It’s time! You’re ready to get out of the house and strike out into the world on your own. You’re wondering how to leave home without going broke.
Maybe you got that great job you’ve been waiting for. Maybe you’ve found a bunch of great roommates ready to live the shared housing dream.
Or, maybe you just can’t stand to hear your dad say, “Sleeping in, champ?” at nine in the morning ever again.
Moving out of your family house is a big step, and as exciting as it is, there’s a lot to consider, mainly, how you’re going to afford it.
Build Your Budget
You can’t be responsible with your money if you don’t know how you’re spending everything.
It’s easy to recognize you’re not making any big purchases and assume that, as a result, you’ve got a hold on your spending.
However, little purchases add up, and a snack run here and a new outfit there can drain your money away from where you really need it.
Spend a few weeks just tracking your spending before you start trying to stick to a specific budget.
Gradual, informed adjustments are much more likely to stick than dramatic, improvised ones.
If you’ve got a bit of time before you move out, start setting aside a reasonable amount of practice rent each month to get a feel for how much you’ll have to spend on other things.
When you do move, this little nest egg can serve as an emergency fund.
Save For Tomorrow
Retirement might seem like a long way away when you first move out, but that means it’s the perfect time to start saving for it.
Just like little expenses, little savings add up to bigger savings.
See if your employer has a retirement program you can use, and if they offer to match, try to maximize your contribution so you can make the most of their offer.
At some point, you may be ready to purchase a home, and you’ll have to save enough for a down payment.
While a down payment can cost up to 20 percent of the home’s sale price, there are many different loan products available which don’t require that much money down.
For example, an FHA home loan may only require a down payment of 3.5 percent.
These loans allow for a wider range of debt and credit histories and may not require you earn as much income as other loans.
It might feel morbid, but now’s also a good time to consider life insurance or to talk to a lawyer about setting up a will.
Almost everyone feels invincible in their 20s, but things do happen. Even if they don’t, planning early never hurts.
If you get a 20-year term life insurance when you’re young, you’ll get a nice, low rate that won’t change for the full term.
The older you are when you sign up, the higher the rate. Getting in now can save you loads of money in the long run.
Stay Credit Smart
Credit card companies love young people who just got their first big jobs, and not because they’re known for smart spending.
It’s enormously tempting to qualify for a great credit card with a high limit and a low minimum payment and start buying like there’s no tomorrow.
But remember, there is a tomorrow, and you’re going to need a decent credit score to thrive in it.
Credit cards themselves are fine, but make sure you’re able to pay your credit card off every month.
If you get a month behind, don’t use your credit card again until you’re back on track.
Getting a credit card is a great way to build your credit score!
Pick Up Side Hustle
Do you wish you had more fun money? Consider picking up some side work.
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Take a look at what kind of skills you have and see if there are any simple jobs you can add to your schedule.
Set-your-own-hours gigs like Lyft work for a lot of people, but you can also do freelance work, babysit, or start an Etsy shop to sell stuff you’ve made at home.
Start with what you know how to do, and see if you can find ways to make some extra cash off that knowledge.
Many young people make the mistake of spending recklessly in the first few years out of the house.
Don’t let a great new paycheck or surprisingly low rent cause you to go wild with your spending.
A few careful steps will help you protect your wallet (and your credit score) while you dive into your new, independent life.
About The Author
This guest article was written by Chris Haymon from Adulting Digest.
“Shortly after I graduated college, I made a lot of financial mistakes.
Between a swanky apartment, brand new furniture and tech gadgets to fill it, and a student loan bill I wasn’t prepared for, I found myself in over my head pretty quickly.
I didn’t mean to be reckless with my money. I just had no idea about the basics of healthy finances, including credit, a debt-to-income ratio, and emergency savings.
That was five years ago, and I’ve learned a lot from my experience. My goal is to help prevent others from finding themselves in a similar situation.”