In the USA, are there popular rent / spending / saving ratio recommendations?

Say I earn $150k per year and split it evenly between the three. Which would be $50k for rent or mortgage, $50k for spending, and $50k for savings or investing. This is one of the popular recommendations in some regions of Asia, but there the tax is 15% versus in USA the tax is 40% (Federal + State tax).

I noticed that when we rent an apartment, if the income is $150k, they'd allow your annual rent to be about $50k (1/3) and they'd approve your application.

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    It's hard to discuss recommendations without knowing the driving factors behind the recommendations. What's your overall strategy? What are your goals? How comfortable are you with risk? People will make recommendations but it will be hard to compare them without knowing the motivations behind them. – dwizum Nov 25 '19 at 14:11
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    Also, the US tax rate is only 40% in very few states, CA being one of them. In Texas for example, it's less than half that(16%-20%). Idaho is around 2%-8%. Each state is different. – Clinical_Coder Nov 25 '19 at 15:17
  • You can google, and find out. – RonJohn Nov 25 '19 at 16:35
  • finance.yahoo.com/news/… – RonJohn Nov 26 '19 at 5:03
  • What if saving ratio is not possible for your earnings after rent/spending? What if your rent is cheap (20%) but you have 5 kids so your spending is around 60%? – SZCZERZO KŁY Nov 26 '19 at 9:07

The landlord has their own guidelines about what ratio of rent to income they will approve. This ratio in combination with the renters credit report gives the landlord an idea on how likely they are to struggle to pay the rent each month. What they can't see is the rest of the renters spending habits. They have no idea if they will spend all their money each month, or if they will start saving for retirement.

I have seen the guidelines expressed as a % of gross, or as a % of take home pay.

In your example of 1/3 rent; 1/3 spending; 1/3 savings/investing, these would have to be after-tax percentages because you left nothing for taxes.

You have to read the explanation associated with any of these guidelines to understand how they are determined and how the author accounts for taxes, specific expenses, and even income. Where do utilities fall in this guideline? Is the ratio the same for somebody making 30K and somebody making 100K?


In the USA, are there popular rent / spending / saving ratio recommendations?

I would say "No", there is not a popular ratios governing personal finance categories. Really it is very dependent upon your goals and stage in life.

For example, people who embrace "FIRE", or financial independence, suggest saving between 50-75% of their income.

When people are young 30% of their income for housing is pretty common as their incomes tend to be lower. Young people tend to buy homes pretty close to the top of their budget, but as they age their income tends to rise while their payment remains pretty close to the the same. After 20 years of raises and promotions, their housing costs tends to be a lot less of a percentage of income.

For those who concentrate on being debt free, spending 1/3 of their income would be suicide to their plans, and should try to keep that around 5 to 10% of their income.

For housing 30% of income is pretty close to the max, some banks went as high as 40% in lending for mortgages, but more importantly they tend to measure your debt to income ratio. A person with high car payments and CC debt is more likely to default on a mortgage than a person who is consumer debt free.

For retirement savings, most authors agree that 15% is the right number to have a decent retirement. Statistics show that people tend to do this and more, or close to nothing. The deviation in average retirement savings is very high. This suggest that there is no "popular ratios" in the US.

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