How Young People Can Financially Prepare for Living on Their Own

Guest Post by: Christopher Haymon

If you’re about to move out of your parent’s house for the first time, this is essentially the beginning of your life as an adult. You’re about to discover the independence that comes with making your own decisions and living life on your terms. You’re also about to discover a new world of financial responsibility.

Needless to say, the whole experience can be an emotional roller-coaster. But it can also be your most exciting and rewarding experience yet. Here are some financial tips to help you start your new chapter off on the right foot:

Explore life insurance.

One of the first steps to consider as you prepare to move out is getting life insurance, because it would help your family out significantly in the event that you unexpectedly passed away. When you look at policy options, it’s important to choose one that fits your current lifestyle and circumstances. For example, a 20-year plan may be perfect for you if you:

1. Are on a tight budget

2. Have a significant amount of debt

3. Pay a 20-year mortgage, and/or

4. Have children

If you die, the right life insurance policy will leave your family some capital or cover funeral costs and medical bills.

Save now.

If you start saving money before you move out, you will not only establish the habit, you can begin your new chapter with a safety net. First things first: Get (and keep) a job if you don’t already have one. If you’re not paying for things like rent, utilities or groceries, this is the perfect time to put away the money you make. Open a savings account, put a majority of your earnings in that account, and keep the rest in your checking account. That way, you’re taking advantage of having low expenses but can still enjoy the occasional entertainment or dinner out.

Learn how to budget.

Another way to prepare for moving out is to learn how to create a budget. Knowing how to create and stick to a budget is an invaluable skill that you will probably use for the rest of your life. Sit down with your parents and/or a financial mentor or advisor and learn the basics of calculating your expenses and income. Even educating yourself on the most basic forms of budgeting can help you avoid getting in over your head in debt by your early twenties.

Each time you accrue a new expense (or new form of income), be sure to update your budget and make any necessary adjustments so that you’re still saving money. For example, once you move out, you will be responsible for a wide range of new living costs. Understanding how to plan for these costs will save you a lot of trouble and keep you in a position to succeed.

Start your credit.

Finally, it can also help to start building your credit history before you move out. For one thing, it can be difficult to get an apartment without a credit history, and if you want to fully embrace the independence of moving out, you may not want to rely on your parents to cosign the lease. Establishing a credit history is also important if you ever want to purchase a car or get approved for a credit card with a higher limit. If you have a poor credit history, it will likely be difficult to buy a home. Most lenders will require that you have a minimum credit score before loan approval.

Get a secured credit card, make a purchase and immediately pay it off. Then, don’t use the card again until you’re completely confident in your financial responsibility. Another way to start building your credit is to make all your federal student loan payments on time.

When you have a financial plan, you can make the most of the independence and responsibility that comes with moving out. Be sure to check out life insurance policies that can create a safety net for your family. Before you move out, start saving most of your paycheck, learn the ins and outs of budgeting, and begin establishing your credit history. You will have a lot to learn along the way but having an understanding of these essential principles will help put you on a good path.

About Chris

Shortly after I graduated college, I made a lot of financial mistakes. Between a swanky apartment, brand new furniture and tech gadgets to fill it, and a student loan bill I wasn’t prepared for, I found myself in over my head pretty quickly. 

I didn’t mean to be reckless with my money. I just had no idea about the basics of healthy finances, including credit, a debt-to-income ratio, and emergency savings.

That was five years ago, and I’ve learned a lot from my experience. My goal is to help prevent others from finding themselves in a similar situation.

 Photo Credit: Pexels

CARES ACT Part 1 - Recovery Rebate

By Amy Irvine, CFP®, EA, MPAS®, CCFC
FINANCIAL PLANNER

I started with this section because we feel it is important for our clients to know if they are or are not eligible for this rebate.

Over the weekend, I've noticed a great deal of confusion regarding this provision.  Let's start with what it is.

It is a rebate provided to those with eligible income (see below).  The bill actually uses the language "credit" for the first taxable year beginning in 2020.

What are the amounts?

• $1,200 single

• $2,400 joint return

• $500 per qualified child (under the age of 17)

Who is eligible?  

• $75,000 Single (and in my interpretation, married filing separate, since it states "as not described in paragraphs 1 or 2" listed below)

• $112,500 Head of Household

• $150,000 Joint

• If your income is above that limit, it will be reduced by 5% for each $100 of income over those thresholds.  Complete phase out:

  • $99,000 single

  • $146,500 Head of Household

  • $198,000 Joint

What tax year is this based on?

• 2019

• 2018 if you haven't filed your 2019 tax return

• If you haven't filed, the legislation states that they may use alternative information such as your SSA-1099.

What if my income is more in 2018 and 2019, but less in 2020?

• You will receive the credit when you file your 2020 tax return and benefit at that time.

What if my 2018 income was lower and I haven't filed 2019?

• As noted above, the rebate will be based on your 2018 income. 

• Interestingly, the language seems to read that if your 2019 income would have reduced your benefit, then you won't be subject to refunding the rebate.  

When should you expect to receive the rebate?

• "As soon as possible" is the language used.

• Our guess, Mid-May

Will these checks be taxable?

• No

The Intersection of Vegetables and Finance

Monday Morning Quarter-Buck

By Financial Planner Becky (Partridge) Eason

Hornell, New York

Did you know that today, June 17th, is national eat your vegetables day? What better time to talk about getting vegetables on a budget! A common misconception is that it’s expensive to eat healthy. There are ways that you can eat healthy and actually save money, especially during the summer if you live in the north.

The biggest way to save money on vegetables is to have a garden. Even for those of you living in cities there are options for gardening available to you as well. If you don’t have a yard you can try small window or balcony planters. Also, many cities offer community garden plots where you can have your own section of a garden to grow what you want. A pack of seeds usually costs in the range of $1 - $3. Think about how many yummy veggies you can grow for $1 - $3, you’ll be well on your way to saving lots of money. Not only do you get to save money but you also get to enjoy the fresh air while working in the garden. The best part is that in the end you get to eat the “fruits of your labor”.

Another way to eat your veggies on a budget is to shop at your local farmers markets and roadside stands. You will likely find fruits and vegetables at a fraction of the cost of chain retailers. Not to mention the fruit and vegetables will be much more fresh and you will be supporting local farmers.

There are also ways to save money on produce at your regular grocery store. For instance, many stores offer “family packs”. These “family packs” are a larger quantity of produce usually sold for a lower price per pound. Remember though that if you know you won’t be consuming the food before it spoils, you won’t be saving money if you have to throw out the extra food.

Eating your vegetables doesn’t have to cost a lot of money. In fact, for a family it’s almost always cheaper to buy your vegetables and cook at home than it is to go to a fast food restaurant, not to mention the health benefits!