SoFi

After you purchase a new home, there are many things to budget for, including moving costs, new furniture, and ongoing expenses, such as your mortgage. Although it may seem like many of the significant expenditures are out of the way once you close on a property, there are additional costs that can add up.

To avoid financial surprises, it’s wise to jot down and budget for all of the extra expenses you will encounter when you move into your new place. To help you organize your finances, here are the things to budget for after buying a house.

Moving-Out Expenses to Budget For

Before you take up residence in your new home, you must move all of your things. Even if you pack and move all your belongings yourself, you’ll still have to spend on items such as boxes, packing materials, and a truck. And if you use movers, it will cost you even more.

Recommended: The Ultimate Moving Checklist

Moving Your Belongings

There are three main options for moving your belongings:

•   Renting a truck and doing it yourself: It’s more cost-efficient than using professional movers, but DIY moving still adds up. You’ll have to pay for the truck rental fee, gas, and damage protection. If you’re moving across the country, you may also have to factor in the costs of shipping some of your items. Even though you can enlist your friends and family to help you do the heavy lifting, the cost of moving yourself can still be significant, and it’s a lot of work.

•   Hiring movers: If you decide to use professional movers, it’s wise to shop around to find the best price. Here’s why: For moves under 100 miles away, the national average cost of moving is $1,714, and it ranges from $880 to $2,570. If you’re moving long-distance, costs can range from $2,417 to $6,863. To cut costs, you can do your own packing.

•   Moving your things in a storage container: Another option is to use a hauling container. You load your things in it, and the container company moves it to your new location. This usually costs several thousand dollars, averaging $3,100 for local container moves and $4,460 for long-distance ones.

Moving Supplies

If you decide to go the DIY moving route, you will need to buy boxes, bubble wrap, labels, and tape. And you likely have more items to wrap and box up than you think, which requires even more supplies.

Cleaning Supplies

You’ll probably want to clean your current property before you move out, and you’ll definitely want to clean the new place when you move in. That means buying mops, sponges, cleaning solutions, and paper towels. You may also want to get the carpets cleaned or hire a professional house cleaner if the place needs a deep cleaning.

10 Common Expenses After Buying a Home

Once the move is done, there are other expenses you’ll need to account for as you settle into your new abode. Here are a few things to budget for after buying a home.

Furniture and Appliances

You’ll likely bring some furniture and decor from your old place, but you’ll probably want to purchase some new things as well. For example, if the appliances are outdated, you may want to upgrade to new ones. And you may have more rooms to furnish, which requires additional furniture.

Consider opening a savings account for the new items you want to purchase. It can also help pay for any unexpected costs, such as having to replace a broken hot water heater.

Mortgage Payments

As a homeowner, every month you will likely be making a mortgage payment that typically includes:

•   The principal portion of the payment. This is the percentage of your mortgage that reduces your payment over the life of the loan. The more you pay toward the principal, the less you will have to pay in interest.

•   The interest. This is the amount you pay to borrow funds from the bank or lender to purchase your home.

If you are using an escrow account to pay your mortgage, other things may be included in your payment, such as your property taxes, insurance, and PMI. This guide to reading your mortgage statement can help you understand all the costs involved in your mortgage payment.

Property Taxes

Property taxes are the taxes you pay on your home. In many cases, these taxes are the second most significant expense after your mortgage. Property taxes are based on the value of your home, which is typically governed by your state. The county or municipality you live in calculates and collects the sum due. Usually, property tax calculations are done every year, so the amount you owe may fluctuate annually.

Homeowners Insurance

Homeowners insurance helps protect your home from damage or destruction caused by events such as fire, wind, storms, or vandalism. It can also protect you from lawsuits or property damages you are liable for. If someone slips and falls on your sidewalk, for instance, homeowners insurance will pay for the injured person’s medical bills and the legal costs if they decide to sue you.

The cost you pay for this coverage will vary by the type and amount of coverage you select.

Private Mortgage Insurance (PMI)

For borrowers who can’t afford a down payment that’s 20% of the mortgage value, lenders usually require PMI. This type of insurance coverage is designed to protect the lender if you default on your mortgage payments.

PMI can cost as much as a few hundred dollars per month, depending on the amount you borrow.

HOA Dues

HOA fees go toward the upkeep of property in a planned community, co-op, or condo. The amount can range from a couple of hundred dollars a year to more than $1,000, depending on the amenities you’re paying for (such as a pool and landscaping). You typically pay HOA fees monthly or annually.

Utilities

Your utility payments include water, gas, electric, trash, and sewer fees. Some bills, such as water and electricity, are based on the amount you use every month, so monitoring your electric and water usage, including taking short showers and turning lights off, can help lower your cost. Other payments, such as your trash or recycling, might be a fixed amount.

Lawn Care

Maintaining the curb appeal of your home requires landscape services and lawn care. If you choose to mow your own lawn, you may need to factor in the purchase of a mower, which can cost about $1,640 on average. If you hire a lawn service to cut your grass, you may pay $30 to $85 a week.

Pest Control

Pests, such as ants, ticks, rodents, or mice, can wreak havoc on your home and your family’s health. For these reasons, many homeowners hire a pest control company to prevent the infestations of pests around their homes. The company’s initial visit may cost between $150 to $300 and then $40 to $70 for every follow-up.

Home Improvement Costs

As a homeowner, there are likely things you want to change about your house. From painting the walls to a complete kitchen renovation, transforming your property can add to the cost of owning a home. According to the Angi 2025 State of Home Spending Report, homeowners spent an average of $9,288 on home improvement that year.

Additionally, as the features of your home age, you will need to replace and repair them accordingly.

Common Mistakes After Buying a Home

One of the most common mistakes people make when buying a home is spending more than they can afford. For instance, you may forget to factor in utilities, lawn care, HOA fees, costs of upkeep, and other hidden expenses that come with owning a home. It’s crucial to do your research to determine extra costs and add them up before you move forward with purchasing a property.

Another mistake new homeowners make is taking on too many DIY projects. TV shows can make home renovations look easy. However, many of these projects require professionals who know what they are doing. Attempting a home improvement project could cost you more to fix than hiring a pro in the first place. In fact, about 80% of homeowners who attempt their own renovation projects make mistakes — some of them serious.

Unless you can afford an expert, you may want to rethink purchasing a home that requires a lot of renovation.

The 50/30/20 Rule

For help planning your budget as a homeowner, you can use the 50/30/20 rule, which breaks your budget into three categories:

•   50% goes to needs

•   30% goes to wants

•   20% goes to savings

That means you’ll be budgeting 50% of your income to go toward necessities such as housing costs, grocery bills, and car payments. Then 30% will go toward things you want, such as entertainment (movies, concerts), vacations, new clothes, and dining out. The remaining 20% goes toward saving for the future or financial goals such as home improvement projects.

Using a 50/30/20 budget rule is simple and easy. It allows you to see where your money is going and helps you save.

Recommended: How to Track Home Improvement Costs

Lifestyle Trade-Offs in Order to Budget

With so many things to budget for after buying a home, you may need to cut back on spending. Start by looking at your discretionary spending and think about where you can trim back. For example, instead of eating out regularly, you can cook more meals at home. Or perhaps you can put your gym membership on hold and do at-home workouts for a while to stay in shape physically and financially.

Recommended: How to Budget in 5 Steps

The Takeaway

After you buy a house, there are many expenses you may not have accounted for, such as the cost of hiring movers, and buying furniture, as well as getting your new place painted, cleaned, and ready to move into. Making a budget is vital to keep you on track financially so you can enjoy your new home.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

How much money should you have left over after buying a house?

After buying a home, the amount you have left will vary depending on your financial situation. However, it’s a good idea to have at least three to six months of living expenses in reserve. That way, in case of an emergency, you can stay afloat financially.

Is it worth putting more than 20% down?

Putting more than 20% down on your home can help lower your monthly mortgage payment and interest because you’ll be borrowing less money. It also gives you more equity in your home from the beginning. But make sure you can afford to pay more than 20% in order not to stretch beyond your budget.

What’s the 50/30/20 budget rule?

The 50/30/20 rule means that you budget 50% of your expenses for needs (housing, groceries, loan payments), 30% for wants (entertainment, eating out, shopping), and 20% for savings goals (retirement, renovations, new furniture).

How much should you budget for home maintenance?

A common rule of thumb is to set aside about 1% to 4% of your home’s value each year for maintenance and repairs. This money can help cover routine upkeep as well as larger fixes that may come up unexpectedly, such as replacing appliances or repairing the roof.

What are some hidden costs of owning a home?

In addition to your mortgage payment, homeowners may face extra costs such as property taxes, homeowners insurance, utilities, maintenance, and repairs. Other expenses can include lawn care, pest control, homeowners association fees, and home improvements. Planning for these costs can help prevent financial surprises after you move in.

---

About the author

---

Photo credit: iStock/ArtMarie

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SORL-Q126-057

Read more

Contrary to what you might think, a person’s starting credit score doesn’t begin at zero. In fact, no one’s credit score is zero. The lowest credit score is 300, but that doesn’t necessarily mean that’s a person’s starting score. If a person is just starting and doesn’t yet have any credit history, they’re more likely to have no score at all.

So, for a person just beginning their credit journey, what is the starting credit score? Read on to learn the factors that impact this from the start and the habits that can help ensure a better credit score.

How Your Credit Score Is Calculated

There’s no standardized starting credit score. That may be partly due to certain factors that influence how a score is calculated. A person’s young credit history will impact their starting FICO® score.

The FICO® Score is a numerical scoring system widely used in the U.S. to help determine a person’s creditworthiness. The FICO company calculates the score, which ranges between 300 and 850, using the following data:

Payment History

Payment history is the most important factor for any credit score, including a starting credit score. Paying on time and avoiding missed payments account for 35% of a person’s credit score. That’s why it’s important to pay everything from credit card bills to rent on time — even one single late payment can harm a starting credit score.

Credit Utilization or Amount Owed

The second most important factor, making up 30% of a credit score, is credit utilization. Credit utilization is the percentage of available credit a person actually uses, and it should ideally be kept at 30% or under, as higher credit utilization can cause your score to decrease.

Length of Credit History

How long someone’s accounts have been open makes up around 15% of their credit score. The longer an account has been open, the higher the credit score.

While it’s out of their hands, consumers who are just beginning to establish credit will likely be negatively impacted by this factor, lowering their starting credit score.

Recommended: How to Get a Personal Loan With No Credit History

Credit Mix

Making up around 10% of a person’s credit score, credit mix refers to the different types of credit a person has. Generally, the two types of credit are:

•   Installment loans: Think car loans, student loans, and mortgages.

•   Revolving credit: Includes credit cards and home equity lines of credit.

If an individual can manage different types of credit without late or missed payments, it reflects well on their score.

New Credit

Opening multiple new accounts at a time? This factor accounts for 10% of a credit score. As well as the action of opening new accounts, this includes the application of hard inquiries to your accounts.

A person with a starting credit score may have all, none, or some of these factors on their credit history. The mix varies from person to person, making it hard to predict one starting credit score for everyone.

What Is a Good First Credit Score?

Unfortunately, a starting credit score won’t be the perfect 850. More likely, it’s somewhere within the fair-credit-score range (580-669).

That’s mostly due to limited payment history. If a person just opened a credit card or started paying off their student loans, the credit bureaus can’t see an established history of timely repayment. Even if the consumer has never missed a payment, payment history is limited.

Similarly, a credit history of just a few months doesn’t give lenders enough data to judge a consumer as low- or high-risk.

Ways to Establish Good Credit

While it can be discouraging that your starting credit score is penalized just for being new, by following these tips on establishing credit, it shouldn’t take you too long to build it up:

•   Paying bills on time will continue to be important, as payment history is a major factor in your credit score.

•   Keeping accounts open and in good standing, even if they’re no longer used, can help lengthen a person’s history.

•   Adding to the credit mix with a personal loan, credit-builder loan, or other types of credit can help boost your credit score.

•   Paying bills in full can help keep the credit utilization ratio balanced at 30% or below.

•   Not applying for too much at once will help you avoid the pitfall of too many hard inquiries and new accounts, which can have a negative impact.

While an individual can try to build their score proactively, a substantial portion of it will come from paying bills consistently over time.

Establishing and continuing these good habits will likely lead to a higher credit score.

Why Your Credit Score Is Important

It may be just a three-digit number, but a good credit score is a gateway to better financial opportunities. With a very good (740-799) or exceptional (800-850) credit score, borrowers have better odds of being approved for loans and may even have better repayment terms or more favorable interest rates.

Businesses and lenders may pull your credit history to confirm your qualification for any of the following:

•   Credit cards

•   Mortgages

•   Rental apartments

•   Job applications

•   Car loans

•   Personal loans

•   Student loans

With a low credit score or no credit score, getting favorable terms or qualifying for any of the above could be challenging.

How to Check Your Credit Score

Checking a credit score isn’t just a good way to track progress. It can also highlight any incorrect or fraudulent activity tied to a person’s name.

You can check your credit score for free through your card issuer, your bank, or a nonprofit credit counseling agency. Also, anyone can get their free credit report, which is not the same as a credit score, from three nationwide consumer credit reporting companies using AnnualCreditReport.com. The site allows visitors three free reports annually, one from each credit bureau.

In addition, lenders often offer free credit score reporting on their portals.

Recommended: The Difference Between Transunion and Equifax

The Takeaway

Having a starting credit score doesn’t mean starting from zero or with a perfect 850. Establishing healthy credit habits, such as paying bills on time and in full, is important because it can help you build a solid credit score. The higher your credit score, the more financial opportunities you’ll have.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

What are the FICO credit score ranges?

FICO credit scores range from 300 to 850. Under 580 is considered a poor score, 580 to 669 is fair, 670 to 739 is good, 740 to 799 is very good, and 800 is considered exceptional.

Can you have a credit score without a credit card?

Yes. Credit scores aren’t based solely on credit cards. The score takes into account student loans, rent, utility payments, and more.

What are the differences between FICO, Experian, and Equifax?

Experian and Equifax are credit bureaus that collect and compile credit histories for lenders and financial institutions based on data from consumers’ borrowing habits. FICO then uses that data to create a numerical credit-scoring system that measures consumers’ creditworthiness.

Do you start with a specific credit score?

There’s no standardized starting credit score. You’ll likely start with no credit score until you have an active credit history, after which your habits will determine your credit score based on factors such as payment history, the length of that history, and how much you owe.

Do I have to pay to get my credit report?

You can get a free copy of your credit report online via the website AnnualCreditReport.com. This detail of your credit history is prepared by the three major credit bureaus — Experian, Equifax, and TransUnion — and you can request your report from one or all three of these agencies.

---

Photo credit: iStock/blackCAT

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SORL-Q126-062

Read more

Sinking funds are tools that people or businesses can use to set aside money for a planned expense. For example, if you want to take a vacation next year, you may start putting cash in an envelope to save up for the trip.

Sinking fund categories can vary by person, depending on their relevant expenses. They can include auto repairs, health care costs, gifts, insurance payments, vacation funds, and more.

You can think of sinking funds as a way of “sinking” your money into an account for later use. It’s basically a savings strategy. Find out more below.

General Definition of Sinking Funds

The term sinking fund has its roots in the world of corporate finance, but it mainly refers to setting aside money for a future expense.

Sinking funds are smaller offshoots of an overall budget. Putting together a sinking fund entails stashing your money away to spend it on a predefined purpose later on.

For instance, some people like to pay their car insurance in six-month installments. They may set aside money each month in anticipation of the next six-month installment payment so that they’re not hit with a big expense all at once.

Examples of Sinking Funds Categories

When it comes to sinking fund categories, there are no hard-and-fast rules. Different individuals have different financial needs and planned expenditures. Some common sinking fund categories are:

•   Vacations

•   Gifts and holiday-related expenses

•   A new car or regular maintenance and insurance costs

•   A home purchase or home maintenance expenses

•   Medical and dental costs

•   Child care costs

•   Tuition fees

•   Pet expenses, such as veterinarian visits

A sinking fund can help you save for just about anything.

Recommended: How to Set Your Financial Goals

Sinking Fund Category Calculations

Setting up a sinking fund is simple enough: You can set cash aside or choose a more formal option like a savings account. The difficulty for most people is regularly contributing to it. The trickiest part, though, may be figuring out how much to put away.

A budget planner app can come in handy, allowing you to assess how much money you have left to put toward your sinking fund categories once you’ve taken care of your monthly expenses.

Similarly, sticking to a certain budget type — such as the 50/30/20 rule — may help determine what you can contribute. You could also structure your sinking fund contributions as a biweekly savings challenge.

To calculate how much you can contribute to a sinking fund, you’ll need to decide which categories are the most important. Another consideration is which fund to use first — perhaps an auto insurance payment is due before a vacation. Your priorities will affect your sinking fund calculations.

In corporate finance, the sinking fund formula helps a company figure out how much it needs to put away to pay off a long-term debt in a lump sum. The formula takes the amount of money already accumulated, multiplies it by any applicable interest, and then divides it by the remaining number of payments.

For individuals, however, the calculation can be as simple as looking at your monthly income and putting extra cash into each of your sinking fund categories.

Types of Sinking Funds

What type of vehicle can you use to save up for a sinking fund? There are a few to choose from.

The most obvious, and probably the simplest, is to keep the sinking fund in cash and store it somewhere safe. Of course, that money won’t earn any interest and will likely lose value due to inflation.

Perhaps the ideal option is to open up individual savings accounts at your financial institution for each of your sinking fund categories. This beats cash because your sinking fund is protected (and insured up to $250,000 by the Federal Deposit Insurance Corporation or the National Credit Union Administration), and you might also earn some interest on it.

Recommended: Money Market Account vs Savings Account

Best Time to Take Advantage of Sinking Funds Categories

Sinking funds are all about taking advantage of saving up for a planned or known expense well in advance. As such, the ideal time to use your saved money is when it’s time to make the payment, be it a fancy vacation, a new car, or paying your child’s college tuition fees.

There may be times during the year when it’s more advantageous to save than others. For instance, most people experience a financial crunch during the holiday season — with gifts to buy, parties to attend, and other demands on income. That may not be the best time to sink money into a fund.

Instead, think about when you may have some extra money to put into your sinking funds, such as when you get your tax refund or receive a cash gift for your birthday.

The Takeaway

Sinking funds are designated cash reserves for future expenses. Corporations and businesses also use sinking funds. Having this type of fund means that you’re stashing money away for an upcoming, known expense and relieving some of the financial pressure ahead of time. Sinking fund categories can vary depending on your individual situation.

Sinking funds are a way to get ahead of your planned expenses and give yourself some financial wiggle room. A money tracker app can help you do the same.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

What to put in sinking funds?

You put cash into a sinking fund to use later for an upcoming expense. What that expense is (i.e., the sinking fund’s category) depends on your specific financial needs.

What is a sinking fund leasehold?

In property management, a sinking fund leasehold contains funds for repairs or renovations to a rental property. The leaseholder or landlord sets aside a small percentage of the monthly rental money to continue adding to the fund.

What is the difference between a reserve fund and a sinking fund?

The two are similar, but a sinking fund’s contents are designated for a specific purpose or expense, while a reserve fund contains funds used for general future expenses.

What is the difference between an emergency fund and a sinking fund?

An emergency fund is a general fund set aside for sudden, unexpected expenses, such as job loss and medical bills. In contrast, sinking funds are meant to finance expenses that you plan for.

What is a common sinking fund mistake?

People may sometimes split their sinking funds into too many categories and find it overwhelming to put money into each. The right number of sinking funds for you will depend on your finances and your individual needs.

---

Photo credit: iStock/Delmaine Donson

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL-Q126-056

Read more

A common rule of thumb for renters states that no more than 30% of your income should go to rent and utility payments each month. This guideline dates back to housing initiatives introduced by the federal government in the 1960s via the Brooke Amendment.

Deciding what percentage of your income should go to rent and utilities is central to making a realistic budget as a renter. The less you can spend on these items each month, the more money you’ll have to fund your financial goals. Read on for more about calculating a housing budget that’s right for you as well as creative ways to cut your housing costs.

What Is the 30% Rule?

The 30% rule says that households should spend no more than 30% of their income on housing costs, including rent and utilities. This housing affordability advice dates back to the 1969 Brooke Amendment, which was passed in response to rental price increases and complaints about public housing services.

The Brooke Amendment capped rent for public housing at 25% of residents’ income. This measure was designed to offer financial relief to low-income households participating in public housing programs. In 1981, Congress increased the 25% threshold to 30%, where it has remained to the present day.

Recommended: Should I Sell My House Now or Wait

What Is 30% Based On?

The 30% rule for housing affordability considers two distinct cost categories: housing and utilities. For renters, this generally means rental payments and basic utilities such as electricity, water, and heating. Collectively, these expenses should total no more than 30% of a renter’s gross monthly income.

Gross income is what someone earns before taxes and other deductions are taken out. Net income, on the other hand, is what they actually take home in their paychecks. Basing the 30% rule on someone’s gross income versus their net income will result in a higher dollar amount to allocate to rent and utilities.

It’s also important to remember that the 30% rule isn’t set in stone. The average monthly expenses for one person will vary depending on your location’s cost of living, optional costs such as renters insurance, and whether you have a very low or high income.

If you need help managing your finances, online tools such as a money tracker can help you monitor spending, set budgets, and keep tabs on your credit score.

Calculating the Percentage to Go to Rent and Utilities

Figuring out what percentage of income should go to rent and utilities using the 30% rule is a fairly simple calculation. You multiply your gross monthly income by 0.30 to figure out the maximum amount you should be budgeting for rent and utility costs. How complicated this calculation is can depend on how often you’re paid and whether your paychecks are always the same amount.

If You Are Paid the Same Amount Every Two Weeks

If you’re paid biweekly and your paychecks are the same, you can calculate your target rent and utilities in one of two ways. First, you take the gross amount reported on one of your paychecks and multiply it by 0.30. You then double that result to find the monthly amount.

So, say your biweekly gross income is $2,500. Thirty percent of that number is $750 ($2,500 x 0.30). If you double it, then your rent and utilities budget should be no more than $1,500 per month.

However, this strategy doesn’t take into account the two months each year when there are three biweekly paychecks. If you want to find the average amount to spend on rent and utilities each month, you can multiply your biweekly gross paycheck amount by 26 (for 26 paychecks in one year), divide by 12 (for 12 months), then find 30% of that amount.

Using the $2,500 figure once again, if you multiply that by 26, you’d get $65,000. Divide that by 12 to get $5,417 (rounded up), your monthly pay. Thirty percent of that is $1,625, the amount you’d allocate to rent and utilities per month.

If You Are Paid Varying Amounts Every Paycheck

Pinpointing what percentage of income should go to rent and utilities can be a little more challenging if your paychecks aren’t the same from one pay period to the next. That might happen if you’re paid hourly and work different hours each week, receive vacation or sick pay, or part of your income is based on commission.

In that scenario, you’d want to look at your annual income in its entirety. You can do that by looking at all of your pay stubs for the previous 12 months or checking your most recent W-2 form. Again, you’re looking at gross income, not net pay.

You’d take the gross income for the year, then multiply it by 0.30 to figure out how much of your pay should go to rent and utilities overall. If your gross annual income were $70,000, then your target number would be $21,000 for the year. Divide that by 12 and you’ll find that you should be spending no more than $1,750 per month on rent and utilities using the 30% rule.

How to Reduce Your Rent to 30% or Less of Your Income

If you’ve done the calculations and you’re spending more than 30% of your income on rent and utilities, there are some things you may be able to do to reduce those costs.

Split the Rent With Roommates

Taking on one or more roommates could ease some of the financial load. Remember, it’s important to have a written agreement in place specifying what percentage of rent and utilities each roommate is responsible for.

Also, determine who will pay the rent and utility bills when everyone is chipping in. For example, one person may volunteer to collect payments from everyone else and then cut a check to the landlord or utility company. Consider using a budget planner app to keep track of household bills and payments.

Recommended: 25 Tips for Sharing Expenses With Roommates

Consider a New Location

Moving is another way to decrease rent and utility costs if you’re relocating to an area with a lower cost of living. Rent in rural areas may be cheaper than in a trendy urban center, for example. There can even be significant variation in rents in different neighborhoods within the same city.

Keep in mind that relocating can have its trade-offs. For instance, living in a less expensive area may mean giving up certain amenities you enjoyed in your old neighborhood, such as walkability or convenient access to stores and restaurants. And of course, you’ll also have to budget for the cost of moving, which can average $1,400 for a local move or $5,450 for a long-distance move.

Work Remotely

Working remotely can have its advantages, including saving money on certain expenses. For example, you may spend less on gas, meals out with coworkers, or office attire.

That said, if you are on a computer all day, you’ll want to take steps to lower your energy bill, such as by unplugging at the end of the day and buying energy-efficient lights.

Opting for remote work could also save you money on rent if you’re able to become location-independent. When you’re not tied to a particular city, that frees you up to seek out cheaper areas to live. You could even forgo renting altogether and become a digital nomad. That has its own costs, such as short-term accommodation or travel expenses, but you’re not locked in to paying rent to a landlord or utility payments long-term.

Negotiate With Your Landlord

The most effective way to reduce your rent may be to go straight to the landlord and negotiate your rent. Your landlord may be willing to offer a discount or reduced rental rate under certain conditions.

For example, your landlord might agree to reduce your rent by 10% or 15% if you pay six months in advance or agree to a longer lease term. The prospect of guaranteed rental income might be attractive enough for them to offer you a better deal.

You may also be able to get a rate discount by offering to take care of certain maintenance and upkeep tasks yourself. If your landlord normally pays for lawn care, for example, they may be willing to let you pay less in rent if you’re working off the difference by cutting the grass and maintaining the property’s landscaping.

Ask for a Promotion or Find a New Job

Instead of attempting to reduce your costs, you could try a different tactic: Making more money means you can budget more for rent and utility costs.

Asking your boss for a raise or promotion might boost your paycheck. If you hit a dead end, you may consider a more drastic move and look for a higher-paying job. Taking on a part-time job or starting a side hustle can also help you bring in more money to cover rent and utility payments.

What to Consider if 30% Doesn’t Work for You

As noted above, the 30% rule for housing is a somewhat arbitrary number and may not work for everyone. Spending more than 30% of your income on rent and utilities doesn’t automatically mean that you’re living beyond your means, for a variety of reasons.

There are, however, a few actions you can take to streamline your finances and determine what percentage of your income should go to rent and utilities.

Try the 50/30/20 Rule

The 50/30/20 budget rule recommends spending 50% of your income on needs, 30% on wants, and the remaining 20% on savings and debt repayment. This budgeting method doesn’t specify an exact percentage or dollar amount to spend on rent and utilities. Instead, those expenses get grouped into the 50% of income allocated to needs.

You still need to keep track of your spending to make sure you’re staying within the 50% limit. Using an online budget planner can help you figure out if the 50/30/20 rule is realistic based on your income and expenses.

Pay Down Loans and Debt

Total U.S. household debt reached $18.59 trillion in the third quarter of 2025, according to Federal Reserve data. While a big chunk of that is mortgage debt, Americans also pay a sizable amount of money to credit cards, student loans, personal loans, auto loans, and other debts.

Working to pay off debts can free up more money to allocate to rent and utilities. There are different methods you can use, including the debt snowball method and the debt avalanche method.

Look for Cost Savings in Recurring Expenses

One more way to make shouldering higher rent costs easier is to lower your other expenses. Making small changes at home can lead to lower electricity and water bills. Cutting out subscriptions you don’t use, looking for a better deal on car insurance, and eating more meals at home instead of dining out are all simple ways to lower your expenses.

The Takeaway

If you’re spending 30% or less of your gross (before tax) income on rent and utilities, pat yourself on the back. You can spend up to 50% of your income on housing if you have no debt and a healthy savings balance. The important thing is to look at your entire financial picture, including your income, debts, and goals, to decide the figure that’s right for you.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

SoFi helps you stay on top of your finances.

FAQ

What is a good percentage of income to spend on rent?

The 30% rule says that renters should spend no more than a third of their gross income on rent and utility payments. The less you spend on rent and utilities, the more money you’ll have to fund other financial goals, such as saving for emergencies, paying off debt, and planning for retirement.

Is 30% of income on rent too much?

Spending 30% of income on rent may be too much if a significant part of your income is also going toward debt repayment. That may leave you with little money to cover other necessary expenses or discretionary spending.

How much of your monthly income should go to rent?

A common rule of thumb says that roughly one-third of your monthly gross income can go to rent. But if you have substantial savings and no debt, you may be okay with spending a larger percentage of income on rent. On the other hand, if you’re trying to pay off debt or build savings, you may prefer to spend less on rent payments.

Does the 30% rule include utilities?

The 30% housing rule generally includes both rent and basic utilities. Utilities may include electricity, water, heating, and sometimes trash or sewer services. Because utility costs vary by location and season, renters may want to estimate an average monthly cost and include it when calculating whether their housing expenses fall within the 30% guideline.

What happens if you spend more than 30% of your income on housing?

Spending more than 30% of income on housing is often described as being cost-burdened, but it doesn’t automatically mean your finances are in trouble. Some households choose to spend a larger share of income on housing because of location preferences, career opportunities, or access to amenities. The key is ensuring that other financial priorities, such as saving and paying down debt, can still be met.

---

About the author

---

Photo credit: iStock/deliormanli

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL-Q126-053

Read more

Credit references are documents that verify your credit history. They can come in the form of a credit check report, asset documentation, or character references.

A limited or poor credit history can potentially impact your approval when applying for a rental. If you have a spotty payment history, a low credit score, or little to no history, your chances of getting approved may go down. Landlords or property management companies can approve or deny rental applications based on these references.

If this description of a less-than-stellar reference fits you, don’t fret. There are ways to put your best foot forward with credit references in today’s competitive market.

Definition of a Credit Reference

Credit references paint a picture of your borrowing and payment habits and history. Property managers and landlords use it to help determine whether you’re likely to pay rent on time and in full.

Documents of financial agreements can be used as credit references. Credit references also come in the form of:

•   Credit reports

•   Asset documentation

•   Character references

•   Financial support letters

In some cases, letters from personal lenders or documents from a car loan can be used. Be sure to clarify what the landlord needs when applying for an apartment. It’s also helpful to pull together the documents ahead of time, so you can pull together references for multiple apartments at once.

💡 Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.

When You Need Credit References

At the end of the day, landlords want to know if you’re able to pay rent. Getting an apartment rental is a business transaction between two strangers. Credit needed for an apartment plays a key role in rental applications.

Why Landlords Want Credit References

A credit reference is proof of your financial history. It details how much debt you have, how timely your payments are, and your credit score, among other factors.

For instance, if your credit references show that you’ve been able to pay off your debts in full in a timely manner, a landlord will likely approve your rental forms.

Applicants with low credit scores or poor payment histories have lower chances of being approved.

Recommended: Does Net Worth Include Home Equity?

Types of Credit References

As mentioned, credit references come in different forms, such as credit reports, character references, or formal letters from bank loan officers.

Credit Report

The most available type is a credit report. Three major credit bureaus provide credit reports: Equifax®, Experian®, and TransUnion®. You can obtain a free credit report every 12 months to check your score and scan for errors. The credit scoring system known as FICO® can be used by all three.

Credit reports contain information such as your credit history, current debt, bankruptcies and foreclosures. It can also include the age of your debt and how many credit inquiries you’ve had. Importantly, it’ll also contain your score. Credit scores range from 300 to 850.

Landlords will look at this report to determine the financial risk of each applicant. Generally speaking, a credit score of 670 or higher is considered acceptable, though requirements may vary based on the lender or circumstances.

Another factor that can impact your credit score and report is the number of inquiries into your credit history. If there are a lot of inquiries, they may lower your score since it can be perceived that you may be struggling financially. Some rental applications will include a fee for running the credit check.

Bad or no credit may give a landlord pause, but it may be possible to strengthen your case.

Recommended: What Is The Difference Between Transunion and Equifax?

Asset Documentation

Asset documentation is proof of income, liquid cash, or investments. It shows landlords that you are financially stable and able to handle unforeseen circumstances, such as a job loss.

Your landlord may request a verification letter from your employer, pay stubs, or an offer letter to prove income. You may also have to provide documentation of your savings or investment funds, such as mutual funds or retirement plans. Reach out to your financial institution or brokerage to provide you with documents of your accounts.

The more assets you have, the stronger your application will be.

Recommended: What Credit Score Is Needed to Buy a Car?

Character and Credit Reference Letters

Credit reports and asset documentation only tell part of the story. A character or credit reference letter may give context to a spotty part of your credit history. Someone you’ve had financial transactions with, such as an employer, previous landlord, or business partner, can write a letter confirming your character and values. For example, if you went through hardship, such as a medical illness, but still met your financial obligations, someone such as a prior landlord can vouch for you.

If you have bad credit, for example, an institution can demonstrate if you have taken courses, been given resources such as a debt payoff planner, or worked out a new payment plan to successfully pay off your debt. It demonstrates a commitment to improving personal finance.

Don’t be afraid to ask for a reference letter — many may be willing to write on your behalf. Remember, however, that these types of letters are not as concrete as credit and asset reports. They work better as supporting documentation.

Financier Support Letters

If you have a troubled credit history, a financial support letter from a cosigner on a lease can help. These letters are typically for business owners who need to prove they have the capital to rent or buy.

For a lessee, a guarantor would write a letter with context on how they can support your rent if needed. This can be helpful if you have an adverse credit history. For business owners, the letters would be obtained from financial institutions or financial partners backing a business lease or purchase.

Credit Reference Examples

If a landlord requests written credit reference letters, have a list of people in mind who can type up a quick letter. You could also ask them to type up a generic letter that you can use across multiple applications, or you might offer to supply a draft of the letter for them to edit as they see fit. Sometimes a property management company or landlord will have their own template, so be sure to clarify which format is acceptable.

A credit reference letter can be brief. But it must include key details such as:

•   Reference full name and contact information

•   Length of relationship

•   Payment history

Additional details may be required depending on what your landlord requests. Below is a sample template:

   Dear [Landlord Name]:

   I have known Ben as a tenant for three years. He paid rent ahead of time, was quiet and respectful, and took care of our property. Also, he ended his lease in search of a bigger space. He got his deposit returned in full, so he’s highly recommended as a tenant.

If you do not have a history of renting, you can ask a financial institution to vouch for you. Here’s an example letter:

   [ABC Bank] lent $30,000 to Tina Jones in 2014. She made her payments on time and paid off the loan ahead of schedule in 2017.

If you’re still short a reference, try an employer to vouch for your stability at your current job:

   Tim has been an employee of ACB Company for three years and has been promoted once. His current salary is $92,000. He’s responsible and puts our clients’ interests first. He will make a great tenant.

How to Secure a Credit or Character Reference Letter

Before you send a mass email to all your contacts, confirm with your landlord what details are needed. If there’s a template letter to use, so much the better. Once details are confirmed, reach out to your contacts. Be sure to provide them with all the information they need to include in the letter.

There’s no formal process to request a letter from financial institutions. You can go in person to speak to a banker who can provide you a letter, or you can contact your bank and ask how to obtain one.

How to Improve the Chances of Getting a Reference Letter

Asking with plenty of time vs. saying you need a letter tomorrow is obviously a good move. Also consider authorizing your institution to release personal information while you are actively applying for rentals. Not doing so could cause delays as the letter goes through the chain of command.

The Takeaway

Landlords want to see that you earn income and honor your debts. Credit references are formal documents that support your profile as a reliable tenant. They come in the form of records from credit bureaus and character reference letters from employers, among others.

If budgeting is not your strong suit and you want to build your financial profile, a money tracker app can help.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

What do I put as a credit reference?

That depends. Ask your landlord what documents they require for a reference. It can mean a credit report, bank statements, character reference — or all three.

Who counts as a credit reference?

A credit reference can be someone with whom you have a tenant-landlord or business relationship. They can be a representative at a bank who can give a formal written letter of loans or accounts you have with them. Or, if you have limited or no credit history, a reference can be a current or former employer who can highlight your reliability.

Why do I need a credit reference?

Most property management agencies or landlords require credit references in order to approve a tenant application. This gives them an idea of your financial history and whether you’ll pay rent on time.

---

Photo credit: iStock/damircudic

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SORL-Q126-060

Read more