1. What is Rent to Salary Ratio?

Definition: The Rent to Salary Ratio (RSR) measures what portion of your annual salary goes toward annual rent payments.

Purpose: It helps individuals assess housing affordability and financial health by comparing housing costs to income.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( RSR \) — Rent to Salary Ratio (dimensionless)
• \( R \) — Annual rent (currency, e.g., USD)
• \( S \) — Annual salary (currency, e.g., USD)

Explanation: The ratio shows what fraction of your salary is spent on rent. Multiply by 100 to get the percentage.

3. Importance of Rent to Salary Ratio

Details: Financial advisors typically recommend keeping this ratio below 30% (0.3) for healthy personal finances.

4. Using the Calculator

Tips: Enter your total annual rent and gross annual salary. The calculator shows both the ratio and percentage.

5. Frequently Asked Questions (FAQ)

Q1: What's a good rent to salary ratio?
A: Generally, below 0.3 (30%) is considered affordable, while above 0.4 (40%) may indicate financial stress.

Q2: Should I use gross or net salary?
A: Most calculations use gross (pre-tax) salary for consistency, but you can use net for personal budgeting.

Q3: How do I calculate monthly ratio?
A: Either use monthly rent/salary or convert annual figures by dividing both by 12.

Q4: Does this include utilities?
A: The basic calculation includes only rent. You can add utilities to rent for a more comprehensive ratio.

Q5: How does this differ from debt-to-income ratio?
A: RSR focuses only on rent, while DTI includes all debt payments relative to income.