Women counting her money

How Much of Your Income Should You Spend on Housing?

Squeeze logo
June 18, 2021

You’ve probably been told the importance of budgeting your money for certain expenses but having a budget should actually extend to everything you spend money on. A budget is the amount of money you give yourself to spend each month, depending on your income.

Budgets may seem to be restrictive at first, but a budget is simply to help you plan. It gives you control of your money and lets you tell it exactly where to go and when.

Whether you’ve had a budget for years or are just now adjusting to the process, we’re here every step of the way. The biggest expense in most budgets is housing. Calculating how much money to set aside for housing each month can be intimidating and take time to get used to, but in the long run, it can be a great way to put your mind at ease and give you more control over your hard-earned money.

This guide breaks down how to budget for your monthly housing expenses and everything else you should know!

The 50/30/20 Rule

The amount of money experts recommend you should be spending each month on housing follows a 50/30/20 budget rule. Let’s briefly break down the amount in each category to see how these may affect your cost of living.

>>CALCULATOR: 50/30/20 budget calculator

Fixed expenses

Fixed expenses make up the category of your budget, accounting for the expenses that remain the same each month. Housing costs are factored into this category, as are any loan payments, utilities, groceries, insurance, and all other bills you pay every month. Your fixed expenses correlate with the 50 and can take up as much as 50% of your monthly income.

These expenses are also typically necessary. While you may not want to spend $300 a month to pay student loans, this is a fixed expense that won’t change until you pay it off.

Variable expenses

The next category in the 50/30/20 budget is your variable expenses. You should spend 30% of your monthly income on variable expenses. These are charges that change from month to month and aren’t as necessary as rent or insurance.

Examples of variable expenses include shopping, eating out, entertainment, subscription services like Netflix or Spotify, and any extra items you purchase.


The last part of the 50/30/20 budget rule goes toward your savings account. You can save for emergency savings (which should be 3 to 6 months of your annual income) or goal-oriented savings. A solid savings account is an important part of your budget. This account provides financial security in emergencies or in the case that an appliance breaks down and needs replacing.

What expenses are included in housing?

Since housing is a fixed expense, it falls into the 50% of the monthly income you can spend. But how much of this 50% should go toward housing?

Experts recommend anywhere from 25-35% of monthly income on housing. However, many families who spend 30% or more on their housing report being financially burdened. It’s safe to stay anywhere in the 25-30% range. In other words, one week’s paycheck can go toward your home expenses.

Unfortunately, housing isn’t just rent or mortgage. There are many factors you may not consider when setting aside 25-30% of income for housing.

Below are three of these costs to factor in when budgeting for housing.

1. Rent

The obvious expense for housing is your rent payment. If you are buying to own your home, this will be your mortgage payment. If you’re renting your home from a lender or landlord, you will pay rent.

Rent is typically a fixed expense that can only change when your lease is up for renewal. A mortgage is the loan payment you take out when you buy a home. 

Regardless of what form of housing payment you have, this is the biggest factor to consider when setting aside housing money!

2. Down payment 

The down payment for a home is the amount of money you pay upfront when you finalize your home loan. This amount may be lower or higher depending on how much you’re able to put down.

While you don’t have to pay a down payment when renting an apartment, you will likely have to pay a security deposit. The good news is—you can get this back when you move out if there is little to no damage to the apartment!

Your down payment and security deposit are one-time payments, so you won’t need to factor them in monthly. However, you will still need to budget for them when planning to move to a new apartment complex or house.

3. Property tax

A large expense often overlooked when budgeting for monthly housing is property tax. If you’re a homeowner, you will have to pay property tax each month. Typically, this tax is rolled into your monthly mortgage payment. 

For those who rent apartments, property taxes are on your landlord, and these are likely factored into your rent each month, so you won’t have to worry about them!

Other expenses for your home

While rent, a down payment, and property taxes are the only expenses directly related to housing, there are a few other fixed expenses that fall into the 50% part of your budget, too. 

After you set aside 25-30% of your income for housing, it’s essential to prepare for these expenses, too.


Utilities are another part of the 50% of your fixed expenses. Experts recommend spending under 10% of your gross income on utilities. Going over this amount can be risky, so be sure to use 10% as the maximum limit.

Let’s break down the standard utilities most people pay each month.


The United States Energy Information Administration reports an average cost of $115.49 for electricity each month. This number differs based on your location and the number of people in your household.


Using the washing machine, sink, shower, laundry, and tap costs money each month. This can add up to a whopping $104 a month on average for households in the U.S. You can’t go without showering, so it’s important to factor in your water bill for each month!


Internet is another fixed expense that falls under utilities. The average internet plan costs $60 a month, but with more devices and users and more internet activity, this amount can increase quickly.

It can also be a challenge to know exactly how much internet you need. While you want to make sure you have enough internet to fuel your work, school, and entertainment from home, nobody wants to pay for more than they need!

Luckily, there are basic guidelines to help you pick the perfect amount of internet and stop overpaying your bills!


Home Insurance

The last fixed expense essential to factor into your household budget is home insurance. Especially if you have a mortgage loan, your lender likely requires home insurance, hazard insurance, or both!

Knowing how much home insurance you need can be tricky, but a good rule of thumb is to have enough coverage to replace your home entirely and pay for temporary living expenses in a worst-case scenario.

>>COMPARE: Get home insurance quotes

How to save money on housing

Knowing how much to set aside each month for housing may make you feel like you’ve got nothing to spend on your variable expenses—or the fun things in life. But this is not true! Even when you set aside 20% for savings, you should still have 30% left for variable expenses and fun things for each month.

But—we do have a few money-saving tips to help you save some extra cash.

1. Look for discounts

Whether you want to save on car insurance, home insurance, or your cell phone plan, almost every company offers discounts. However, they may not always advertise them. As you’re shopping for providers, be sure to ask about any discounts you may qualify for.

2. Improve your credit score

Your credit score is a crucial factor that insurance providers and creditors look at when determining your rates. A high credit score tells them you’re a reliable investment. A poor credit score means you may be a risk, resulting in increased rates, interest, and deductibles.

Here are some easy ways to improve your credit score:

  • Pay on time
  • Don’t exceed your credit limit
  • Limit the number of credit cards you have. If you don’t need another credit card, don’t apply for it.

3. Don’t pay for more than you need 

While this sounds easy, it can be a challenge without the right resources. Understanding what exactly you need from each service is key. Plus, having the right tools can ensure you find the most affordable plan or rate. From car insurance to home insurance to how much you should spend on cell phone service, understand your needs and then shop around.


While you may be able to afford to spend 50% of your paycheck each month on housing, this can cause all the other expenses in your life to feel very tight. It also doesn’t account for future kids, emergencies, and the financial security that comes with a savings account!

It may seem appealing to live luxuriously but living outside of your means comes with risks too. Our take is to pay anywhere between 25-30% of your monthly income on housing. Luckily, with our deals and money-saving tips, this will be a breeze!