● Money & small business
How much rent can I afford? The 30% rule, the 40x rule and your take-home pay
There are two questions hiding in "how much rent can I afford": what a landlord will approve, and what fits your budget. They use the same kind of rule on different numbers. Here's both, by income.
By income
| Gross income a year | Per month | 30% rule / 40x rule | 3x rule (33%) |
|---|---|---|---|
| $30,000 | $2,500.00 | $750 | $833 |
| $40,000 | $3,333.33 | $1,000 | $1,111 |
| $50,000 | $4,166.67 | $1,250 | $1,389 |
| $60,000 | $5,000.00 | $1,500 | $1,667 |
| $75,000 | $6,250.00 | $1,875 | $2,083 |
| $100,000 | $8,333.33 | $2,500 | $2,778 |
| $125,000 | $10,416.67 | $3,125 | $3,472 |
| $150,000 | $12,500.00 | $3,750 | $4,167 |
The 40x rule is the 30% rule
Many landlords ask for a yearly income of at least 40 times the monthly rent. Divide the income by 40 and you get the maximum rent: $60,000 ÷ 40 = $1,500. That's exactly 30% of $5,000 a month, because 12 ÷ 40 = 0.3. The "3 times the rent" rule (monthly income at least three times the rent) is looser: 33.3% of gross.
The catch: those are gross numbers
Both rules use income before tax, retirement contributions and health insurance. What you actually have to spend is smaller. If your take-home pay is 75% of your gross, a rent of 30% of gross is 40% of take-home: at $60,000, $1,500 out of $3,750.
That's where a budget helps. The 50/30/20 rule splits take-home pay into 50% for needs (rent, utilities, groceries, insurance, minimum debt payments), 30% for wants and 20% for saving. On $3,750 of take-home, needs get $1,875, so a $1,500 rent leaves $375 for every other need. The 50/30/20 rule on a real budget shows where that split holds and where it breaks.
Finding your number
- Start from take-home pay, not gross: your pay stub, or your bank deposits.
- List the other needs that have to fit with rent: utilities, groceries, transport, insurance, minimum debt payments.
- Rent is what's left of the needs budget, not a fixed percentage. Check it against the landlord's rule too, since that decides whether you're approved.
The free 50/30/20 calculator splits your take-home pay in seconds, and our monthly budget planner tracks the real numbers against it. Not financial advice.