Living with your parents may create a false sense of financial security if you have no direct responsibility for the majority of expenses. Even if you pay a portion of the bills, there are many costs associated with moving out and living on your own that may be new to you. Now that you are ready to leave the nest---even if it is not for the first time---it is important to understand how to budget to ensure that you are financially prepared for the freedom you seek.
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Knowing your monthly income is the first step in how to budget. It may sound simple but until you have a firm number to work from you can't budget effectively. Work from net income (what you take home after taxes and deductions), if possible, to simplify the process. Always use the lowest probable income if it fluctuates from month to month.
Plan for one-time budget costs associated with your move like moving vans, rental application fees and deposits, utility set-up costs and even your first big grocery-shopping trip. Include any household set-up costs like furniture, sheets, towels and kitchen items. Set aside funds for the initial moving expenses without depleting all your funds in case of emergency.
Build your long-term budget by listing every single living expense you can think of, including the things you currently pay for and the new things you will begin to pay for when living on your own. Get ideas on how to budget from friends who already live on their own, budgeting worksheets and your own parents who currently pay many of the kind of bills you will soon be facing. Don't forget things like eating out and entertainment.
Calculate any additional automobile insurance costs that might arise due to moving out of your parents' house and off their insurance plan.Transportation can also be a large budget item if you drive your own vehicle.
Take a trip to the local grocery store with a calculator and walk the aisles with an average weekly list to see how much you will need to budget. Food can be a significant expense especially if you will be including restaurant visits in your budget.
Determine what your monthly payments need to be to reach your pay-off goals for any debt you've incurred, like student loans or credit cards, and include the total amount in your monthly budget.
Allow for variable cost items not purchased each month like cleaning supplies and light bulbs. Entertainment, medical costs and emergencies are also categories that may not come up each month but which will eventually need funding. Too often these items are left off of the budget when moving out of your parents' house, but they can add up to a significant sum.
Cut back where you can, if your budgeted expenses exceed income. Consider sharing expenses with a roommate if the housing portion of your budget is too high for you alone, but you are still determined to move out of your parents' house. Plan to eat out with friends less often. Compare the costs of public transportation to the costs of car ownership, which would include fuel, repairs and insurance.
Tips and warnings
- Create a budget several months before moving out of your parents' house, so you can test it and make changes. Put the money you "spend" on the test budget into a savings account.
- Be sure you understand all of your new financial obligations when moving out of your parents' house and, in particular, those you must sign in writing such as leases.
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