If you’re looking to buy, rent, or sell your home, or even if you’re the top realtor in Las Vegas, it’s always good to brush up on important real estate vocabulary.
The saying goes that 30% of your income should go to rent. This ideal came about in the 1960’s, when government regulations capped rent at 25% of income mainly for the reason that this is what was spent on average at the time. Eventually, this norm became public policy.
However, the average renter of the 60’s faced different obligations and obstacles from the average renter today. Furthermore, having a hard-and-fast rule for everyone does not account for the wide variations in income there are.
Individuals who earn 30,000/year can spend $750/month on rent, but that does not account for the many other investments on top of this that the average person has today. On the other hand, earners of 300,000/year are better off buying a home or condo than spending 7,500/month on rent.
What’s the best approach? Doing what’s best for you.
If you take a comprehensive look at your annual expenses and how you want to effectively manage your budget, you should be able to come up with the best rent expense on your own.
If you want to optimize your budget, you may want to brush up on investing, saving, and other ways of maximizing your funds. Especially for first-time home buyers, we recommend Personal Finance in Your 20’s & 30’s for Dummies and Investing for Dummies. But really any finance book that explains these concepts in a way that is digestible to you is a step in the right direction.
As great as it would be to have a hard-and-fast rule about how you should spend your money, you are the one who is in ultimate control of that. This comes with a lot of freedom, power, and (yes) responsibility that should not be taken for granted. If you give this important part of your life ample thought and attention, you will reap the benefits.
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