Rents have been steadily increasing throughout the United States over the past decade. Ever since the financial crisis, people have somewhat shied away from home ownership and opted to rent. With the demand for rentals on the rise, a sharp increase in monthly rents has been a clear side effect. The old rule of thumb used to be 30% of one’s income should be spent on rent; however, we are now seeing a burden like never before. What should a millennial spend on rent? The simple answer is as little as possible.
Millennial’s are those born from the late 1980’s to the early 2000’s depending on who you ask. These individuals tend to have a high burden of student loan debt, which makes it all the more concerning that they are spending high amounts on their monthly rent. A recent report came out showing that millennial’s will spend close to six figures, yes, $100,000 on rent before they turn 30. That is a staggering amount considering that most are also in the process of trying to pay off student loan debt.
3 WAYS TO NOT SPEND 6 FIGURES ON RENT BEFORE 30
- Get a roommate. Sharing a two bedroom with a friend is a simple and easy way to save money every month. Sure two bedrooms cost more than a one bedroom, but when you split it two ways, it comes out to about a 30% savings versus living on your own. This isn’t a long term solution, but it is a good way to free up additional income every month.
- Move in with a significant other. While some will shy away from this advice, there are many benefits to doing so. I knew a couple who had to live apart until the day they were married for various reasons. They chose to do this in order to respect the wishes of others. However, they were basically spending an extra $1000 a month on an additional apartment that got little to no use, all to please a few. They could have used that money to build up an emergency fund or increase their down payment on a future house.
- Buy a house. While buying a house requires more responsibility and obligations than renting, it is also a good choice to lower your monthly expenses and build equity. For example, a $200,000 loan on a property with 20% down will give someone a monthly payment of approximately $1250 a month. Depending on the area of the country you live in, it will almost certainly be cheaper than paying someone else to rent.
While some see a benefit to renting, there are also many drawbacks financially. Although we can’t exactly put into numbers what should a millennial spend on rent, there are ways to reduce your monthly expenses. Whether you are able to implement one of the solutions above into your situation or not, living costs will be your largest expense every month.
Budget Smart, Invest Wise