I Used to Spend Half of My Income on Rent. Here’s How I Made it Work

by Maurie Backman | Updated July 25, 2021 - First published on March 5, 2021

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A woman sitting on the kitchen counter in her apartment and smiling at a tablet she's holding.

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In some parts of the country, people have no choice but to spend a fortune on housing. Here's how I managed.

I moved to New York City in my early twenties to be close to work, friends, and entertainment. Now, even if you've never lived in New York City, you'll probably know that housing there is extremely expensive, and you get very little value for your money from a square footage perspective. In fact, I was fortunate enough to snag a relatively large studio for a price that was considered reasonable at the time. The problem? My rent took up half of my paycheck.

As a general rule, it's a good idea to keep housing costs to 30% of your income or less. That way, you'll have enough money to cover your remaining expenses without risking debt. But in a city like Manhattan where rents are so inflated, it's often not possible to stick to that 30% threshold. The same holds true in other major cities as well.

Still, I managed to live in New York City for two years without taking on an ounce of debt. I also managed to pad my savings account nicely at the time. Here's how I did it.

It's all about budgeting

Once I moved into my New York City apartment, I knew I'd need to limit my non-housing spending. I set up a budget to make sure that would be possible.

Now, the good thing about living in a place like New York City is that while rent is expensive, transportation isn't. A monthly unlimited transit pass at the time I lived there was less than $100. I didn't own a car, which is far more expensive. That alone made my high rent payment more manageable.

I also kept my other costs low. I didn't get a landline, bought a cheap cable and internet package, prepared most of my meals at home, and walked or took the subway instead of paying for taxis. I shopped infrequently and spent very little on utilities. Having a 500-square-foot apartment makes it easy to keep your electric bill to a minimum.

All told, while I did spend 50% of my paycheck on rent, I only spent about 30% of it on my remaining monthly expenses. That left me with about 20% of my paycheck to put into near-term savings as well as my retirement plan. Also, because I didn't have any debt to begin with, I didn't have to spend money on loans or a nagging credit card balance. That helped as well.

Budgets can evolve

These days, I live in the suburbs and have many expenses outside of housing -- a vehicle, higher utility bills, and childcare costs, to name a few. As such, there's no way I could afford to spend half of my earnings on housing alone right now. But I still follow a budget because it helps me manage my current expenses and adjust as things evolve.

For example, through the years, my kids have signed up for different activities, some of which are expensive. As those activities got added to our schedule, I've adjusted my household budget to account for those costs. One year, we skipped a weekend getaway to free up room for martial arts and gymnastics and soccer. And my budget helped me realize it was an easy shift to make.

The takeaway? It's best to keep your various living expenses as moderate as you can, but sometimes, that's not possible. Sometimes, you need to spend a small fortune on housing based on where you live. But if you follow a budget and make accommodations in other areas, you may be able to manage just fine.

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