As an adult, moving out is a big step. You might be moving out to a new place or a city; it can be personal or professional, so make sure you are prepared to live an independent life, especially financially. If you’ve stayed with your parents during school and college days and want to start living independently, you need to know how much money you need to save before moving out.
In the USA, teens usually move out when they are 18 or older. Moving out has its pros and cons. You can enjoy independence, freedom, opportunities, and adventures, but you must also support yourself individually. Moving out in haste or without planning can complicate things and make you move back home. To avoid such situations, be financially strong and save enough money before taking the big step.
How Much Funds Should I Save Before Moving Out?
It’s fun to have your place to live, decorate and style it, and host parties, but it all comes with a cost! Rent, groceries, and unexpected expenses can pop up, making handling challenging. Therefore, it is essential to save money before moving out.
How Much Do You Need to Save?
The golden rule is to have three to six months’ salary in your emergency fund. This will help you in case any expenses pop up when moving out. When it comes to rent, save an income that is thrice your rent. Most rental places follow this rule.
Calculating Essential Costs
If you’re moving out, the first things you must cover are rentals, utilities, and bills. Be realistic and practical about fulfilling this need. Will you be able to do it? Are you earning enough? Do you have enough money saved to meet these needs? Plan well and create a budget; look for side hustles to boost income and meet your expenses.
Add your income and subtract your monthly expenses, giving you the total monthly savings. If you have money left, put it in your emergency fund. Recurring expenses include rent, utilities, internet, phone, groceries, transportation (public transit or car-related costs), and insurance. Look into monthly costs such as electricity, rent, phone bills, groceries, transportation, and more.
These expenses are never-ending and occur daily or monthly. Set aside a budget for each expense and stick to it. When you go grocery shopping, plan meals, list things you need, and buy them. Avoid dining at fancy restaurants and make meals at home. Stay healthy and save money.
First month and security deposits: Many landlords require first and last month’s rent plus a security deposit
If you’re renting your own home or apartment, you need to pay a deposit for security, pay the first and last month’s rent, fees for the rental application, and a background check will be done. Landlords usually ask and check for a security deposit if you move in. This will be one or two months of rent that will be refunded at the end of your tenure if you leave the place in neat condition. To maintain and have a smooth sailing to your new home, save money to cover these expenses.
Moving Costs: Truck rental, hiring movers (if needed), packing supplies
If you’re moving out, hiring professional movers, or renting a truck to shift your things, you need money. Data reports that the average cost of hiring a moving firm in the USA is $1250- for local distances and $4890 for long distances. Many moving costs need to be looked into, ranging from a few hundred to a thousand dollars. Moving out for the first time will be inexpensive as you’ll have fewer things to shift. Before you move out, get moving cost quotes from companies, compare prices, and decide. Be flexible and save on moving costs by moving out during the mid-week or mid-month.
Building an Emergency Fund
No matter how carefully you spend, expenses will come up. An emergency fund will help in such situations. A wise and essential step to moving out is to save and secure an emergency fund. Take it step by step, saving $1000-$2000 in your emergency fund. This amount can cover unexpected costs like car, health, utilities, or other needs. The emergency fund acts as a security measure for your finances. Build your emergency fund till it’s sufficient to cover two months of expenses.
Experts recommend 3-6 months’ worth of living expenses in case of job loss or unexpected costs
Be prepared before moving out. Experts suggest you save 3-6 months of your salary before you move out. This will help you during unexpected situations, emergencies, or even if you lose your job. This money should cover moving costs, rentals, utilities, groceries, etc. If you lose your job, the money you have saved should help you until you get a new job. Follow the thumb rule of getting a monthly income three times your rental or mortgage payment.
Start by saving a smaller emergency fund ($1,000 – $2,000) and gradually increase it
Having an emergency fund will help you during difficult situations. Save money every month from your income as part of an emergency fund. Start slow and eventually save money equal to 3-6 months of your income before moving out. This amount will help you spend on utilities, unexpected expenses, deductibles, getaways, and other needs for which you don’t have to borrow or take a loan.
Income vs. Expenses
Before moving out:
- See if you can afford to live independently.
- Check your income. Can you manage expenses with your salary, or do you need to wait longer before moving out?
- Create a monthly budget and plan how to spend and save money.
- Slowly build this plan by including extra expenses like rent, transportation, etc.
Minus your expenses from your income, a negative number means you need to earn more to cover your bills. If the number is positive, plan well to save money left over.
The 30% rule: Aim to keep housing costs below 30% of your income
Regarding housing costs, experts suggest following and sticking to the 30% rule. The rule is to spend at most 30% of your gross monthly income (the amount before tax or other deductions are done) on housing. Allocate 10-15% of your income for utilities and other necessities. This rule is a guideline that will help you plan and budget well for the lifestyle that suits you.
Ensure you have sufficient to comfortably cover all expenses with some buffer for savings and leisure
Moving out might be overwhelming, but take your time; save enough money, plan well in advance, and have a budget before you move out. Stick to your budget and stay consistent; this will help you in the long run. Split your income into categories like rent, food, groceries, savings, and other costs, and set aside a budget. Ultimately, you need to have money to save as an emergency fund. Avoid spending beyond your means; keep it simple, essential, and yet a fun-filled lifestyle.
Factors Affecting Your Savings Goal
Saving is an essential element of financial planning. Determine your savings goal, why you want to save money, how you can save money, and work toward it. Make sure you spend and save your income wisely. Avoid impulse buying and overspending. Cutting down on unnecessary costs will help you save money. If you have debts, try clearing them as soon as they pile up, and you might pay considerable interest. Please avoid using your credit card often, as they can increase debt; instead, pay in cash for your purchases. Inflation is another factor that affects savings. Higher inflation rates will make you spend more. Start to save money from a young age to secure your future!
Cost of living in your area: Research average rental costs, utilities, etc
One of the essential costs of living in the USA is housing, which varies depending on location, size, and type of housing. Housing costs are usually high in major metropolitan regions like NYC, LA, and San Francisco. Nevertheless, costs can be reasonable and affordable in various small cities, rural areas, and towns. Property tax and house owner insurance are added to your rental utilities. Tax rates vary based on demographics, size, and house age. Be ready; save money to pay housing and taxes!
Lifestyle choices: Eating out, entertainment, etc., will impact needs
The money you spend on dining out, entertainment, and other impulse buying can affect your needs. The choice of food we intake every day will determine our mental and physical well-being. Take time to cook meals at home; this can be fun and help you learn new dishes. Host parties or family get-togethers within a budget and call friends and family over. Spending lavishly on food and outdoor activities can soon empty your pocket and break you. Be wise with your lifestyle choice; keep it simple and healthy.
Sharing expenses Consider roommates to split costs
Sharing your house with a roommate is an excellent way to save on rent. Having a roommate can help you move into a more prominent place that can’t be afforded all by yourself. While selecting roommates, be careful. Choose someone with a similar lifestyle and habits. Pen down financial needs and document discussions about finances to avoid confusion. Safeguard your identity and personal details in places that cannot be accessed. Build a positive bond and friendship with your roommate for a happy and healthy stay.
Conclusion
Owning a place for yourself can be tempting, but it comes with tremendous financial responsibility. Take time to understand and go through your financial state. Be prepared to move out by reading and following the points mentioned above. Planning, budgeting, saving, using credit cards responsibly, having a good credit score, being responsible with expenses and sacrificing now to meet your financial goals will help you stay at peace in the long run. Beem is here to help you if you are looking for apps. Download the app and secure your finances.
