Use this checklist to help you decide if moving out of your parents' house is in your future
Suppose you moved back home after graduating from college, lived at home while attending school, or have lived with family while working for the past several years. In that case, you may wonder how much money you need to save before you can move out and enjoy the freedom of being an independent adult. But if you move out before you are in a position to support yourself, there is a possibility that you may not have what it takes to be successful financially and that you will end up living with your parents again. Make sure you have met all of these financial requirements before moving out of your current location to avoid the boomerang effect.You Will Be Able to Pay For Your Own Bills
Make sure that you can afford to live on your own before you decide how you want to move out of the house. Devise a straightforward strategy for how you intend to spend your money each month by putting together a monthly budget. To get started, list all the money you spend and all the money you make in a given month. Include in the construction of your spending plan any potential additional costs you may incur due to moving out. These include things like the cost of utilities, transportation, food, and rent, among other things. You may have been spending a higher amount of your salary on leisure and other non-essential items because you've been staying at home up until now. When you move out on your own, you might find that you need to make some sacrifices in this area. Next, remove your expenses from your revenue. If the figure is negative, it shows that you are not yet paying all of your bills and that you need to either increase your income or decrease your spending in order to live within your means. If the figure is positive, you will need to devise a strategy to spend the money left over. Before you move out, try living on the budget you create for the next several months as if you were already living alone. This will help you prepare financially. In a similar vein, you should put any additional money into an emergency fund. This test will prepare you for a smoother transition into solitary living and determine whether you can afford to live on your own.You Are Able to Handle Your Financial Obligations
Your level of financial obligation is another factor that may affect your capacity to relocate. Your debt-to-income ratio is calculated by comparing the total amount you owe on all of your loans, including credit card payments, vehicle loan payments, and any other loan payments, to the total amount you earn each month. Lenders look favorably on borrowers whose debt-to-income ratio is less than 43 percent, but the lower this ratio is, the more control you have over your financial obligations. If your debt to income ratio is significantly higher than the recommended figure, you might want to delay moving out for a while. This is because you might prefer to use any leftover money from your budget to pay down debt rather than paying for a place of your own and the expenses that come along with it. If this describes your current financial situation, and if you work in close proximity to your parents and get along well with them, you may want to consider living with them temporarily so that you can pay off your debt more quickly. If you have a job in the same area as your parents and get along with them, this may be an option for you. If, on the flip side, your debt is manageable, you may be able to pay it off swiftly and aggressively in order to get out of your situation as soon as possible. For this to be a viable choice for you, you will need to devise a strategy for paying off your debt and be willing to make some concessions to put the majority of your available funds into paying it off. If you are unsure which bills to address first, start with the ones with the highest interest rates, then go on to the debts with the smallest balances, and finally deal with any obligations sent to collectors. After getting your strategy for repaying debt off the ground, set two milestone dates: one for settling all of your financial obligations and another for relocating out of your current home. Prior to carrying out this strategy, you should consult with your parents.You Have Money Set Aside for Emergencies
Creating an emergency fund, also known as a rainy-day fund, is essential to moving out responsibly and securely. An emergency fund is a pool of money that you can tap into to pay for unexpected needs, eliminating the need to take out a loan or use retirement funds. Beginning with $1,000 to $2,000 in your emergency fund is an excellent place to start. In order to be prepared for unanticipated costs such as medical bills, insurance deductibles, and vacations, you should eventually save an amount that is equivalent to three to six months' worth of living expenses before moving out on your own. You can put together a reasonably large emergency fund relatively fast if you have secure employment and are willing to stick to a monthly budget.You Have Sufficient Income to Pay the Rent Each Month
The income-to-rent ratio of three to one is a common factor utilized by landlords throughout the tenant screening process. To put it differently, it is preferable to have a monthly income equivalent to three times the amount that your rent costs each month. This is a good rule of thumb to apply in order to determine whether or not you will be able to afford a rental property of your own. If the apartment you are interested in renting costs $1,000 per month, you need to have a monthly income of at least $3,000 in order to pay that rent in a manner that is comfortable and does not put an undue strain on your budget. If you cannot pay the rent because you do not have enough money, you may have two options: either move into a smaller home or put off moving entirely until you can pay the rent with the money you make.It Is Possible For You to Find a Roommate
Even while having a roommate isn't a prerequisite for moving out on your own, it's a smart financial move to do so because it allows you to share the cost of a more expensive rent with someone else. If you find suitable roommates, you could even be able to afford a larger apartment than you could on your own. Your ability to move out may eventually depend on whether or not you can find an affordable place to live, so you should give the concept of finding roommates some severe thought. However, you should be careful when selecting roommates; if at all feasible, choose people who lead lifestyles comparable to yours. In the same vein, please write down your particular financial obligations because it is easy for friendships to fall apart when people are struggling to make ends meet in challenging living situations. Safeguarding your personal information in a location that is not easily located or accessible will help you avoid the potentially devastating effects of identity theft. If you want to avoid being held accountable for your roommates' failure to pay the rent or any other bills, you should negotiate separate leases with your landlord if that is at all possible.You Do Not Have To Stress About Making Payments For Any Additional Fees Or Deposits
When you rent your own apartment or house, you will typically be required to pay a security deposit, as well as your first and possibly last month's rent, rental application fees, and a credit or background check. If you do not have enough money, renting your own apartment or house may not be an option for you. Have money set up for utility deposits or fees associated with hooking up to utilities such as cable, water, and electricity. Save up enough money to pay these expenses before you move into your future house so that the move goes as smoothly as possible. In a similar vein, make sure you have enough money saved up to cover the expenditures of moving. If you don't have enough money to handle these necessary moving fees, your shortage of funds could derail your plan for how to move out of your current home.You Are Able To Afford Renter's Insurance
When you move out on your own for the first time, it's easy to fool yourself into believing that you are unstoppable. However, even if you are a conscientious tenant, unexpected catastrophes may still befall you. Renter's insurance can provide you with the peace of mind you need and the financial assistance you need to repair or replace your belongings in the event that something unexpected happens. Renter's insurance is a specialized form of homeowner's insurance that protects your belongings if they are lost or damaged due to one of the covered risks, such as a burglary, a fire, or a storm. Renter's insurance may appear to be an unnecessary investment, yet, it is typically reasonable (about $20 per month), and it can save you a significant amount of money when compared to paying for damages after a disaster out of your own pocket. Suppose you currently do not have the financial means to pay for renter's insurance. In that case, you should seriously consider postponing your move until you have enough money saved to cover the monthly rates for renter's insurance. It's essential to remember that the premiums for rental insurance are determined by various factors, including where you live, how much you choose to insure, and how high your deductible is.You Are Willing to Stay for One Whole Year
Build up the necessary financial cushion to afford a one-year rental, or be willing to find a short-term or month-to-month lease if you don't think you can afford to live in the rental for that long. Because apartment leases typically last for a period of one year or more, you should be ready to commit to moving into and being in your new location for at least that long before signing one. If you think you cannot afford to live in the rental for that long, build up the necessary financial cushion to afford a one-year rental. If you break your lease by vacating the premises before the end of the agreed-upon term, you will be responsible for the remaining rent due on the property. It is possible that you could turn over the unpaid amount to collections, which will negatively impact your credit score and your ability to purchase a home in the future.You Can Consider Purchasing Pre-Owned Furnishings
If you are patient and wait until you have saved up enough money for that leather sofa or luxury dining set, it may prevent you from moving out in the timeframe that you like. Instead, when you first move out on your own, you should have just enough money saved up to be able to equip your place using second hand stuff that you get from family or from thrift stores. You'll be able to upgrade your inventory once you've accumulated enough financial savings. When it comes time to go shopping for furniture, be sure to put in the effort to find reasonable offers. It is not necessary to have everything ready to go at once. Instead, you can take your time planning and saving up money in order to construct the home of your dreams over the course of several years. If you decide to be more thrifty today, it will help you avoid going into debt, allowing you to buy a nicer property when the time comes.You Are Ready To Take Measures To Guard Your Credit Score
When they first move out on their own, many young adults do damage to their credit. Your credit score may take a hit if you make payments that are over 30 days late or if you fail to pay your utilities on time, resulting in the accounts being turned over to a collection agency or being charged off. It's possible that you are not yet financially competent enough to move out on your own if you are not prepared to maintain the responsible money management skills that are required to keep a decent credit score. In contrast, if you are prepared to pay all of your bills on time, you will ultimately have the stellar credit score that is required to qualify for a good loan when you decide to purchase a home of your own. This will allow you to get a better interest rate on the mortgage. Making the transition from living at home to living independently for the first time requires careful planning to guarantee that you will be able to meet all of your financial obligations. You need to establish a reliable budget by doing an exhaustive and accurate inventory of your costs. It would be for the best if you also opened an emergency savings account so that you are prepared for any unplanned occurrences. It is possible to assure that you will pack up in a timely manner and be able to live comfortably on your own if you have a well-conceived plan on how to move out. When you move out for the first time, you'll establish patterns of behavior that will stay with you throughout your adult life. If you are responsible and pay your bills on time, you should have no problem keeping track of your funds and managing them properly.Frequently Asked Questions (FAQs)
How much money do you need to put away before you move out?
The amount of money you will need to put away before moving out is directly proportional to the cost of living in the place you plan to move to. You should have enough money saved to cover all of your relocation expenditures, including any rent payments or deposits that must be made in advance. Your salary should be sufficient to meet all of your monthly living expenses, including your rent or mortgage payment, utility payments, grocery bills, and any other necessary payments. Make sure your monthly income is at least three times the amount you spend on rent or mortgage. This is a good rule of thumb to follow.When migrating to a new state, what are a few things that one should keep in mind?
When moving out of state, it is essential to factor in the move's expense. Will you require the use of a truck or the services of a moving company? When you move into your new home, will you need to go out and get brand new furniture and household goods? It would be best if you started making preparations for state-specific costs that may increase. This includes things such as the price of a new driver's license or identification card, the cost of transportation (such as auto insurance), and any changes to your cost day-to-day expenses.