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Personal Finance

Financial experts say only 30% of your income should go toward rent, but here's some advice if you're spending more

CNBC Select spoke with Michaela McDonald, a certified financial planner, to help you determine how much rent you can afford.

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Advice from financial planners can be helpful, but these guidelines don't always apply to everyone. Take rent for example. The traditional advice is simple: Spend no more than 30% of your before-tax income on housing costs. That means if you bring in $5,000 per month before taxes, your rent shouldn't exceed $1,500.

Yet in high-cost-of-living cities around the U.S., lots of Americans are spending much more than 30% of their take-home pay on rent. CNBC Select spoke to Michaela McDonald, a certified financial planner and Albert financial advice expert, to help you figure out how much rent you can really afford.

Here's what she has to say:

Rent higher than 30% of your income might be OK

If you live in a high-cost-of-living area, your rent might be more than 30% of your gross monthly income.

"And that's OK," says McDonald. "You just have to adjust other areas of your budget."

Whether you currently live in an expensive city or foresee a move in your future, McDonald suggests taking a look at all the ways your budget might be different than someone living in a more affordable area. You might find that certain costs are lower than others, so you can afford to pay more in rent.

For instance, in a city with good public transportation, you could save money by ditching your car and taking the subway or bus instead. Or maybe having access to free or discounted cultural events makes up for having to trim your entertainment budget.

Likewise, the cost of living in a more expensive place might be well worthwhile if it opens up fulfilling career opportunities and higher earning potential to boot. If you're moving for a job opportunity, do some salary comparisons to make sure you'll be earning enough to compensate for higher living costs.

And before you relocate to an expensive area, do your research on the housing market, too: "Take a look at what current rental prices are and identify a few neighborhoods you'd like to live in," McDonald advises. "Rent an Airbnb for a bit and walk around the areas, get to know what's currently offered and what's normal."

It's also important to figure out just how much more rent you can afford if you're moving into a more expensive apartment. Instead of just taking the plunge and hoping for the best, take a few months to see how higher rent would impact your overall budget.

If your rent is increasing by $500, for example, start saving that amount every month so you can see what it's like to live without it. Put the money in a high yield savings account such as the Vio Bank High Yield Online Savings Account, and then you can use that extra cash to pay for moving costs or as an emergency fund if you don't yet have one.

Vio Bank Online Savings Account

Vio Bank is a division of MidFirst Bank, Member FDIC.
  • Annual Percentage Yield (APY)


  • Minimum balance

    $100 to open

  • Monthly fee

    None, if you opt for paperless statements (otherwise, $5 per month)

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *The 6/statement cycle withdrawal limit is waived during the coronavirus outbreak under Regulation D

  • Excessive transactions fee

    $10 per transaction

  • Overdraft fees


  • Offer checking account?


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Terms apply.

A good credit score makes renting more affordable

A credit score of 620 is often the minimum you need to qualify for an apartment, according to Experian.

But a higher credit score can actually help you save money.

If you have poor or average credit, your landlord might require a larger security deposit when you sign your lease. The same goes for utilities: According to the Federal Trade Commission (FTC), opening utility services in your name is a form of applying for credit. A history of missed payments can be used against you, and the utility company might ask you to pay a deposit.

Before you apply for a new apartment, know where your credit score stands and find ways to improve it.

*Experian Boost™ is completely free and may help you raise your FICO® Score. Once you sign up, the feature will report your on-time payments for certain bills, like phone, utilities and some streaming services, to the credit bureau Experian. Use Boost along with Experian's free credit monitoring service to see your overall credit improve.

Experian Dark Web Scan + Credit Monitoring

On Experian's secure site
  • Cost


  • Credit bureaus monitored


  • Credit scoring model used


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    Yes, one-time only

  • Identity insurance


Terms apply.

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Bottom line

You should aim to spend no more than 30% of your before-tax income on your rent, but when that's not possible find ways to save in other areas of your budget.

When it comes to getting the best deal on rent, improving your credit score will make your rental application more competitive. In some major cities, such as New York and San Francisco, landlords and property management companies ask for a full financial snapshot, including your latest bank statements, paystubs, a credit report and sometimes even tax returns.

It may sound intimidating, but when your financials are in a good place, you can negotiate costs like brokers fees and security deposits. Sometimes, you can even lower your rent and/or ask for a longer lease to lock in the price.

The better your renter and credit history, the more incentive there is for your landlord to work with you. And that can mean a better apartment in a better location at a better price.

Catch up on CNBC Select's in-depth coverage of credit cardsbanking and money, and follow us on TikTokFacebookInstagram and Twitter to stay up to date.

*Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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