I'm about to graduate from college, and I will be starting a PhD program in the fall. The program has a 5 year funding guarantee with a stipend of just under $4,000 a month. As I search for apartments, I'm aware the 1/3 rent rule is generally a good guideline to follow, and this would cap me at $1325 a month for rent. However, I'm looking for a one bedroom apartment and the low range of available options (that don't seem to have problems with roaches and bedbugs and such) is mostly around $1350-$1400.
While I am generally risk averse when it comes to things like this, there are a few reasons I think I may be okay paying ~$1400:
- I have a guaranteed income for five years, so I don't have to worry about sudden unemployment.
- I have no debt and no car, which means I have fewer other necessary expenses each month (aside from a public transit pass, although I will still be on my family's phone plan)
- I'm 22 and the field I'm studying has high earning potential after I graduate, with every graduate I know of the program I'm entering either securing a six figure position or a postdoc (which I have no interest in). So I'm pretty confident I can easily catch up on savings once I graduate the program, even if I don't graduate with a ton of savings.
So what do you guys think? Would it be dumb for me to sign a lease with rent over 1/3 of my gross income?
As a young person with a stable job, how important is the rule capping rent at 1/3 gross income?
byu/goOdDoorman inpersonalfinance
Posted by goOdDoorman
7 Comments
I came here to say “no!” But then I realized you are talking about going over by like $75/mo? That’s totally fine
Rules of thumb like the 1/3 thing are just benchmarks. You don’t have to follow them perfectly. So long as you are really close they should serve their purpose
It’s important to reduce your spending as much as possible. The difference between $1325 and $1400 is pretty negligible, but IMO there’s no real reason to get a one-bed as a 22 yr old PhD student – I’d definitely get roommates in your shoes.
Even if you get a well paying job when you’re done, it’s actually really hard to make up for the lack of savings right now and the compound growth of investments.
Probably not the end of the world in your specific situation. It will squeeze you a little bit, but your income is stable. When you are less insulated, try to keep within the 1/3 (which I always hear as a quarter of gross).
if you expect career progression, that 1/3 maybe 1/10 in a few years
I was flabbergasted at young colleagues when I started working paying 50%
Its great for networking and staying back late at work
I have lots of friends who got doctorate, every single one lived with other doctorate students, often 3 or 4 to an apartment or house (all with their own rooms). A lot can change in 5 years, you should be a little more cautious. 5 years ago everyone going into software development thought they had it made for life.
no and:
“…a guaranteed income for five years…”; dont count on it (secure at least a mental back stop)
“…high earning potential…” good U stated this w/a lill more reality. Some use 1/4 not 33% as a guideline. Do the best you can till on easy st (hi income). U have a focus (school program) so less than ideal living conditions can B a minor inconvieance. No, I’m not encouraging unsafe living conditions, pollution blowin up yer…. but luxery comes to the fully employed… I enjoyed learning to cook as a 22 y/o student. I rely on that asa retired ol man now.
Glad U gota good program ahead. Go the other way for 3 more things w/ur list. That will B balanced. But only a thought process. Look at the 2 (ie + vs -) then put the paper asside’n think “How would it FEEL to go cheeper or more expensive (anxiety or confidence, etc) and U dont needs us to 2nd guess it/who U R. U can more forward w/a good decision (roomates, on campus, wrk in exchange for free rent, poverty row, or “the good stuff”)~
when I was doing my PhD, our stipend was < $2800 / month before tax and housing was $1200 / month per person + a share of the utilities. With minimal other expenses, I was saving money every month even with these numbers. You will do just fine at 4k / 1400