So, you’ve grown up and want to start your independent adult life – get your own place, make your own rules, and do as you please. As eager as you may be to get your freedom and take control of your life, however, you shouldn’t rush things – you need to be sure that you’re emotionally and financially ready to live on your own before you decide to make the big step and move out of your parent’s house.
You need to be ready to face the challenges of living away from family and home (leaving your comfort zone, taking responsibilities, dealing with everything on your own, etc.), to know how to stand up for yourself, and – most importantly – to be able to afford to move out.
You don’t want to fly the nest only to be forced to move back in a couple of months because of financial issues – so, you need to have some financial security before you strike out on your own.
In other words, you need to have a good amount of savings in your bank account.
But how to build these savings? How to ensure your financial stability?
Read on to find out some practical and effective tips on how to save up to move out of parents’ house:
Open a savings account
This one may be pretty obvious but opening a savings account is a very symbolical – and very practical – first step to building up savings.
Having a savings account will make you feel like a financially independent adult and will motivate you to save as much as possible.
So, how to save to move out of your parents’ house? In order to grow your savings faster, you’re advised to:
1. Choose an account with high interest rate – preferably, a no-minimum-balance account (to avoid fees if your balance drops below a certain point).
2. Put a part of your paycheck into savings every month (see below for details).
3. Find out how much money you need to have saved up before you can move out, as having a clear goal (such as knowing that you need $5,000 in order to feel financially comfortable with your move) will increase your motivation to save. Generally, you need to have enough money saved up to cover your:
- initial moving out expenses – rental application fees, security deposits, and various move-in fees – or down payment and closing costs (if you’re planning to purchase a home, you will need to have a lot more money saved up before you move out than if you intend to rent an apartment); moving costs (packing expenses, movers’ charges or moving truck rental fee, travel expenses, etc.); furnishings for your new home; etc.;
- housing expenses for the first few months after the move – rent or mortgage, utility bills, renter’s or homeowner’s insurance, maintenance costs, etc.;
- living expenses for several months after the relocation – food, transportation, clothing, medications, toiletries, cleaning supplies, subscriptions and memberships, entertainment, etc.;
- emergency expenses – medical bills, car repairs, replacements of broken items, etc.
See also: How much money to save for moving
Maximize your savings
Your next step when saving money to move out is to assess your income and spending habits and create a personal budget.
Calculate approximately how much you spend per month (including student loan payments), subtract the number from your monthly income, and see how much money remains – this is the money you can put into savings.
If the amount is smaller than you’d like, curb your spendings – avoid buying things you don’t really need, reduce eating out, cut back on travel expenses, cancel non-essential subscriptions, etc.
If you’re eager to move out, look for ways to temporarily boost your income – work overtime or take on a second job – so you can save up faster. Do not assume, however, that you will be able to keep up such a break-neck work pace all the time and do not count on having that extra income after moving out of your parents’ house. (Working extra is meant to boost your income temporarily – assuming that you will be able to make that much after the move and making your post-relocation budget based on that extra income would be a big mistake).
When wondering how to save money to move out of parents’ house, you should also consider selling your unneeded stuff – clothes, shoes, sports equipment, books, CDs, DVDs, collectibles, decorations, and other things in good conditions you don’t really need, don’t really like, or are no longer interested in. Selling your unneeded items will not only allow you to put more money into your savings account, but will also help you save money (and time, and effort) on your move. (See also: How to save money when moving)
Bonus tip for saving up to move out of parents’ house: Start paying rent (or mortgage)
The biggest financial advantage of living with your parents is that you don’t need to pay rent. Yet, one of the best ways to save enough for moving out on your own is to start “paying rent” (or making “mortgage payments”) while still living at home.
You won’t really be paying rent (or mortgage), of course, just setting aside the rent/mortgage money, so you have several months of rent/mortgage saved up when you move out:
- Remember that the general rule is to spend no more than 30% of your income on rent or mortgage. So, divide your monthly income by three and be sure to set aside at least that much per month; or
- Research rental costs in the area where you want to move to and find out the average rent for the type of apartment you’d like to live in. Alternatively, research housing costs in the area you want to move to, then speak with a mortgage broker to find out how much lenders would be willing to loan you for a home and what your mortgage would be if you decided to buy a place in your chosen area. Be sure to put at least that much money in savings every month. (Keep in mind that if you want to buy a home, you need to have enough money saved up for a down payment (up to 20 percent of the total purchase price) and closing costs (up to 6% of the purchase price), too).
Related: How to budget for your first apartment
Build up a good credit profile
When saving up to move out of your parents’ house, along with putting as much money into savings as you can, you also need to establish good credit.
Your credit history is very important when applying for a loan or a rental property – banks and landlords run credit checks on applicants to assess their ability to repay debts or pay rent and bills on time. If you have a poor or non-existing credit rating, it will be more difficult to get approved for a rental property or obtain a loan from a bank.
Having a premium credit score, on the other hand, will be of huge help when looking to rent or buy a property.
In order to establish good credit you’re advised to:
- Start paying off your student loan (if you have one) – Making timely payments on loans will give your credit score a nice boost – and it will certainly be easier to make a dent in your student loan while still living at home. Keep in mind that defaulting on your student loan (not making payments) can hurt your credit score badly;
- Get a credit card (if you don’t already have one) – Use it for all sorts of payments and pay your bill off in full and on time every month. Try to stay well below your credit limit each month;
- Become an authorized user on your parents’ account – that’s seen as a sign of your trustworthiness.
Having a steady job and an established bank account is also beneficial to your credit profile.
Remember that it is not a good idea to close a credit card account, even when the balance is paid off. It could affect your credit history quite negatively.
With enough savings and a good credit score, you shouldn’t experience any financial difficulties when moving out of your parents’ house. Just be sure to think things through and prepare well for the biggest adventure of your lifetime.
Must-read: Tips for moving out of parents’ house
