I’m 34, make $5K a month and spend 64% of my income on rent — $3,200 for a 1-bedroom in Philadelphia. I have $0 savings. Am I making a big mistake or is this just the reality of US housing?
Rent prices have been rising across the United States, and it’s causing big problems.
Rental data from StreetEasy and Zillow shows that since 2019, rents have risen faster than wages in 44 of the country’s 50 largest metro areas. Rents have gone up an average of 1.5 times faster than wages since 2019 and have increased three times as fast as wages in some areas.
This has very real financial consequences for people who are trying to live and work in these locations. Say, for example, you live in Philadelphia, make $5,000 a month and you’re paying $3,200 a month for a one-bedroom apartment. That’s 64% of your income, leaving you less than 40% to cover all of your other expenses.
With such little income remaining, you haven’t had an opportunity to build your savings, and now you’re wondering if you are making a big mistake or just stuck in a bad situation due to the state of the U.S. housing market.
Yes, you’re definitely stuck in a bad situation and many Americans are in the same boat. But you can make it better if you’re willing to make a few sacrifices.
When it comes to the cost of living, experts typically recommend that you spend no more than 30% of your income on housing. Those who spend more than 30% on their home are considered “cost burdened.”
Unfortunately, U.S. Census data shows that far too many Americans fall into this category. According to a 2024 report, over 21 million renter households in America spend more than the recommended percentage of their income on housing. That’s around half of all the households that rent properties throughout the country.
Those living in Philadelphia are very likely to feel the pinch, as the City of Brotherly Love came in at number nine on Redfin’s list of the 10 least affordable metros for renters. As of December, 2024, the median rent in the area was $1,865, which means you’d need an annual income of $74,600 to afford the median rent in Philly.
Since you’re earning $5,000 per month, you’re earning less than what you’d need to comfortably afford the median rent in Philadelphia. And since you’re paying $3,200 per month on rent, you’re actually paying nearly twice the amount that a typical renter pays in Philly.
Spending 64% of your income on rent is not sustainable, so you’re going to need to make a change if you want to save money and build financial security for your retirement.
Unfortunately, you are far from alone when it comes to struggling with rent prices. Data from Redfin shows that nationwide, renters must earn $63,680 to afford the median rent for an apartment in the U.S. ($1,592).
That’s down 6.4% from August, 2022, when the median asking rent in America reached an all-time high of $1,700 due to the pandemic. At that time, a renter would have to earn $68,000 annually to afford the median asking rent in the U.S., which is just about $5,000 more than today.
And while the country’s median asking rent has gone down in recent years, rent prices are still 33.4% higher than they were before the COVID-19 lockdown. This, as you can imagine, is a problem for many renters in America. In 2024, the estimated median income for a renter was $54,752, which is 14% less than the $63,680 that renters must earn to comfortably afford the median rent in the U.S.
You may love your apartment in Philadelphia, but spending 64% of your income on rent is far from an ideal situation. Not only are you unable to save money for your future, but leaving less than 40% of your income for everyday expenses is likely to push you into debt.
Since you’re paying more than the median rent in Philly, looking for a cheaper place to live is an option that you should consider. Try using online search tools to find an apartment that gets you closer to that 30% mark that we mentioned above.
You could also try pointing out to your landlord that you are paying more than the median and see if there’s any wiggle room to negotiate, as they may not want to lose a reliable tenant.
But even if you do move or get a better deal on your apartment, you still don’t make the amount that Redfin says you’d need to be able to comfortably afford a typical apartment in Philly. With this in mind, you may want to look into finding a roommate or taking on a side gig for a few hours a week.
If those aren’t viable options, you’ll need to be pretty strict in other areas of your budget to afford rent and leave some income for savings. Cooking meals at home, taking advantage of public transportation and finding opportunities to enjoy free entertainment are all ways that you can keep spending down.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
