Are You Ready to Move Out? Here's a Guide
For most young people, to move away from home is the most daunting experience to face. The prospects of finding a home that is comparable to the home and lifestyle they are familiar with can be very challenging.
Moving out of your family home is one of the biggest adult milestones. However, this dream is a bit harder to reach now as compared to previous decades. A report compiled by Pew Research Center says that 19 per cent of young professionals, move back with their parents after graduation. Rising student debt, lack of job security, and cultural upbringing are just some of the reasons why men and women among younger age groups choose to stay at home.
Despite the odds, it doesn’t mean that your dream of striking out on your own is impossible. There are some things that you can put into consideration before taking the next step. Taking note of these factors will help you to be more prepared and avoid moving back to your folks’ place one day.
Keep Existing Debt in Check
One of the biggest reasons why millennials today move back into their parent’s home is because of the crushing burden of debt, particularly student loans that get harder and harder to pay. That is why many financial experts recommend that you start paying off these loans as early as while you’re still in college. If you have graduated, consider refinancing or consolidating your existing student loans to find a way to make the payments more manageable so it won’t hit you hard once you move out.
Avoid these 5 Mistakes People Make When Trying to Get Out of Debt
Getting out of debt is not an easy journey. It takes time, discipline, and sacrifice to successfully do it. For one, it takes a significant change in financial lifestyle and spending habits if you are determined to get out of debt. This means cutting back on eating out, buying new gadgets and jewellery, and taking vacations — all made more difficult to do by targeted ads everywhere, any time of the day.
While it is without a doubt, one of the most daunting tasks you’d have to do in your life, getting out of debt is possible, provided that you are committed and serious about this life-changing decision. However, just like any endeavour, you are bound to make mistakes. Here are some you would want to avoid to keep yourself on track in overcoming this financial challenge.
Mistake #1: Setting an unrealistic budget.
Once you have committed to paying off your debt, possibly within a timeframe. Set yourself a monthly budget to work with and set aside some cash for debt payments. Do not make the mistake of setting an impractical and unrealistic budget to make room to pay for debts. Make sure to take into account all your financial needs such as groceries, housing, utilities, insurance, retirement, emergency fund, and other important parts of your budget. Make sure that the new budget is not too far away from the one you’ve been following for years. Ease your way into it and evaluate if you can set aside a few more bucks for debt payments in the following months.
Mistake #2: Falling back into the old spending habits.
Since you are working around a new budget, you will need to adjust your spending habits. Start with the little things such as drinking coffee and eating breakfast at home and preparing packed lunches every day. If you shop for new clothes every week, try to limit it to once every month if you can. You might have to remove your browser bookmarks for online shops for now to avoid the temptation.
Mistake #3: Cutting into your emergency fund and retirement savings.
Do not stop allotting money for your emergency fund. With or without debt, you need three to six months worth of monthly expenses for emergencies. Also, continue contributing 5 to 10 per cent of your monthly income to your retirement fund. When it comes to retirement savings, time is your powerful tool, so putting it off or stopping can hurt your retirement years.
Mistake #4: Paying off all debts at the same time.
It’s possible that you have more than one source of debt – may it is credit cards, mortgage, or student loans. It would help if you prioritise paying off the debt that incurs the highest interest. Religiously stick to your budget and pay off your debts one by one, starting with one that has the highest interest.
Mistake #5: Doing it alone.
It’s understandable if you do not find seeking the advice of relatives and friends regarding your finances a good idea. The good news is you don’t have to. There are nonprofit organizations you can get free help from. Credit counsellors from these agencies can provide suggestions on debt settlement and management, credit consolidation, and debt-relief programs.
Grow Your Savings
Due to debts and expenses, saving money is something that most young people overlook in their life after graduation. This is especially true with the current generation as they have a shocking negative 2% per cent savings rate according to A Wall Street Journal to report. If moving out is your goal, make sure you have personal savings of at least 3 to 8 months’ worth of your income to finance your independence and live well.
Start and Maintain a List of Expenses
Creating and maintaining a budget is an art and science that you should master before even owning or renting a house or apartment of your own. Thankfully, there are numerous ways now of tracking down your expenses from old school notebooks, simple Excel spreadsheets or different money management apps. This will help you be on top of things like your monthly bills, dues, and even incidental expenses like home or auto repairs.
Seek Out Additional Sources of Income
Millennials are often distinguished by their love for innovation and entrepreneurial spirit. Why not live up to this positive stereotype and find creative ways to supplement your income? Freelancing and building a side venture are just some examples worth looking into. This will help you build your purchasing power and savings, which can greatly help you once you decide to live independently.
Build Up Your Credit Score
Taking in more debt after managing to pay off most, if not all your student loans may sound counterintuitive at first. However, building your credit score through loans and other types of financing can help institutions build trust in your ability to pay your own rent or mortgage, which will help you in the long run.
To Move out and live your adult life to the fullest is possible when you make the right decisions with your finances. All you need is to keep yourself informed and open to different options that can lead you to your goals.