When Should I Become Financially Independent?

father hands car keys to daughter who is busy emptying his wallet of cash

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It's a common question—when should I become financially independent? In other words, when should you stop asking for or accepting financial help from your parents or guardians?

While it's very common for new college graduates to still live with their parents, it's also important to work toward becoming financially independent. In other words, having a job that pays enough that you can support yourself and pay important bills like rent, utilities, cable and phone bills, and any debt payments, like student loans.

Learn when you should become financially independent, and some tips on how to get there.

What Is Financial Independence? 

There are two different definitions of financial independence. The first is becoming completely responsible for your own expenses. In this case, you are no longer relying on your parents to give you money or cover some of your bills. You are covering your daily expenses, planning for the future, and you are able to meet your basic needs.

The second type of financial independence is the point where you no longer need to work in order to cover your daily expenses. Generally, this means that you have enough savings and investments to support yourself. Generally, this won't occur until retirement. And good news: Once you reach this point, you really do not need to work and you can pursue the interests that are most important to you.

For the purpose of this article, we'll focus on the first interpretation of financial independence.

When Should I Become Financially Independent from My Parents?

Ideally, you should become financially independent from your parents as soon as you graduate from college and secure a job. While many new college graduates live at home for a few months following graduation, it's best to put an end date on this.

Here's why: You can get used to having extra money each month since you likely aren't paying rent or groceries or bills. This can lead to poor money management in the future since you didn't get this budgeting practice when you were young. Rather, you relied on your parents to support you. If you do this you can become dependent on your parents. You can also end up in a bad situation when they are no longer able to support you.

Before you move out, be sure you have enough savings to cover the first month's rent, as well as any security deposit. It's also wise to have built up an emergency fund of at least three months of living expenses. Be sure that you are ready to move out so that you do not end up back with mom and dad in a few months.

How Do I Become Financially Independent from My Parents?

So you know when you should become financially independent. But how can you actually do it?

First, you'll need a reliable, good-paying full-time job to support yourself. Ideally, you'll have a full-time job offer when you graduate college, or shortly thereafter. When you receive an offer, be sure to inquire about employee benefits, such as health insurance and retirement savings options such as a 401(k). These two things are an important part of becoming financially independent.

Once you start your job, give it a few months to make sure it's a good fit. It's OK to live with your parents while you are saving up for your own place and padding your emergency fund, as long as you have an end date in mind.

Next, create a workable budget that takes into account your new salary, your living expense, expected bills, debt payments, retirement contributions, and other savings goals. Don't forget to include discretionary spending, as well as food and transportation costs. Once you have a budget, you will know how much you can spend on rent. If the amount is a small one, look for roommates to try to cut costs. And most importantly, before you move out, be sure you have an emergency fund in place.

Is It Ever OK to Accept Help?

You may be wondering if it's ever OK to accept occasionally financial help from your parents. For example, some parents give their children the money for a down payment on their house. They may also help with car repairs or other big unexpected bills.

There is no right answer on whether you should accept this type of help from your parents. But if you do, be sure that you don't make it a habit, expect the money, or inadvertently make your parents play the role of an emergency fund.

Other tips:

  1. If you live with your parents but want to become financially independent, put an end date on when you will move out. It helps to work toward a solid goal.
  2. Stay on a budget that includes living expenses, saving, and investing. You also need a good emergency fund.
  3. Get out of debt. the more you can save, the more quickly you can reach your goal. It may mean making real sacrifices in your lifestyle so that you can reach your goals more quickly.
  4. Don't forget about saving for retirement. You should begin saving for retirement as soon as you start your first job. The earlier you start saving, the less you will have to contribute, due to compound interest. This will also help you become financially independent in the future.

Remember, the money habits you start now will follow you into the future. It is important to start living within your means as quickly as possible. Your parents will not always be able to help you out, especially as they start to retire. So take these steps now to improve your financial situation and eventually become financially independent.

Updated by Rachel Morgan Cautero.