There are a number of factors to take into consideration before making the decision to become financially independent from parents. Understanding if you are financially ready and identifying what options you have based on your income and expenses are two of them. Moving out is a major milestone that requires proper planning and management. Here we provide tips on how you could approach it.
Financial emancipation is one of the most important decisions one can make. It marks the beginning of a new stage of life in which you alone are in charge of your day-to-day life, using your own means. This financial independence from parents entails certain obligations and responsibilities that you need to bear in mind. One of those is managing your finances.
On average, young people in the United States leave the parental home at the age of 24. In Spain and Poland the average is 29, while in Portugal it is 33, according to data provided by Eurostat. What is certain, mo matter how old you are, it that it’s advisable to prepare your finances before taking that step that represents a transition from childhood to adulthood. To discuss the most important aspects to bear in mind, we're going to look at the example of Ana.
How much does it cost to move out?
This is the most frequently asked question, but the answer depends on a number of variables. The thing that will impact your personal finances most will be whether you are planning to rent or whether you want to own your own home.
For Ana, moving out was one of her goals, so she decided to save a portion of her salary to achieve that goal. However, although she had decided to do this, she doesn't know much it could cost to rent or buy, or how much money she will need to maintain a house. Ana looked for information on how to gain financial independence. She found four factors that helped her work out the cost of living alone without disregarding her financial health:
- Calculate the initial costs. Moving out from your parents’ house generally involves an initial outlay of money. Ana looked into the cost of flats, considering both to buy and to rent, in the areas she would like to live in. For the purchase option, she considered fixed costs like the down payment, the mortgage she would have to apply for, and other costs associated with managing the mortgage. For the renting option, she focused on the security deposit and other related costs. Ana also considered charges she would have in both cases, such as household insurance, buying or renting furniture, and hiring a moving company.
- Make a budget. You need to be able to afford the expenses of your daily, independent, life. Ana decided to make a budget that included things like her monthly grocery budget, household bills (gas, electricity, and internet), money for leisure activities, and any other recurring expenses. By doing this, she was able to figure out whether her current income, and expenses, permitted her to move out.
- Plan big purchases. You might find a place that's unfurnished. Perhaps you want to buy some of your own appliances. If that's the case, the best thing to do is to establish priorities and plan to buy what you need over time. This way you avoid going into debt or finding yourself with no money to cover those unexpected expenses. Ana is interested in a flat that doesn't include electronic devices, so she decided to save up firstly to buy a TV, then a robot vacuum.
- Continue to save. It's important that you keep up good financial habits in your new life chapter. To do that, it's key that, once your expenses are covered, you set aside a portion of your income as savings. Ana decided to manage her income using the 50-30-20 rule - where 50% goes to basic expenses, 30% goes to personal expenses and 20% is saved.
Options for moving out and saving money
As we've seen, living alone brings about a number of financial obligations that you have to prepare yourself for. Nonetheless, there are alternative options that will help you achieve your goals while easing the financial burden.
