Your Rent Should be 10% of Your Income: How Much to Spend on Housing

Housing is expensive! Rent all across the US, but especially in big cities are crazy expensive. And now, even as a full time digital nomad traveling around the world with just carry on luggage, I still need a place to sleep at night and it's not cheap. My Airbnb, hotel and housing bills are by far my biggest expense and it's something that we just can't escape. That being said, when Jake Nomada posted on Twitter that spending anything over 10% of your monthly income is living above your means, it hit a nerve and the commenters got mad. How dare you tell me that I'm living above my means, and how dare you suggest anyone can live with that little of their income dedicated to rent.

People got really pissed. They said it was ridiculous, irrational, dumb, and impossible. For whatever reason this subject really triggered a lot of people. Perhaps it was the victim mentality in a lot of us, but either way, people got them defensive and angry. In this post I'm going to explore if it really is possible to spend 10% or less of your monthly income on housing, how to actually do it, and why spending 30% as suggested by banks and lenders is stupid. Here we go, get ready to be really pissed off if you're spending more than what Jake suggested as he's right, we really should be spending no more than 10% of our monthly income on housing.

Rent is CRAZY!

To start it off, rent and housing is the biggest monthly expense we have, but it's also something that we absolutely need and cannot do without. To cut down on costs, we could stop eating out at restaurants and cook at home instead, choose not to own a car and bicycle, walk, or take public transportation instead. But rent is something we just can't get away from no matter how hard we try, especially since buying a house ends up with just as much or more expenses anyways when you factor in mortgages, interest payments, property tax, HOA fees, and maintenance and repair costs.

The median rent in San Francisco is now $3,700 which means I'd have to make $444,000 a year just to live in a 1 bedroom apartment there. The median rent in all of America is $1,500 a month so by Jake's calculation I would need to earn $180,000 a year just to live there. Someone even laughed saying "I ain't earning $100,000 a year just to live in a studio apartment." While others like the guys below were pissed that someone would even suggest something that ridiculous.

If you earn $___ you should be spending $___ a month on rent.

$3,000 a month = $300 on rent.
$5,000 a month = $500 on rent.
$10,000 a month = $1,000 on rent.
$20,000 a month = $2,000 on rent.
$30,000 a month = $3,000 on rent.

Here are some of the tweets saying how unrealitic, stupid, and impossible it is to spend 10% of your monthly income on rent.

The 30% on Rent Rule

Growing up, I've always heard that it's okay to spend up to 30% of your monthly income on housing, and that's the rule that most of us aim for. But honestly, I don't even think most of us calculate the percentage at all, when looking for a new apartment, we usually just ask ourselves what we think we can afford, then look around for a place that we actually like and want to live in. Also, who even came up with this rule? Was it the same people that told us we should spend 3 months salary on a engagement ring? (which by the way is made by up an ad campaign by De Beers and used to be 2 months salary, until they randomly decided to bump it up for no reason)

In reality, most people spend 30-50% of their income on housing when you factor in utilities, bills, buying and replacing furniture, appliances, household electronics, TVs, home internet, and other things that are associated with your fixed monthly costs of living. Also as we get older, watch more HGTV, visit more friends with nicer places, we all automatically spend more and more on housing. Think about it, when was the last time you moved and your rent actually went down? 

But here's the thing, yes it's normal, but it's also normal to have $38,000 in personal debt. If you want to live the rest of your life without ever getting ahead, retiring early, or having financial or location independence, go ahead and get angry, saying your situation is unique, or it's impossible. However, this blog isn't for people who want to be average, normal or victims of society, my blog is for people who want to live differently, be better, and ask, "How" instead of "Why me." So here's how to actually do it. 

20% is More Realistic

First off, I don't actually agree with Jake. I think that even though it would be ideal to spend 10% of your monthly income on rent, it's not actually living above your means if you spend more. You can safely spend up to 20% of your monthly income on rent and still live at your means. That instantly doubles the amount you're allowed to spend and will be more realistic for most people. 

However, don't let that be an excuse to spend more and feel good about yourself. It's absolutely possible to spend less, and if you strive to be financially free, it's something you should aim to do. As I said in my post below, most people can spend less on rent, but just aren't willing to make the sacrifices or life changes to make it happen. People who have chosen to have kids will automatically say things like, that's good if you're single, but what they don't realize is that it's not only possible, but they have even more incentive to become financially free, to spend as much time with their family as possible, and have savings and financial stability. 

We're f*cking spoiled and all think that we should be living in luxury and designer houses, like the ones we see on TV. I know a ton of people who are in debt, or are financially struggling but still assume it's normal or necessary to have a guest room even though it sits empty most of the time, and to have their entire house or apartment furnished like something out of a home design magazine. By lowering our rent or housing costs to less than 20%, we can invest the rest of the cash and buy income producing assets instead of liabilities. If you aren't doing this yet, you need to read Rich Dad Poor Dad by Robert Kiyosaki and make it a priority. It's the only way to escape the rat race we call life and get ahead. 

Follow @JohnnyFDK and @NomadicHustler

How to Lower Your Rent

Now that you've read this far, I'm going to give you actionable ways to actually lower your housing costs. Do yourself and favor and keep an open mind and don't read any of them and think to yourself that it's impossible, unrealistic, or stupid. Instead, you can say "it's not something I'm personally willing to do at this time, but I can see it working." 

So here it goes, 5 ways to lower your rent starting this month! 

#1. Get Roommates 

Yes, it's nice to live alone and I also prefer it. But the thing is a 2 bedroom apartment doesn't cost 2x the cost of a 1 bedroom, and a 3 bedroom definitely doesn't cost 300% more than a single unit. 

If you can lower your expenses by 30%-50% by splitting the costs of both rent as well as bills like wifi, rental insurance, furniture, appliances, just by having a housemate, why wouldn't you? 

#2. House Hack 

Even better than having housemates is buying a 3+ bedroom house and rent out the other rooms to long term house mates or list rooms on Airbnb (become an Airbnb host) to cover most or all of your mortgage. It's something I wish I would have done my first year of college as I was used to living with 3 other people anyways, and by the end of the 4 years, I would have lived for free, and had equity built up. 

You can even do this with kids in the house, or if you really value your own space by buying a property with an inlaw unit, or buying a duplex, triplex or fourplex and renting out the other separate units. 

Read the book House Hacking by Ben Leybovich if you want to learn more. 

#3. Go Minimalist 

I used to love living in a big house, drive a big car, and have a ton of stuff. But now that I've been living and traveling as a minimalist for the past couple of years, I'm much happier, more free, and have saved a ton of money in the process. 

Try downsizing into a smaller space, getting rid of or better yet, not buying as much stuff in the first place, and living comfortably in a small space or even a studio apartment. 

#4. Move Cities 

Have you ever heard the phrase, "If you don't like where you are, move. You're not a tree." It's crazy how many people live their entire lives within miles of where they were born. Even within California, the average rent varies a ton. Why live above your means in SF for $3,600 a month when San Jose is $2,536 and Sacramento is only $995? 

Moving to another state can save you even more money, especially when you factor in potential income tax savings, property tax, or costs of living in general. Especially for those who work from home, or who's salary would be the same even if you moved, living in a big city is a luxury, not a necessity. 

#5. Tiny Homes 

One great house hack that I have a guilty pleasure of watching on Youtube are tiny house tours. I love downsizing to exactly what you need, having small, well designed spaces that are functional and easy to clean. If you can build on cheap land somewhere, on a family member's property, or arrange a deal with someone with space, going Tiny can save you thousands of dollars on rent or house payments. And yes, there are even families with kids that live in Tiny Homes. 

The same idea goes with Van Life for those who want to be mobile and travel with their house on wheels. 


For those who are making $5,000 a month or less and thinking, Johnny, even if I do all of those things above, it's still hard to find a decent apartment and still have a good quality life for $500 a month. You're right. It's expensive to live in America, Australia, Canada, London and many other popular places in the world.

That's why I moved overseas and live internationally. Even living in a studio apartment, my rent in california was $1,200 a month, which means I would have had to of made $12,000 a month or $144,000 a year just to hit the 10% target. So instead, four years ago, I legally moved to Texas, which both has lower costs of living and no state income tax, saving me over $10k a year. Then I packed a bag and started living overseas 11 months of the year saving me even more money by giving me a $100,000 a year tax credit through the FEIE, saving me now over $25,000 a year total. 

On top of all of that, I get to live in amazing places like Thailand, Portugal, the Spanish Islands, and spend summers in Europe, all for less than I was spending on rent back home. On average, I currently pay anywhere between $350-$700 a month on housing which means, I'm spending just 10% of my monthly income on rent. You can even find places in the $250 a month range living in places like Chiang Mai, Vietnam, Sri Lanka, or outside of the city center here in Eastern Europe.

Currently I'm staying in an Airbnb (use this link for $40 off) for $500 a month including all utilities, wifi, and best of all, it's directly in the best part of the city center which means I can walk everywhere within 5 minutes. Imagine how much that would cost being in Union Square or SOMA in SF, East Village in NYC, or even downtown San Diego. Here's a link to my luxury apartment that I most recently lived in Chiang Mai for 4 months over the winter, it would have been even cheaper if I was willing to stay for 6 months or 1 year. 

Sacrifices vs. Entitlements 

At the end of the day, life is all about balance. There's a popular saying that we can have anything, just not everything and that's true. There are people who choose to drive expensive luxury cars while living in their parent's basements, and there are others who live in big fancy houses but have soul crushing debt for the rest of their lives. Even in my examples above, my $463 a month condo was a 15 minute walk from where I wanted to be on the popular Nimman rd. but I didn't want to spend $950 a month on the equivalent condo there. 

Here in Kharkiv, I could have had a more modern apartment with a big flat screen TV and leather couches for $1,000 a month, but instead, I chose to keep my costs down and watch movies on my laptop. During months that I travel a lot, I even sometimes stay in hostels for a few nights in expensive cities instead of getting a hotel or Airbnb when the prices are high. For an example, when I was recently in Lisbon for 4 nights, instead of spending $55 a night for an Airbnb or Hotel room, I opted instead to spend $15 a night staying at the Selina Hostel.

I knew I would be mostly hangout out with other nomads, going on walking tours, and wouldn't staying in much, so right there, I saved almost $200. If I knew I was going to be hanging out at my place more often or if I was dating someone, I'd happily splurge for  a hotel or an Airbnb if I needed. But doing the math, at $55 x 30, you're spending $1,650 a month and if you're staying in places that are over $100 a night, that figure becomes over $3,000 a month if you do the math. Here's a highlight video from my first trip to Lisbon.

Frugal vs. Cheap 

I actually don't like any of the those words as they all have a negative connotation and usually mean that you don't spend money ever and try to nickel and dime the world. It usually means that you are cheaping out on friends and experiences, or stay at home to eat cup noodles and miss out on life instead of living life now and enjoying yourself.

For me, I try to save money wherever I can, so instead I can splurge and spend when I really need to.  This is why I'm able to go to far away islands like Komodo to Scuba Dive and see the world's largest lizard while other people never leave Bali when they go to Indonesia. Or being able to go to different cities in Italy over the summers just to eat local pasta and visit the Ferrari Museum. Also what most people don't realize is that when you cut all ties to paying double rent back home, it's actually cheaper to spend 3 weeks Surfing in Sri Lanka than it would be for me just to pay rent back home.

By being selective on what I spend my money on, it allows me to have extra money to be able to do things that really matter. For me it's Investing and Buying Income Producing Assets instead of overpriced drinks at the nightclub. Also by staying in cheaper places and keeping my monthly fixed costs lower, I'm able to save up enough money for my own future, do the things I really want to do, and even have money left over to pay my parent's property taxes and even give them $1,000 a month and help support their retirement so they don't have to work anymore.


Make More Money

The funny thing is, almost all of us skipped over the most straightforward solution to this all, and it's to simply make more money. If you want to live in a $2,000 a month apartment and not have to give up anything and still be able to live well below your means, the solution is to make $20,000 a month. I think that the reason why most people don't even consider this option is because they think it's impossible or unrealistic. 

The truth is, it's possible, I've done it myself for years when making as much as possible and focusing all of my time on business was my number one priority. I even made as much as $325,000 in one year which would have easily allowed me to rent a baller penthouse somewhere or live in an expensive city like NY or SF while still living way below my means. But here's the thing, the reason why I was able to grow my networth from $1,000 to having my first $30,000 in the bank which honestly seemed impossible at the time as I detailed in my book Life Changes Quick, going from $30k total networth to now over $720,000 was only possible because I had consciously chose to keep my expenses low even when I was making $20,000-$30,000 a month. 

My girlfriend at the time didn't understand it and actually got into a fight with me when she found out how much I earned asking why we still lived in a $400 a month apartment when I was earning $20,000. It was hard for me to explain then, but having some years to reflect on it, it was because I was thinking of the future, whether it be ours together, or mine alone. I was choosing to delay my gratification by spending 90% of my income in buying investments for the future, rather than wasting it on nicer things then. In episode 122 of Invest Like a Boss, my co-host Sam Marks and I both talk about how we both use a hybrid of FIRE (Financial Independence Retire Early) and Geo-Arbitrage to keep our monthly expenses low while enjoying life today,  grow our net worth, while still enjoy life and travel now in the process.

Listen to this episode ILAB 122 for the full breakdown.

The Wrap Up

I hope that this blog post has inspired you to lower your monthly fixed expenses, especially your housing expense and opened your mind to all the potential ways to do it. I've listed 7 ways to do it, including ways to lower your housing expenses while still living in your home country and the benefits to moving abroad either as a digital nomad or an expat.

I'm sure that most of you will have reasons or excuses on why your situation is different, or special, but even if you can't do it now, I highly encourage everyone to aim to get to 20% as soon as possible, within 3 months if you can, then set a goal to get it down to 10% by next year. It won't be easy, but I know it's possible. If you really want to get ahead in life, remember and follow this quote:

"Be willing to live a few years how most people won’t, so that you can live the rest of your life how most people can’t." - Mastin Kipp

Warm Regards,

Johnny FD

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  1. What are you currently paying for rent and where do you live now? What's the 10% of your monthly income?

  2. Hey Johnny, loved this post. I won't lie, when I initially saw the numbers, I was like holy cow, $500 on rent in the US, that's insane! But after taking a look at the numbers I realized that's already what I was doing (20%, not 10%); it was a conscious decision, as I did look at some places that were $500 a month (multiple bunk beds per room; I was military so that's no issue for me) and decided I wanted to come home to something nice and comfortable. So instead I opted to pay $1500/m for a really baller luxury apartment with gym and 24 hour doorman in SF's Financial District. But I had two other roommates and I slept in the living room with a divider. That's in stark contrast to the 3 story house I own in Colorado, where my mortgage is less than that. But I rent out half the house so essentially stay for free whenever I'm back in CO. You briefly touched on it, but I think the driving force behind all this animosity is the entitlement mentality; people in the western world believe they're entitled to a certain standard of living and get upset at the notion anyone would suggest otherwise. Everyone is trying to keep up with their friends/family/neighbors/colleagues/social media or whatever so they spend whatever it takes, which is usually almost everything. I removed myself from the keeping up with the joneses mentality long ago which has allowed me to amass a sizable chunk of cash and investments. I would never pay the full SF rent prices, even if I was pulling in a million a year. It's just a waste and can be spent on assets instead.

    1. Smart man! And great insights! Thanks for sharing Steven!

  3. I once read somewhere that is should be 25%, but really no explanation why. Personally for me I spend around 10%, but it also accounts as a company cost as I am the CEO. This on one hand easier but on the other hand I generally have problem separating company and personal finance :( Thanks for sharing your perspective. PS. Left you some notes in a priv msg you FB profile ;)

    1. I think the 25% rule was just randomly made up. As for your company housing costs, you might want to check with your tax accountant. Generally you can only write off the home office portion of your housing (1/3 of the total or so) if you are expensing the house or apartment through your company. This is regardless if you give yourself the title of CEO or Sole Proprietor or business owner.

  4. good post and something to aim for. Much easier to do if you are single. With a wife and kids- good luck! :) That said, we manage to do about 20% on rent in Dubai which is not a cheap place to be. factor in utilities, etc it probably is near 30%. Electric/water bills are nuts here.

    1. It's great to have it as an aim, especially hitting 20%, but I understand bills in some countries can be crazy! I'd be showering at the gym everyday if I had to pay a ton for water and utilities!

  5. If you want to get a clear understanding of your finances, you need to analyze and learn how to plan your budget on items starting from things as important as housing.

  6. We currently spend about 20% in rent and my husband still thinks it is too much because houses are cheap where we grew up (just no jobs there!). We are also in the market for a house soon. I was questioning even the conservative 25% rule. We make 4 times the amount of what our parents made. Their houses are modest, but bigger than our apartment and cost less. We live in a similar region but with a better economy. Houses that size exist here but just aren't not as common as the $200,000 and higher houses. Instead of paying more like our peers, why don't we spend what our parents did on a mortgage? That would be 7% of our take home pay. In that price bracket we can buy in cash using the downpayment for the $200,000 house we are 'supposed' to buy,the taxes would make it just under 2% (taxes are very low here).
    We plan live there for 5 years and improve it to our liking without going overboard then find a bigger house to live in a strong buyers market. The small house will become a rental property for extra income. When the sellers market takes a dive I'm sure the value will go down about 20%, but that's not as much as 20% of a $200,000 house!
    It also takes the bank out of the equation. Most don't want to finance a small house, especially if we are low risk and make a higher amount. It confuses them. They would rather we spend more. I've had a bank lie about the smaller loan having a higher interest rate due to risk just to get me to spend more. Normally this is true, but looking at the rate I was locked into, it wasn't any different from a larger conventional loan they offered.

  7. Great plan Ashley. I agree that housing prices, especially in cities have gone up a lot from when our parents were our age. But hopefully now that some jobs are more location independent we can take advantage of buying in cheaper places with less jobs.

  8. I'm sorry I must confess this post is way too long to read. I would rather watch your pics and video. It seems you had good time. I'm glad for you, guys. I am workng on my personal blog at the moment. Do you think it is possible to buy a blog writing?

  9. Hi Johnny,

    Great food for thought. Keeping up with Jones is definitely not part of my FIRE dream. Well-written and inspirational post!


  10. hi jhonny
    you write very well post i want my own house thats why i do job as a designer after sucsess i will purchase my own home here its my site shearling leather jackets for men in usa


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