How much of your income do you spend on rent?

Posted by Felix Okoli on Tuesday September 11, 2012 at 15:12:43:

If you are paying rent on your home, this could be one of the ways through which your hard earned money could be leaving you. As someone who dreams of having a rich or at least stable financial future, you need to decide on what reasonable amount you should be spending on rent. How much of your income should you really sacrifice for your rent?

According to most reports I've seen online, they agree that one should not spend more than 20% of your yearly income on rent.

What does this mean? It simply means that if you were making around N1m a year, then your should only spend about N200,000 per year on rent. This should be ideal for people who pay rent on an yearly or bi-annual basis and for people who are really interested in saving for their future.

Now, how much is house rent really in Nigeria? In places like Lagos, N200,000($1250) a year seems like a fair deal as yearly house rent for a 2 to 3 bedroom flat cost around that figure although it can rise to as high as N500,000($3125) a year on choice locations with good utilities and security.

If you are not yet comfortably rich and I mean like N10m income a year rich, then you shouldn't spend too much of your yearly income on your accommodation yet unless you just value a luxurious life.

When it comes to living in urban centers in Nigeria, rent is a major expense that uses most of one's income and I still wonder why some people spend up to 80% of their income on rent. Wouldn't it be better to move to a different place where rent is more affordable and suits your income?

There should be a limit to the amount of your income that you spend on rent and so if you maybe make N50,000 a month, then it would be wise to put a limit on how much monthly rent you can pay out of that money. Assuming 20% is your high limit, that means you shouldn't spend more than N10,000 a month on rent. You can however spend lower than that if you want.

So if you are planning for a bright future, saving and investing some of your income rather than spending most of it in paying rent can really make you richer.