How to Budget for Living on Your Own for the First Time

If you can’t wait to move out of your parents’ home and start living on your own, you’re not alone. Independence is amazing, but enjoying that newfound freedom can be more expensive than you might think. Fortunately, there are tons of helpful websites, mobile apps, and online budget calculators that can make managing your finances fun. And by incorporating these tools in your everyday life, you can develop a realistic budget and start saving money for the things you enjoy.

If you’ve been asking yourself “How much money do I need to move out?” here are a few tips to help you start adulting like you’ve been at it for years.

Common Mistakes When Moving Out for the First Time

Perhaps the biggest mistake young adults make when moving into their first apartment is not making a budget. The principle is simple: First figure out how much income you’re earning each month, and determine how much you’re spending and on what. Then, based on those numbers, set aside a certain amount of each paycheck for rent and utilities, and actively track your spending so you can prevent overdraft fees and don’t run out of cash.

Budgeting apps like Mint automatically import and categorize your living expenses (like how much you spend on fast food and concert tickets each month), giving you a bird’s-eye view of your financial standing in seconds. You can also use a notebook or spreadsheet to track your spending if you prefer to kick it old-school. The point is, creating and sticking to a monthly budget is the single best thing you can do to prevent a financial catastrophe. It might even be among the most valuable life skills you’ll ever develop.

Another big mistake young adults make when first moving out of Mom and Dad’s is not saving any money. You might wonder what the point of saving is if you only have a handful of dimes left over from each paycheck. It’s difficult to save when you’re living paycheck to paycheck, but even saving just $5 a week is better than not saving at all. And you’ll definitely thank yourself for having stashed away that cash when your car starts making weird noises or if you sprain your ankle at a music festival. Learn a few easy ways to save money here.

Paying bills late is also common among the newly independent. Avoid this nasty habit by setting up reminders on your smartphone or using an online calendar to alert you a few days before bills are due. Or, better yet, start paying your bills as soon as they arrive. Not only are late-fees crazy expensive, but if you regularly miss due dates, you could be crippling your credit score. Paying a bill late, even if only by a day or two, makes it more expensive to borrow money when you want to finance a car, house or some other major purchase. Look out for your future self by paying your bills promptly.

Before You Move Out for the First Time

Answer a few of these questions before moving out for the first time:

Can you cover your bills?

The most important thing you need to determine before you move out is whether or not you’re going to be able to pay your bills. You’re going to have to create a detailed budget to determine what your living costs will be. A budgeting app can help you.

Do you have an emergency fund?

Some people spend so much on living expenses that they don’t have any money to be used as emergency funds. An emergency fund is money you can use if you have an immediate and unavoidable expense, like a broken-down vehicle or medical costs. You might want to reconsider moving out if you don’t have any emergency funds in the bank, or if you’re not going to be able to save enough money to contribute to emergency funds.

Do you have renter’s insurance?

Renter’s insurance will cover anything in your rental that gets stolen. It’s usually a good idea, because most landlords won’t cover theft — and some even require that you have renter’s insurance before signing a lease. If you’re going to buy renter’s insurance, you’ll have to include that in your overall budget.

Will you have a roommate?

If you’re going to share your apartment with a roommate, you might be able to cut down on certain costs significantly. For example, you and your roommate might be able to split rent and utilities bills.

Do you have money for rental fees and deposits?

When you move out for the first time, you’ll have to pay a security deposit on your new apartment (typically it’s one month’s rent). Many rental applications have fees that you’ll have to pay, which are typically around $50. Make sure you have money for these costs before you move out.

Do you have furnishings?

If you don’t have furnishings for your apartment, you’ll probably have to buy new furniture. You should include new furniture as a one-time living expense on your budget. Remember that you don’t need a fully-furnished apartment right away. It’s most important that you have a comfortable bed to sleep in. You can add cozy sofas, tables, and chairs later.

Preparing for Expenses You Hadn’t Considered

In order for a budget to work, it has to account for everything you spend money on. This includes little things like parking lot fees, late-night drive-thru meals and random convenience-store purchases. Like to rent movies on the weekend? Add it to your budget. Tend to drop a few bucks on mobile apps or lotto tickets each month? Include those as well.

Those living away from home for the first time are bound to face a flurry of unexpected expenses during their initial months of independence. In the kitchen alone, you’ll likely need to invest in dishes, cookware, and a dozen ingredients to stock your pantry. And when it comes to keeping your home looking good, it’s easy to underestimate the cost of cleaning supplies. Netflix and Spotify subscriptions are also often overlooked, as are annual bills like vehicle registration and tax preparation. To create a realistic budget, you should first spend some serious time looking at last year’s expenses to make sure you’re not missing anything.

Money-Saving Tips for Moving Out at 18

Here are a few basic ways to cut back on expenses during your first years of independence.

1. Don Your Chef’s Hat

Cooking your own meals on a daily basis can save you more money than just about any other change in your behavior. Knowing how to make five basic meals (say, chili, tacos, chicken and vegetables, spaghetti with marinara sauce, and a slow-cooked roast with veggies), and having a microwave handy for reheating leftovers, can cut your food expenses in half. An added bonus: Homemade food is almost always healthier than prepared meals.

2. Kill Some Kilowatt Hours

Get into the habit of turning off—or even unplugging—lights, appliances and electronics when you aren’t using them. And consider getting a programmable thermostat to keep heating and cooling costs down.

3. Quit Using Credit

Only carry one credit card, and commit to only using it in absolute emergencies. Using cash or a debit card for day-to-day expenses prevents you from overspending and accruing budget-busting interest charges.

4. Explore Other Avenues

Consider all your transportation options. Do you really need to drive everywhere, particularly if you have to pay for parking once you get there? And with Uber, Lyft, Car2Go and other ride-sharing services now widely available, city dwellers might even consider ditching their cars completely. The cheapest gallon of gas is the one you don’t use.

Things to Include in Your First Budget

Show Mom and Dad you know how to move out the smart way by creating a monthly budget and sticking to it. Summing everything up, here’s a quick list of items you’ll probably want to include.

Rent

Your rent expense is most likely going to be your largest expense. Try to sign a 1-year or 2-year lease so you can go as long as possible without any rent increases. Of course, bear in mind whether you’ll need to move out before that. Another important rule of thumb is to try not to spend over 30% of your income on rent if you don’t need to.

Debt

Lots of people who are moving out for the first time have to pay some sort of debt. Most of the time it’s loan debt from student financial aid. Be sure to include these payments in your budget.

Utilities

You’ll have to pay a separate bill for electricity, gas, water, cable TV, internet, and other similar things. Internet and cable usually have fixed rates, but with electricity, water, and gas, you’ll have to pay for what you use. Most people pay around $50 to $100 on their utilities, depending on the area.

Meals

Most people forget to factor in food costs. Food may not be one of your larger expenses, but it’s a necessary expense. You can cut down on food costs by cooking your own meals.

Transportation

Transportation costs might include flights, cab rides, auto insurance, and vehicle registration. It’s most important that you budget for the transportation you’re going to use every day. If you’re going to be driving to work, calculate your fuel costs and insurance costs. If you’re going to use public transit, try to calculate daily transit costs. Lastly, try and leave a little extra space in your budget for rideshare costs and flight costs (just in case you want to fly home for the weekend and visit your parents).

Medical

If you have your own health care plan, be sure to include it in your budget. You should also leave some extra room in your budget for prescription drugs and appointment copays.

Entertainment

Some folks spend so much money on living expenses that they wind up being “house poor:” that means they have no extra cash for doing fun things, like going on vacation, having date nights, or going on impromptu adventures. Be sure to budget for fun things, too, and remember that you don’t have to spend a whole lot of money to have fun.

Clothing and toiletries

A lot of first-time apartment dwellers forget to budget for clothing and toiletries. Be sure you account for clothing costs, as well as costs for soaps, shampoos, and shaving cream.

Subscriptions and memberships

Budget for your gym membership, magazine subscriptions, and subscriptions to streaming services.

Gifts

From time to time, you’ll need to buy gifts for birthdays, weddings, baby showers, and holidays. Leave some room in your budget for these expenses.

Pet care

If you have a furry (or scaley!) friend, be sure to budget for veterinary costs and animal medicines.

 

You Need a Financial Cushion

A good rule of thumb you might’ve heard is, in the event of an emergency, everyone should have a financial cushion substantial enough to cover three to six months’ worth of living expenses. And while there’s no arguing the soundness of that advice, many people think that’s simply not possible and they don’t even bother trying.

But even if you don’t have half a year’s salary chilling in your bank account, having some money set aside is better than none. There are countless ways to work toward building an emergency savings account, from setting aside loose change at the end of every day and depositing it in the bank at the end of the month, to having a percentage of your paycheck automatically stashed away in your savings account. Many first-timers use the simple 50/20/30 rule of budgeting to ensure a balanced bank account, which splits your monthly expenses into:

• Essentials: 50% of your income
• Wants: 30% of your income
• Savings: 20% of your income

Use our calculator to set up your own 50/20/30 budget.

Start now, and even if you only save a few dollars a week, it will add up over time, and help you avoid financial hardship later on.

Learning how to make a budget isn’t the most exciting thing you’ll do when first moving out and living on your own, but it can mean the difference between just getting by and making the most of your money.

Not using Mint yet? Download our free app today and you’ll be budgeting like a boss before you know it.