Whether you’re leaving home to attend a post-secondary institution, take a job somewhere, or simply because it’s time to spread your wings and leave the nest, moving out on your own is always an exciting time.
Along with all the emotions, this exhilarating adventure also comes with its fair share of serious financial obligations and responsibilities. That’s why moving out on your own requires some careful advance planning and preparation to make sure the dollars and cents all add up.
Being house poor is no fun, so make sure you budget wisely before the big move. Here’s a look at some of the essentials.
Get ready to go by building up some savings
If you plan on moving into an apartment, you’ll probably have to provide up-front payment of the first and last month’s rent, which is often a big chunk of change. Setting up new utility accounts sometimes requires paying a deposit, which can eat further into cash reserves. Plus, if you happen to be making a long-distance move, you may need to pay for a rental van or truck, or possibly even a plane ticket.
If you’re an established saver with solid cash reserves, then great! Get ready to use them.
If not, and you’re already earning an income, a simple way to get started is by opening two high-interest, low-fee savings accounts, one for emergency savings and one for sizable purchases. Set up automatic deposits that move a small percentage of each paycheque, say three to five per cent, into each of these accounts every time you get paid. Then, sit back and watch your savings start to accumulate.
Don’t forget to pay yourself first
No matter how much you may want to move out of home, it’s unwise to commit too much of your money towards accommodation. Depending on what you can afford, try to put between five and 10 per cent of your income towards long-term savings, whether that’s with a Tax-Free Savings Account or a Registered Retirement Savings Plan.
If you can only afford three or four per cent to start, don’t let that stop you from moving out – just remember to increase the amount you pay yourself as your income grows over time. Of course, if you can afford to save more than 10 per cent, you’ll be able to reap big benefits from the power of compounding and eventually retire far richer.
Build a budget of all your costs
Having a place of your own means paying bills, starting with a monthly rental fee for most young people. In some cases that fee will include costs for utilities such as water, gas, and electricity, but in other situations it won’t, so make sure to factor those in as needed. You should also factor in the cost of contents insurance for your stuff in case of theft, flooding, or fire.
Other common costs include some things you may already pay for and some you may not, such as cell phone service, TV and internet service, transportations costs (ie. car costs, if you have one, or transit fares and ride-share fees), and any subscriptions and memberships you may use. If you’re still paying off student loans, or have a car loan or any other debts, remember to account for those, too.
Once you’ve added up all your monthly costs, look for ways to cut spending and save extra money. Can you do without one of your streaming services, or find a cheaper cell phone provider? Make your budget as lean as possible by trimming down or cutting out excess spending.
Understand how much it costs to buy food
Inflation has driven up grocery prices in recent years, so make sure your budget has enough room to keep your belly full once you’re not eating out of mom and dad’s fridge. You won’t want to pay for restaurant meals more often than necessary, except for certain social events, so it’s also important to ensure you have some basic culinary skills. Home-cooked meals are much more economical than dining out and tend to be healthier, too.
Not sure how much money you might need to budget for food? Accompany your family on the next big grocery run and pay close attention to what’s being bought, and how much it all costs. Ask your parents whether they compare prices between chains or buy certain items in bulk to save money. Learn to read price tags and understand unit pricing – it’s a helpful way to see how different items stack up, and whether something is truly a bargain.
Factor in the cost of houseware (and other essentials)
Setting up a home comes with costs you may not have considered. While some of us dream about having a place with a great entertainment system or a super comfy couch, don’t forget about all the other little essentials you’ll need, whether it’s kitchenware and cleaning supplies, towels and linens, or a desk and dresser.
Some stuff you should be able to get free from friends and family or pick up second-hand, and you certainly shouldn’t feel obliged to blow the bank on high-end pots and pans, for example.
Even so, a lot of little costs for furnishings and other items all add up when you’re basically starting from scratch. To make things easier, try to get as much as you can before you move out, meaning you won’t have to go on a big shopping spree right after moving day. Also, if there’s something you want but can live without for a while, be willing to wait until you’ve got the money saved up in your big purchases account before buying it.