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

Love and Money

With Valentine’s Day right in the middle of February, we are surrounded by reminders of love and relationships. We thought this month it would be appropriate to spend some time talking about relationships and finance.

by Kate Welker, CFP®

Money consistently is listed as one of the top reasons for stress in relationships and causes for divorce. Money is one of those topics that people sometimes like to avoid, as if they don’t talk about it it won’t exist, and that just leads to more stress. Along with your Valentine’s dinner I want to encourage you to set up a money date.

Make it a real date. Mark it on the calendar, get a babysitter for the kids, put on a nice outfit. You want to be able to focus and still enjoy your time together.

Spend some time reviewing what your current status is.  Take a look at your current accounts, your assets and your debts, income and expenses, to get a “snapshot” of what your financial picture looks like. Talk about your goals to see if you are spending your money in the right areas.If you’re not, ask why. Is it debt, unnecessary spending, or something else in your lifestyle? When you talk about these things together you have a teammate to work towards your goals with. It’s easier to say no to extra spending if there are two of you on board.

Check in on your feelings about your money. Do you feel stressed over your spending, do you feel like you aren’t saving enough, maybe you have plenty each month but you don’t feel in control over where its going. Whatever it is, spend some time discussing if you are happy with your money and why or why not. 

If you decide there are changes to be made talk about what that looks like and what the next steps are.

It is extremely important to be honest, hiding financial problems leads to more stress and bigger problems. There is actually a term for this - financial infidelity. If you are hiding anything it will be extremely difficult to bring this up, but it needs to be addressed. If you are struggling with how to work through this you may want to enlist the assistance or a counselor or financial professional. 

We hope you enjoy your money dates and it encourages you to do it more often. We would love to hear from you if you try this, let us know how it went!