How to calculate the ideal money to pay for rent: this is the 40-fold rule

The most important expense for a large part of Spaniards is the one they spend month after month on rent. This is a problematic issue, given the growing trend in rental prices that has led to measures such as the housing law or the youth bonus. However, the problem is still far from resolved and that is why different methods emerge that indicate what should be the maximum amount to spend on that concept in order to have a solvent personal economy.

One of those methods is 40 times rule, which relates the monthly rental expense to the worker’s annual salary. Thus, the maximum amount of rent that should be paid month by month must be the result of divide by 40 the net annual salary of the worker who pays said rent.

Thus, the rest of the money corresponding to the salary could be used to pay bills and the month’s food, in addition to other concepts such as culture, restaurants, travel… and even the percentage that can be allocated to our particular goals of saving.

Applied to a salary of 20,000 euros per year, the calculation would be as follows: those 20,000 euros would be divided by 40, which gives a result of 500 euros. This amount would be the limit that this worker should allocate to pay the rent if he wishes to have a truly sustainable economy.

In the case of a part-time worker the difficulties would increase. With a salary, for example, of 8,000 euros net per year, the maximum amount of rent to be paid according to the 40 times rule would be 200 euros per month.

The drawbacks of the 40 times rule

The caveat of this method is that it speaks of an ideal scenario, a maximum limit for workers in a situation that talks more about ‘what should be’ and not about what is really on the market Spanish rental. Therefore, it can serve as a reference but it does not work as a rule of thumb.

When talking about an ideal situation, sometimes the reality can be different. Thus, in the event of breaching the 40 times rule, the rental options open to the worker are two: either exceed that limit and pay a higher rent, or pay for a room instead of a home. In certain cities (the most stressed such as Madrid or Barcelona, ​​for example) it is common that even sharing a flat also has to exceed these limit amounts.

In fact, the state rental landscape is complicated month by month after the impact suffered in the first year of the coronavirus pandemic. According to the Idealista rental price report, the average rental price per square meter in Spain has increased by 0.9% to stand at 10.6 euros in January (although in cities such as Barcelona and Madrid it is between 14 and 15 euros per square meter).

Thus, a 40-square-meter flat for rent will have an average price of 424 euros per month, although in Madrid and Barcelona this amount would increase to 588 and 632 euros per month on average, respectively.