Budget before you move away from home
If you’re a young person getting ready to leave home for the first time, you’re probably both very excited and a little anxious. What will you need to know? How much money will you need, and for what?
If you want to be sure you’re financially ready, do the math and make a budget for living on your own. Don’t whine; it’s Grade 5 math and you’re more than capable of doing it. Being financially prepared means you won’t be one of those pathetic people who has to call home for help.
Set up an emergency fund before you pack your first box. You’re working toward having six months’ worth of essential expenses (rent, utilities, transportation, basic food) covered so that if you lose a few shifts of work, get laid off, get sick or have to deal with some other catastrophe, you’ve got enough money.
Have two months’ worth of buffer before you step out on your own, so you don’t ever have to fold up camp and move back to the basement.
It’s easy to overlook the initial expenses of starting out. Do some research to find out how much you’ll need for first and last months’ rent for the area in which you want to live. Unless you’re OK with never leaving your apartment because you’re broke, keep your shelter costs to 35 per cent of your net income. If you have no debt at all, you have another 15 per cent you can throw to shelter or any other part of your budget.
You may have already started to accumulate the stuff of an independent life, like dishes and linens. But what about those start-up costs you have had no experience with? Utilities and Internet connections have one-time, non-refundable startup fees. And whether you own or rent, you’ll need some insurance (no, you can’t skimp on this). Get a quote.
And you’ll have to stock your kitchen for the first time with everything from ketchup to salt and pepper, dish soap to butter, laundry detergent to toilet paper. And don’t forget a mop, broom, vacuum cleaner and toilet brush, or no one will want to hang out at your place.
To keep your moving-out budget on track, get creative. Check with friends and family to see if they have extras of anything and grab ’em for your stash. Extra pillow cases, sheets, plates and glasses, pots and pans are all things you won’t have to lay money out for if they come to you as gifts. Shop second-hand for furniture. If you want to have “nice things,” make sure you save up for what you want so that you’re not sacrificing your independence by putting stuff on credit.
If you go into debt to buy the chichi stuff, and you end up moving back home because you blew all your money and can’t make ends meet, you’ll just prove you couldn’t prioritize and just weren’t ready to be independent. Gail Vaz-Oxlade’s column appears each Tuesday in Smart Money.