Living with your parents has some notable benefits. After all, having access to home-cooked meals, free utilities and the other comforts of home, all free of charge, can be advantageous for your financial bottom line. However, there comes a time in everyone’s life when being independent and living on your own trumps the benefits of residing with mom and dad. If you are arriving at this point and ready to take the plunge of financial independence
, here are a few tips to keep in mind beforehand:
1. Get Your Finances in Order
There is a safety net that exists with your finances when you live at home. However, when you move out of your parents’ house, staying on top of your finances is of paramount importance. This means keeping up with your bills, knowing when each one is due and paying each one on time.
To prepare for this process you should create a budget. Start tracking your monthly income and then list all your regular expenses, like your phone bill, car payment, groceries, etc. If you find keeping track of your bills and expenses to be an overwhelming task, try using an Excel spreadsheet or an expense-tracking app to keep everything organized and documented. That way, it will be easier to visualize all the withdrawals that will be coming out of your bank account on a monthly basis.
2. Know What You Can Afford
After all of your monthly expenses have been accounted for, analyze how much money you’ll have leftover each month. It’s a good idea to earmark a portion of those leftover funds for your savings, but the rest could give you a general idea of what apartment or house you could potentially afford. Just remember that in addition to a monthly rent or mortgage payment you’ll also need to cover housing-related expenses such as utility bills and renters or homeowners insurance. If you’re buying a home, you’ll also have to consider property taxes.
A general rule of thumb that can be helpful when calculating an affordable rent or mortgage payment is the “30% rule”. This rule states that your monthly mortgage or rent payment should be no more than 30% of your gross income (your income before taxes). While this rule can provide a good jumping off point, it’s extremely important to do your own calculations to ensure you can actually afford to sign a lease or take out a mortgage. You don’t want to overtax yourself by committing to a housing situation that allows little to no wiggle room in your budget. You should also keep in mind that you will likely need some cash saved up before moving out – either for a security deposit on an apartment, or for a down payment and closing costs on a house.
If you find that you don’t have sufficient funds leftover each month to cover housing costs, or you don’t have enough money saved up to cover a rental deposit or down payment, you may have to make some adjustments to your budget and your spending habits. One of the easiest ways to free up and save additional funds is by cutting back on unnecessary expenses.
3. Think About All Costs Involved
A rent or mortgage payment is one significant expense to prepare for when moving out of your parents’ house, but it’s not the only expense you will face living on your own. In fact, there are many costs you may not have considered, such as:
- Home Necessities: Unless you’ll be moving into a furnished apartment or home, you’ll need to consider the cost of purchasing furniture and other household items. This may include buying things like trash cans, tables, chairs, sofas, beds and bedding, pots and pans, towels, kitchen utensils and dinnerware, small appliances like a toaster, coffee maker, and microwave, as well as window treatments, rugs, shelving, and storage. There will also be the ongoing expense of household supplies such as laundry detergent, toiletries, trash bags, and cleaning supplies.
- Entertainment and Groceries: Be sure to factor in the cost of buying groceries and paying for cable, internet, or video streaming services.
Bottom Line: A Big Move, But a Great Life Experience
With all the expenses outlined above, moving out is certainly a financial challenge for most. But with a sufficient plan in place, you can reach your goal of independence. With a little budgeting and saving you can make living on your own a reality.