be something driving it, giving it the power to control your financial spending.

For example, at the beginning of the year, you may decide to go on a vacation come December. The desire for a vacation will help you work towards the experience.

To achieve the intended goal, you may need to save for it. You might also decide not to save at all.

If you don’t save, you may need to borrow some money when the time comes.

Alternatively, you may decide to use the available money from your income.

This may not be enough, forcing you to have a less enjoyable experience.

With your goals being an important part of your life, budgeting becomes easy. You set aside enough money for your goals reminding yourself of their importance.

Long-term goals bring many benefits apart from the goal itself being achieved. Three big benefits are:

1. You live a focused life – whenever you have something you are aiming at, you are bound to stay focused so as to achieve it. Especially if you are to achieve it on time. A good example is what happens on the track.

Athletes who have been training tirelessly line up to race against one another. It is the desire of each one to win the gold medal. With this goal, they put all their effort and strength to work. They run, get tired and push themselves further.

If one falls, he quickly gets up and continues running. Why?

Because there is a goal to be achieved.

The same applies to you. When you have a goal to achieve, you will work towards it. And in the event that you don’t get it, you will at least be content with what you have managed to achieve. This will be in recognition and acknowledgment of your efforts. And you will enjoy it.

2. You live a disciplined life – success demands discipline. With your goals clearly outlined, they will push you to make adjustments in your lifestyle. These adjustments are always painful when getting started. They later prove to have helped you become better and stronger.

Discipline causes a positive impact on many other parts of your life. A major one is your mind. When you have a disciplined mind, you are able to make better decisions. You develop a stronger will power and are able to resist all sorts of temptations.

3. You live a better life ahead – this is common to all human beings. Everyone wants to live comfortably, even luxuriously. But luxury and comfort are costly. But when your goal is well defined and you work on it accordingly, you will certainly achieve it.

This will come with much joy as any win always does. This will also put you in a position to advise others on how to go about achieving their own goals.


For you to go on that vacation, you need money. This money will come from your income sources. The same income sources will have to take care of other things.

And chief among them is rent.

Rent is by far the highest expense in many people’s budgets.

And to make it worse, this has been rising and will keep rising.

Land, a big determiner of rent, is always increasing in value.

The other factor contributing to the rent amount is the kind of home you live in.

The size of the home, type of finishing, amenities provided etc also determine how much you pay.

There are primarily two elements of a budget: income and expenses.

Income is the money you receive from various sources. If you are employed, then this is your regular paycheck. If you are in business, this is the money you get from satisfying your customers’ needs.

For budgeting purposes, there are two different amounts of your income you need to understand. One is the gross the other is the net.

Gross income is the full amount you receive from your income sources. If you are employed, this is the total before any compulsory deductions are made.

If you are in business, this is the amount you receive from payments before deducting business expenses.

One smart way of operating if you are in business, is by paying yourself a salary then working with your own salary. You then live out of that and not by taking random amounts of money from your business as your pay.

Net income is what you have after all the mandatory deduction are made.

Once your taxes are deducted as well as your contributions, this is what you remain with.

In reality, this is the amount you can rightly call yours. And this is the amount you should budget with.

Expenses are the costs you incur in the course of living. From your groceries, transportation, any regular medical bills, HVAC, shopping, entertainment etc.

In many cases, expenses go out of hand because they can increase arbitrarily.

For example, you may be unable to control your desire for something. When you come across it, you buy it although the expense was not planned for.

This way, your expenses increase beyond what you had anticipated.


There are two major models adopted by many people, including real estate professionals.

Some in the real estate industry even use these to decide whether or not you are qualified to rent an apartment.

Here are the two models which are widely used.

The 30% Rule

This model has existed for a very long time and has its basis in the 1937 Housing Act.

That act was established to provide decent homes for those with low incomes.

This model advises that your housing costs should not go above 30% of your gross income.

To make it clear, 30% is the percentage of your gross income that should go towards not only your rent, but all your home expenses.

Home expenses include all utilities i.e. electricity, gas, water, internet etc.

As simple and straightforward as this rule is, it falls short in a big way.

From a budgeting perspective, having a guiding figure of 30% set aside for home expenses is not helpful. This is because there is more to life than housing expenses.

What happens to other bills like medical, credit card transportation?

Using this as a budgeting model provides no direction for tackling expenses in view of goals to be achieved.

The 50/30/20 Rule

This rule was developed by Elizabeth Warren, the US senator from Massachusetts.

With a background on bankruptcy law, it is easy to see how she came to invent a budgeting model.

The formula she came up with is significantly different from the above budget model.

The figures which make up the name of the model are all percentages of your take-home pay.

Very specific to this model, your take-home income is your gross income minus the appropriate tax deductions.

If you get your pay with retirement and healthcare deductions already done, you should add them back.

In using the 50/30/20 budget model, you take care of all your needs using 50% of your take-home pay. These needs will include rent, utilities, groceries, car payments, insurance etc.

Any expense that has to be incurred should go here.

Next comes the 30%. This is set aside for your wants. These are the expenses which are not a must but you have them as part of your lifestyle.

This is where things like going out with your friends come in. Hosting a party, the cost of enjoying your hobbies etc.

It is important to take note that wants can be a very subjective term. Lifestyles are very personal and whatever you view as important may actually be just an indulgence.

The remaining 20% is what should go to debt repayment and savings. These include retirement, credit card and emergency fund.

The Rent Reality

Looking at these models, one thing will be clear: you do not have much money to spend on rent.

At the same time, you obviously don’t want to live in an unattractive apartment with little maintenance just to stay within your budget.

Remember we noted that rent has been going up?

In fact, there are cities you cannot live in unless you have a lot of money to spend on rent.

Alternatively, you can live in them, being ready to compromise on many other necessities of life.

Living in such places can easily raise your stress levels and push you into debt.


The good news is that you can still live comfortably without getting into debt.

This will work if you are willing to make some sacrifices.

The important thing to consider here is the goal you have in mind.

Are you looking to save more for emergencies? Or maybe a vacation? Do you want to save some extra money for buying your own home?

Whatever your goal is, keep it in mind to save yourself from sliding back when short-term desires crop up.

There are at least three options you can consider. These are:

Getting a Roommate

In this situation, nothing can relieve you of the rent burden more than getting a roommate to share the rent with.

Whether you are straight from college, newly-employed or just looking for a new home, this can be a great option. Reach out to one of your friends and make the proposal.

This can work well if you can have your best friend or a close friend buying your idea.

The friendship between you two will help you avoid unnecessary conflicts.

The mutual respect and love for each other will hopefully establish your agreement.

In spite of the friendship, you will need to be careful not to force your friend into this if he isn’t for it. Do not use manipulative means to get him to agree with you.

This might backfire later on.

At the same time, make sure you properly vet the person you approach for sharing a room with. They need to be people you have trusted.

Check their lifestyle, character, friends, habits etc.

When you are comfortable, go for it.


This is where you discuss with a current tenant the option of you sharing the home with him. That person will become a resident landlord.

Basically, it is similar to the room sharing option discussed above but different in that you two don’t necessarily have the same rights. To you, he is your landlord.

Despite that, you will have an opportunity to pay less than what you would pay if you had a home all to yourself.

As with the option of getting a roommate, you should seriously consider trust. It will not be best to approach just any stranger who is subletting and move in with him without asking questions.

Although looking for a sublet space puts you somehow at the mercies of the situation, you have every right to do a background check on the person.

Ask him questions about whatever concerns you have.

Ask his neighbors about him. Find out the amenities provided and be keen to know the terms of the agreement. Make sure there is a written agreement before settling for the home.

Moving to a Cheaper Location

This could be the best thing you can do—if you don’t have anything tying you down to a specific location.

If you are the adventurous type, then this is not only a good idea but also an opportunity to see what is “out there.” The difference in culture and way of life can be exciting.

If you are not that type, then it’s safe to stay with the perspective of saving on rent.

The differences between various cities in terms of rent is big. It is so big that some numbers are actually shocking when you think about them.

A survey by GOBankingRates revealed the cost of living in 50 major US cities. Consider the below figures from the survey.

Monthly rent in San Francisco for a one-bedroom home averages $3,300. Groceries are also said to be more expensive than anywhere else.

San Jose follows with an average of $2,395 for a similar-sized home.

In New York, you will pay an average of $2,295 for a one-bedroom. This city has the second-biggest gap between the residents’ average earnings and the cost of living. That means life in New York is a big struggle for many.

By the way, the survey used the 50/30/20 budget model to come up with the figures representing the cost of living.


With this information at hand, you can now make a good decision about your rent expense.

In all you do, keep in mind the goals you want to achieve and practice staying within your budget.

How Much of My Income Should Go Toward Rent?

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