Are You Ready to Move Out?
If you moved back home after college graduation, or if you lived at home while attending school, you may be anxious and ready to move out on your own. Plus, it can be frustrating to live at home with your parents when you are no longer a teenager.
But if you move out before you are in a position to support yourself, you may hurt your credit and end up back home. Ask yourself these questions before you move out.
Can You Cover Your Bills?
Before you move out, you need to make sure that you can afford to live on your own. You should write down a detailed monthly budget, including any extra expenses that you will be taking on when you move out. These include items such as utilities, transportation costs, food, and rent. It's also important to include a surplus of cash as an emergency fund for unanticipated expenses, such as insurance deductibles, tolls, and vacations.
If you've been living at home, you may have been spending a larger portion of your salary on entertainment or other non-essential spends. Once you move out on your own, you may have to cut back in this area.
Before you move out, try living on a set budget for the next two months as if you are living alone. Be sure to put any extra money into an emergency fund. This plan will indicate whether you are able to afford to live on your own and prepare you for a much smoother transition. Another bonus? You'll build an emergency fund in the meantime.
How Much Debt Do You Have?
It is also important to consider how much debt you have. For example, if you find a job that's near your parents' house and you get along with your parents, you may consider living with them temporarily so you can pay down your debt more quickly.
For this to be a good option, you need to have a debt repayment plan and make sacrifices so that the majority of your money is directed toward your debt. You should also have a set date for completing your debt obligation and a target date for moving out. It's also a good idea to discuss this plan with your parents beforehand.
Have You Set Up an Emergency Fund?
Before you move out, you should have an emergency fund saved up for extra expenses. Start small, with $1,000-$2,000 in your emergency fund. Eventually, you should have 3-6 months' living expenses set aside in your emergency fund.
If you have a good job and are sticking to a monthly budget, you should be able to tuck away a good-sized emergency fund fairly quickly.
Do You Have Money for Rental Fees and Deposits?
When you move out, you will need to have money to pay for your first and last month’s rent, as well as any deposit and rental application fees. Additionally, you should have extra money for deposits or hook up fees for utilities such as electricity, water, and cable.
To ensure a smooth transition to your next home, you will need to make sure you have enough money on hand to cover these bills. Another important thing to keep in mind? Be sure you have enough money set aside for moving costs.
Will You Purchase Renter's Insurance?
Renter's insurance will protect your property if you are robbed or there is a natural disaster or other event, like a fire. These things happen, and renters' insurance can give you peace of mind and help you replace your possessions.
Although this may seem like an unnecessary expense, it is usually very affordable and can save you a lot of money. Worth noting: rates are based on where you live and how much you choose to insure.
Will You Have a Roommate?
Roommates are a great way to save on rent. However, you need to choose your roommate situation carefully, as friendships can deteriorate quickly in difficult living situations.
Additionally, you need to protect yourself against identity theft by securing your personal information in a place that cannot be found or accessed. If possible, sign separate leases with your landlord so that you are not held responsible if your roommates skip out on the rent or other bills.
How Much Will You Need to Spend on Furniture?
When you first move out, you may need to furnish your apartment with secondhand items that you get from family or thrift stores. Once you save some cash, you can use it to add newer items to your apartment to create a more welcoming space.
Making the frugal choice now will help you to afford a nicer home in the future because it will help you to avoid debt. Take the time to hunt for deals. You can work on designing the home you want with careful planning and saving.
Are You Protecting Your Credit Score?
Many young adults ruin their credit when they first move out. Late payments and failure to pay your utilities on time or having them turned off can have disasterous effects on your credit. Be sure you pay all of your bills on time so that when you want to buy a house, your credit will help you qualify for a good loan.
The habits you form when you first move out will follow you throughout your adult life. Be sure to be responsible and pay your bills on time, and you should be able to manage your finances effectively.
Updated by Rachel Morgan Cautero.