Here's exactly how to figure out how much rent you can afford

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How much rent you can afford depends on how much money you bring home.

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• How much rent you can afford is equal to 30% of your annual gross income, experts say.
• But if you want to build more wealth, try limiting housing costs to 30% of your take-home pay.
• We calculated how much rent people can afford after federal taxes and a pretax 401(k) contribution of 10% at ten different income levels, from $50,000 to $200,000.

Most Americans blow their budget on three things: Housing, transportation, and food.

The typical US renter spends about 30% of their gross income on rent, according to the latest data from the US Census Bureau. Meanwhile, residents in some high cost-of-living cities, including Los Angeles, San Francisco, and New York, spend more than 37% of their income on rent each month, according to a Zillow report.

The standard measure of housing affordability in the US is 30% of pretax income. But if you really want to make progress on building wealth, try limiting rent to 30% of your after-tax income.

You'll likely have to rent a cheaper place than if you were calculating using your gross income, but you won't run the risk of overspending. Plus, if you contribute to a pretax retirement savings account, like a 401(k), at least part of your savings will already be covered by the time your paycheck hits your bank account.

Note that when talking about affordability, rent means housing costs: rent, maintenance, and utilities. To be considered affordable, your housing costs overall should be less than 30% of your monthly pay.

Here's what that looks like for people earning between $50,000 and $200,000 a year.

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For these calculations, we used SmartAsset's paycheck calculator to find semi-monthly take-home pay, assuming one federal withholding allowance. We used Florida, which doesn't tax income, as the stand-in location for each calculation. If your state taxes income, your take-home pay will be lower, resulting in less money to put toward rent if you want to abide by the 30% standard. 

We also included a pretax 401(k) contribution of 10% - the minimum retirement savings rate recommended by most financial experts.

Keeping housing costs low and putting that money elsewhere, like in investments, is one of the best ways to save more money. It's a strategy even millionaires use to keep building wealth.

Investing is one of the best ways to grow your money. Our partner Wealthfront can help. »

Grant Sabatier, a self-made millionaire who retired at 30, was able to save about $25,000 in two years by cutting back on housing, as well as transportation and dining expenses.

"At the end of the day it comes down to a personal choice, but I was happy moving to a smaller apartment, moving closer to my office, and eating out less, to bank the difference," Sabatier wrote on his blog Millennial Money.

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