Credit portal




How Much Of My Paycheck Should I Spend On Rent?

Photographed by Rockie Nolan.

Welcome to Money Talks, our brand-new, truly helpful, non-boring personal-finance column, in which Harvard dropout turned super-successful entrepreneur Alexa von Tobel answers some of your most stressful and specific money Qs. 

The founder of LearnVest. a site that teaches women and men how to deal with their finances in a smarter, savvier way, is more than qualified to give you meaningful advice on everything from impossible credit-card debt to managing your 401(k). First up, a recent grad needs real intel on credit lines and interest rates.

And, of course, if you've got your own Qs for Alexa, hit us up in the comments.

Hi Alexa,

I just got my first job in NYC and will be making $32,500. I've heard you're only supposed to spend 30% of your earnings (is that before taxes or after?) on rent. But, that means $812.50 in monthly rent for me, and that doesn't seem to be working out in my apartment search.

What's the real max I should be spending on rent from my salary? Where should I be making up that money? Is it okay that I'm not saving in my first few years of working? And, realistically, is it okay if I carry a little bit of credit card debt for a while? How much is acceptable? Can I just pay the minimum balance? Is that going to be impossible to pay off down the line? Help!

Marisol, New York, NY (almost!)

Photographed by Rockie Nolan.

Hi Marisol,

Great question! I talk to so many people who ask these questions too late — once they’ve already spent far beyond their means and are drowning in credit card debt. That is an incredibly stressful position to be in,

so let’s figure out how you can start making smarter decisions now .

While I know it can be challenging in an expensive city like New York, you are absolutely right that we recommend targeting 30% for your housing costs. That’s 30% of your income after taxes. Whenever you’re budgeting, I recommend looking at your net income (what you take home after taxes), because those are the dollars you actually have to plan with. Based on your starting salary, that leaves approximately $600 per month for rent. Considering that the average monthly cost of a Manhattan studio is $2,277 (according to the Manhattan rental-market report in October 2014), I know that may feel like a massive stretch. But, I don’t want you to consider credit card debt a viable option. Credit card debt is designed to snowball, and we recommend only using a credit card if you can pay it off in full each month.

So, how do you follow your dream of living in the city while also starting your money life on the right foot? There are two levers here — how much you spend and how much you earn.

Start by figuring out ways you can reduce what you spend, like bringing in additional roommates (you can often convert a one-bedroom into a two-bedroom) or moving to a less expensive neighborhood (Manhattan is not your only option). Remember that you can always try to negotiate rental costs, especially when armed with research. Check out resources like or which features no-fee apartments.

Also think about ways you may be able to increase your income. You can consider babysitting, tutoring, or picking up jobs via websites like or which give you flexibility and play to your skills.

Category: Personal Finance

Similar articles: