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I'm in an apartment-rental nightmare, and it's called Toronto.

After religiously trolling Craigslist, ViewIt.ca, and Kijiji, I'm no closer to finding a place to live for September – unless, that is, I'm willing to pay $1,450 a month for a 470-square-foot apartment. (Utilities? Not included.)

Like many young people flocking to the city with limited job security, I know that as an intern at The Globe and Mail I shouldn't spend all my pennies on rent. But with the average rental price for a one-bedroom apartment being $1,485 per month in the first-quarter of 2011, according to the Toronto Real Estate Board, I may not have much choice.

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Besides, it would be convenient to live downtown.

I'm not keen to live with five strangers that I met online, and I'd really, really like a BBQ.

So what percentage of my gross income can I spend on rent before I qualify as fiscally insane?

"Fifty per cent would be pretty nuts," says personal finance expert Lesley Scorgie, author of Rich by Thirty: A Young Adult's Guide To Financial Success.

The general rule of thumb is to pay no more than 35 per cent of your gross income on housing, Ms. Scorgie explained. Any higher than that and it cuts into other essential pieces of the budget such as food, RRSP contributions, or car payments.

More frequently she sees people put more than 50 per cent of their income towards living expenses.

"You see it a lot in folks that are living right in the core of certain cities like Vancouver, Calgary and Toronto," she said. "It means having a smaller grocery budget, not travelling or even making child care choices that are probably less than desirable."

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But there is an argument that the higher housing expenses of downtown living can actually mean savings, Ms. Scorgie said. When people cut down commute times and use their time productively, their "lean" lifestyles can not only make them happier, but can also save them money.

"You reduce your eco footprint, commuting time, gas bills, or car maintenance, which can actually save you energy, time and money," she said. "It's an opportunity cost."

That being said, Ms. Scorgie sticks by her general 35-per-cent rule.

Whether a person rents or buys, she recommends dividing the amount of rent (or mortgage) by the square footage to get a ratio that can be compared with other options.

For those that insist on living downtown, she suggests looking at basement suites or finding a roommate. "It makes financial sense."

Although rental rates can be excessive, it can be more financially prudent to rent than to buy, she said. The "short-term pain" of renting is a wise option for a person without a long-term contract or a full-time job.

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"Don't force yourself into a position that could be financially lethal if you could be out of a job," she said.

And her final advice on renting the $1,450 shoebox I looked at last week?

"I'd find somewhere else. That's insane."

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