28 Percent Rule Calculator – Calculate How Much You Should Spend

The 28 Percent Rule is a common personal finance guideline that helps individuals determine how much of their gross monthly income should be spent on housing costs. According to this rule, you should not spend more than 28% of your gross income on housing expenses such as rent, mortgage payments, taxes, and insurance.

Formula:

To calculate the maximum affordable housing cost:

$\text{Maximum Housing Cost}=\text{Gross Monthly Income}\times 0.28$

Current Housing Expense Percentage (Optional)

If you want to analyze your current housing expense ratio:

$\text{Housing Cost \%}=\left(\frac{\text{Monthly Housing Costs}}{\text{Gross Monthly Income}}\right)\times 100$

Example

Let’s assume:

• Gross Monthly Income = $5,000
• Monthly Housing Costs = $1,400

Step 1: Calculate Maximum Housing Cost Allowed by 28% Rule

$\text{Maximum Housing Cost}=5000\times 0.28=1400$

Step 2: Calculate Current Housing Cost Percentage

$\text{Housing Cost \%}=\left(\frac{1400}{5000}\right)\times 100=28\%$

Result:

You are exactly at the 28% threshold. According to the rule, this is acceptable but you may want to reduce housing expenses to allow room for other financial goals.