The Most You Should Pay for Housing If You Earn $80,000 a Year
For many Americans, housing is the largest and most influential expense in their budgets. However, determining how much you can afford to spend on housing has become increasingly difficult in recent years due to rising shelter costs.
If you earn $80,000 annually — the median U.S. household income — a common guideline suggests spending no more than 30% of your income on housing. This would be around $2,000 per month. However, with home prices rising rapidly and rental costs soaring, this benchmark is becoming less feasible, especially in major cities.
Since August 2020, home prices in the U.S. have increased by 45%, while the cost of renting a two-bedroom apartment has jumped by 22%, according to Redfin. As a result, nearly a third of American households are now considered “cost burdened,” spending more than 30% of their income on housing.
What Can You Afford on $80,000 a Year?
While the 30% rule remains a good starting point, financial experts suggest that a range of 35% to 39% of your income on housing may be more realistic, particularly in high-cost areas. Emmanuel Eliason, a certified financial planner from Colorado, advises against spending more than 50% of your income on housing, as it can cause financial strain, limiting your ability to save or cover other expenses.
Here’s a breakdown of how much you could reasonably allocate toward housing costs based on different percentages of your income:
- 30% of your gross income: $2,000 per month
- 35% of your gross income: $2,333 per month
- 40% of your gross income: $2,667 per month
- 45% of your gross income: $3,000 per month
- 50% of your gross income: $3,333 per month
While spending more than 30% can be unavoidable in some areas, it’s crucial to aim for a balanced budget, leaving room for savings and unexpected costs. Housing should remain a manageable expense, as it is one of the few costs that doesn’t fluctuate easily and often comes with long-term commitments.
