How much you should spend on rent (and what to do if you already spend more)

"No more than 30% of your income on rent" is a rule from the 1980s, designed for a market that doesn't resemble any large city today. Repeating it is good for feeling bad, not for deciding.

The useful question isn't what percentage you should spend. It's what's left after you pay.

The residual method

Instead of looking at rent as a share of income, look at what's left over:

1. Take your monthly net income.
2. Subtract rent and everything that comes with it: service charges, utilities, insurance.
3. Subtract the rest of your essential expenses — the calculation is in your essential monthly expenses.
4. What remains is your residual: what you have to save, to absorb surprises, and to live.

A residual of 20% of income works even if rent takes 45%. A residual of 3% doesn't work even if rent is 25%. The rent percentage can't tell those two cases apart; the residual can.

The three warning numbers

If your situation hits any of these, the problem is structural rather than a discipline issue:

Residual under 10%. Any surprise goes on the card. There's no room to save and no room for anything to break.

You can't set anything aside for an emergency fund, not even 3%. One month without income leaves you with no way out.

Rent plus utilities exceed half your income. Past that point almost no consumption decision moves the needle: rent moves the needle.

What levers exist when the number doesn't work

There aren't many, so it's worth looking at them in order of real impact:

1. Location. The biggest lever and the most uncomfortable. Twenty more minutes of commute can be 20% less rent. Against that you weigh transport costs and time, which aren't zero.

2. Sharing. Going from living alone to sharing is almost always the largest single-move reduction available. How to handle the money afterwards is in splitting with roommates.

3. Renegotiating, or moving within the same neighbourhood. Less glamorous and sometimes more effective: the gap between two similar flats three blocks apart can be significant.

4. Income. The slowest lever and the only one without a ceiling. If rent is already at the reasonable floor for your city, the problem isn't spending.

What almost never works: cutting the variable stuff. If rent takes 50%, giving up delivery doesn't change the equation — it changes the month, not the structure. The logic of measuring before cutting is in small expenses that add up.

If rent is in another currency or indexed

In several countries rent isn't in the same currency as your salary, or it adjusts by an index. There the percentage moves on its own, without anything you do changing.

What to watch in that case is the trend of the percentage, not the amount: if it went from 38% to 45% in six months, that's the information. It's developed for the Chilean case in tracking expenses in Chile and for the Uruguayan one in tracking expenses in Uruguay.

In one line

Stop looking at what share rent takes and look at what's left after you've paid everything. If the residual is under 10%, the levers are location, sharing or income — cutting variable spending won't get you there.

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