The U.S. Census Bureau recently reported that more than 30 percent of people aged 18 to 34 still live with their parents. This number works out to be a whopping 42.2 million people, most of whom are college-educated. What’s shocking about that number is that there are more people who are living with their parents now than there were during the recession. While many people choose to live with their parents, many others want to be on their own but don’t have the financial means necessary to do so. However, with one budgeting trick, those who want to be independent can be well on their way sooner than they think.
It might seem too good to be true, but one exceptional way to become accustomed to living on your own is to budget in rent, even if you’re living at your parents’ house for free. This trick not only gets you accustomed to paying for rent or a mortgage regularly, but it will also help you build a substantial enough savings account to allow you to feel comfortable moving out of your parents’ house.
Many parents do not charge their adult children rent, believing that they are being helpful and allowing their children to become more financially aware. However, because children are not responsible for paying to live somewhere, they can easily get lulled into a false security that they have more money than they really do.
I personally use this trick to save for my future car. It’s not exactly the same thing but it’s similar. I have two paid-for cars, but they are both very old and both have high mileage on them. Every month, though, I put $250 in a savings account for a future car.
Sometimes my old cars need repairs and I use the savings for that but ultimately I’m building up towards a larger purchase. Although I’ve never had a car payment because I have driven the same car since I was 16, it still allows me to see how a newer car might fit into my budget, just as factoring in rent to your budget will help you to prepare for the future.
In order to prepare to move out of your parents’ house and live on your own, the absolute best thing you can do is budget in rent. Because many people’s parents don’t actually charge them rent, you can place that money aside. The benefits are that you get used to not spending that amount of money each month, and you build a substantial savings account that will help you when it is time to move.
While factoring in rent (or a mortgage payment) into your budget is the best way to prepare for moving out of your parents’ house, there are some other financial factors that you should consider in addition to this in order to prepare for your big move.
Remember, not only will you have to pay for rent and other bills when you move out, but you might have to pay to actually move too. Even a move in-state can cost on average $1,170 according to U.S. News and World Report, so that’s definitely something to keep in mind.
Having a handle on paying your rent is great, as it’s one of the largest payments you will make once you are out on your own, but if you also conquer some of the financial tasks below, you will be well on your way to not only moving out, but staying out and living on your own for good.
Check Your Credit Report: You can check your credit report at AnnualCreditReport.com. If you have adverse accounts or something else that needs to be corrected, now is the time to do it while you’re under your parents roof. If there is a debt collection that needs to be settled or paid, do that now while you have your parents paying for your rent, food, and other necessities.
Build an Emergency Fund: 76 percent of Americans live paycheck to paycheck, and that’s definitely not a financial situation you want to be in. Most financial experts recommend building a $1,000 to $2,000 emergency fund to start with and then eventually growing it to be six months’ worth of expenses. You don’t want to move out of your parents’ house, then have a major expense you weren’t prepared for that forces you to move back in with them. An emergency fund will help you handle anything unexpected that comes up to allow you to keep living independently.
Assess Your Lifestyle: When you’re living with your parents, it’s easier to afford a nicer car or more expensive clothes because you don’t have to worry as much about spending on the necessities. However, in order to be ready to be on your own financially, assess your lifestyle. Take a long, hard look at your spending and see if you can cut anything out to better prepare you for life on your own.
The Takeaway: Budgeting in rent is one of the most crucial financial tasks that will get you out of your parents’ house, but it’s definitely not the only one. In order to be truly financially ready to live on your own, you also need to make sure your credit is clean of any adverse accounts, save an emergency fund and assess your lifestyle to make sure your spending is in check.
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The Budgeting Trick That Will Give You Financial Independence originally appeared on usnews.com
