housing budget

5 Steps to Being Financially Prepared to Move Out on Your Own

August 13, 2020 By Tamila McDonald Leave a Comment

Getting financially prepared to move out requires action. Often, you’ll need to take specific steps to ensure you’re ready to live independently. Otherwise, you may experience a notable financial hardship that derails your budget incredibly quickly. Luckily, it isn’t hard to begin on the right path. If you want to make sure you are financially prepared to move out on your own, here are five steps you need to take.

1. Research Local Living Expenses

Many people underestimate what it costs to live on their own. Along with handling rent or a mortgage payment, you’ll also need to pay utilities, garbage collection, and insurance, at a minimum. There may also be other expenses, depending on your area, like parking space rentals or homeowner’s association fees. Plus, there could be additional costs, like the need to buy your own groceries, that may be new to you, as well.

Before you move out, get financially prepared by reviewing the local cost of living and going rates for many common expenses. That way, you’ll have a complete picture of what you’ll need to spend when you strike out on your own.

2. Create a Household Budget

After researching local living expenses, make sure your financially prepared to move out by creating a household budget. Even if you are dealing with estimates for utilities and similar costs, it will give you a solid idea of how far your income does (or doesn’t) go.

Plus, this allows you to address any other financial obligations. This includes existing debt payments and optional spending.

3. Set Aside Money for the Transition

When you first move out, you’ll often face costs related to the transition. For example, if you’re going to rent a place, you may need to pay first and last month’s rent, as well as a security deposit. For aspiring homebuyers, earnest money, inspection costs, down payments, and similar expenses have to be handled during the buying process.

Additionally, with your first place, you may need to acquire a variety of items. Many people don’t own their own kitchen trash can, mop and broom, vacuum, shower curtains, and similar items until they get a place. If you don’t have that stuff, you need to account for the cost of buying it all.

After you know how much you need, you can set aside money to assist with the transition. That way, you don’t have to turn to debt or get stuck having to pause your move out plans because you can’t handle some of the expenses.

4. Establish an Emergency Fund

Having an emergency fund is a must if you want to be financially prepared to move out. It ensures you can deal with the unexpected once you are on your own without having to turn to debt.

Ideally, you want at least $1,000 set aside before you get a new place. However, if you can stash three to six months of living expenses, that may be a better approach. That way, if you experience an unexpected job loss, you can still cover your bills for a period.

5. Review Your Credit History

Most landlords and all mortgage lenders are going to check your credit. As a result, it’s wise to know what’s on your report before you begin looking for a new place.

Everyone can check their credit reports for free once a year. You can head to AnnualCreditReport.com to access yours. While these reports don’t have your credit score on them, they do show what’s been told to the bureaus. If you see a discrepancy, you can then work to address it, ensuring your score would be in the best shape possible.

However, if you have no or poor credit, you may want to spend a little time building up a good history before you move forward. Otherwise, you might have to get a cosigner or could be denied when you apply to get into a new place.

Exactly how you build up your credit will depend on your unique situation. If you have existing debts that are reporting to the bureaus, work to maintain a good payment history and reduce your balances.

If you don’t have any history, you may need to open an account – such as a credit card or a personal loan – to begin building one. Just make sure to proceed with caution and act responsibly. Otherwise, you could hurt your situation instead of helping it.

Do you know of any other tips that can help someone be financially prepared to move out? Share your thoughts in the comments below.

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How to Set Budget Percentages

March 22, 2017 By Amanda Blankenship 3 Comments

Setting up a budget can be difficult, especially if you are trying to budget for an entire family. When you sit down to set up a budget for the first time you may have a lot of questions. The sole purpose of setting a budget is to get your spending habits into check and identify areas where you can save money. One of the most difficult numbers to come up with while making a budget are the percentages of your annual or monthly income that should go to certain categories within your budget.

To find your personal budget percentages you can identify the average spending percentages nationally. For instance, if the average American spends 24 percent of their monthly income on housing you can use that percentage in your budget as a guideline. You can also track your spending and create percentages off what you already spend. So, how should you go about setting up your personal budget percentages?

Setting Budget Percentages

The amount of money you need for the “perfect” budget depends on a number of factors. Where you live, if you have small children, health issues, etc. For example, a married couple with no kids will spend far more money on clothing and entertainment than a married couple with three children. Also, lower income families tend to spend more money on food than higher income families. Spending from family-to-family and even between individuals varies by income level, family size and your overall location. Since these three things can differ greatly from situation-to-siutation there is no truly perfect combination of budget percentages.

Average Budget Percentages

Average budget percentages across the United States are figured out by taking a look at the budget percentages of everyone in America. These percentages include individuals as well as families in the U.S. Here are the national average budget percentages in the U.S.:

Category	Percentage of Overall Spending
Housing	24%
Utilities	8%
Food	14%
Clothing	4%
Medical	6%
Donations	4%
Savings/Insurance	9%
Entertainment	5%
Transportation	14%
Personal/Debt Payments	12%

The percentages in the table were gathered from the U.S. Bureau of Labor Statistics Consumer Expenditure Survey. These numbers are simply the national average. They may not work for everyone’s personal budget. Along with family, location and overall income, your other personal finance goals may come into play. For instance, if you are trying to pay off debt your budget may look a lot differently than someone who holds no debt. What budget percentages should you use if you are trying to get out of debt? Dave Ramsey, hailed a financial guru, weighed in on the budget percentages and how much each category should be allocated. Here are his numbers:

Category	Percentages
Housing	25-35%
Utilities	5-10%
Transportation	10-15%
Healthcare	5-10%
Food	5-15%
Investments	5-10%
Debt Payments	5-10%
Donations	5-15%
Entertainment	5-9%
Personal	2-7%

How to Create Budget Percentages

No budget will ever be the same, however, everyone has to start somewhere. You can use the national average percentages or even the percentages Dave Ramsey charted out to begin your budget. You will likely have to do some tweaking to fit your personal needs but these percentages provide a good guideline. You will be able to identify within weeks areas where you can spend less and areas where you may have to spend more. Where budgets are concerned you will have to alter everything to whatever works best for you.

Budgeting Apps

There are a few budgeting apps and other tools readily available to you that may help with your budget. One of the most popular apps, Mint, helps you create a budget with personalized percentages. It gives you alerts to areas where it thinks you can trim your budget and it will also give you alerts when bills are due. You can get the Mint app for most devices (both Android and Apple products). If you don’t like the Mint app there are a number of other apps you can use to help create a budget for yourself and your family.

What budget percentages do you use? Do you think these percentages are accurate? Let us know in the comments.

Photos: CafeCredit.com and jridgewayphotography

Renting or Homeless? Minimum Wage Challenge

December 11, 2012 By Jeffrey Strain 18 Comments

One of the biggest decisions I need to make that will determine whether this living well on minimum wage challenge will be successful or not is my living conditions. I’ve spent a lot of time thinking about this and there is little doubt that renting would definitely be the safer, cheaper option.

The first question I asked myself was do I really need to pay for a place to live? Could I create an arrangement where I could live someplace for free? Would it be possible to find someone leaving the country for a year and housesit for them in exchange for a place to live? Could I find a family that would let me live rent free if I was willing to do their grocery shopping for them since they would end up getting thousands of dollars worth of food each month for pennies on the dollar? Could I find a place with an older couple that would trade basic maintenance for a room? While I think these possibilities are out there and that it’s worthwhile keeping my eyes open for them as I do this challenge, they probably are not ones that I could arrange before the beginning of the year. So while I will keep these in the back of my mind, I needed to look at some more realistic possibilities for the beginning of the New Year.

The next question became what type of rental could I get that was inexpensive, yet still a decent place to live. Looking through advertisements it quickly became apparent that renting an apartment for myself, even if just a studio, was going to be $400+. Then there would be the need to furnish and to pay utilities and other fees. Even worse, most had a minimum of a 6 month commitment, with most wanting a year. While this certainly could be done, it would be pretty basic and wouldn’t allow me to take advantage of other opportunities if they arose.

As I continued to explore, it became apparent that renting a room within a house was often priced in about the same range, but often came with furnishing and sometimes with utilities and other fees included. There were still time commitments on most, but many would allow for a month to month for a slightly higher price. The trade-off was that there would be a lot less privacy since the kitchen and other rooms would be communal. While ideally I would prefer a place all to myself, I think that the better house conditions and locations would make a room in a house a better overall deal given the right circumstances. I began to search to see what I could find in this area.

After sending out some emails and making some calls to family and friends, I was able to find someone who was looking to rent an extra room in their house for $400 a month with a six month commitment which would include all utilities. They would be willing to do a month to month arrangement for $475 a month. It’s already furnished so I wouldn’t need to buy anything extra which would be a great savings. I would have my own bathroom and shower, but the kitchen and living room would be shared. That would be a flat $4800 for the entire year if I went with the 6 month commitment, it would be easy to budget, and there would be little risk involved with additional or unexpected charges hitting me from out of the blue.

If this was simply a “minimum wage challenge,” this is probably the choice I would make without hesitation. If finances were the only aspect to the challenge, it would be a no brainer. However, an essential part of this challenge is the “living well” portion. For me, that means getting out and traveling a fair amount. Living in a set place would greatly inhibit my ability to do this, especially on such a restrictive budget.

With this in mind, I have decided to stay purposely homeless for a three-month trial period. While there is a chance that the room will get rented out while I’m doing this trial period, I know that the person is only willing to rent out the room to someone they know well which means that there is a fairly good chance that it will still be available in three months if I need it. It’s a risk, but one that I think is worth taking to see if I can make the full-time traveling work. Basically, I’ll have an opportunity to try to do the traveling that I love to do, and have a back up plan if it isn’t working out quite as well financially as I hoped.

Of course, as soon as my sister heard I made this decision, she cried foul and said I was trying to cheat. She immediately demanded that we set a new rule to the challenge that I’m not allowed to spend more than a week with the same family member or friend per month (with the one exception being at her house where I am more than welcome to stay as long as I want to babysit her kids). Basically, she was afraid that I was going to stay long periods of time with someone for free, and that wouldn’t have made the challenge hard enough in her eyes (because, apparently, that is her main concern in all our bets — to make things as difficult as possible for me so that she can win). I figured that since doing so would defeat the purpose of why I decided to choose “homeless” in the first place (to travel more) that it was something not worth fighting over and accepted the new rule.

This choice comes with some risks, especially when compared to having a fixed living cost of renting. The main one will be the cost of hotels. There are times when the unexpected happens and I find myself in a position where I end up having to pay far more than I expected for accommodations. A perfect example was on one trip I took when I pulled into a small town mid-week where I was sure I could find a cheap place to stay only to find out that there was a popular festival going on that had most of the rooms in town booked. I ended up having to pay $150 at a dive motel, and if something like this happens too often, it could quickly ruin the budget. I think with better planning and less of the “OK, let’s just start driving as see where I end up” attitude I usually have, I should be able to avoid most of these costly mistakes.

This will also raise the cost of my food. Although I think that I can still keep costs at pretty low levels, living on the road means that couponing will be a lot more difficult (it’s hard to find deals in areas where you aren’t familiar with the stores) and it won’t be possible to stockpile the great deals the way I could if I had a place of my own. This is another area I will need to think through since it does get easy to spend a lot on food through convenience and restaurants when on the road.

So the question is, will I be able to cut down the costs of my current living lifestyle to the $400 – $500 a month range? I would estimate that these expenses are currently running in the $1000 – $1500 a month range (again, I don’t usually budget, so I’m not exactly sure), if not a bit more. There are certainly things that I can do to bring these costs down, but I’m not sure if it will be enough. That is why I will be giving it a 3 month trial period, then go onto plan B if I find that it’s just not possible for me to get down to a spending level that will allow me to remain within the budget.

While I’m aware that me choosing this option means that it’s extremely unlikely that is will apply directly to the vast majority of the readers of this challenge, and not nearly as much as renting a place would, my hope is that it ends up proving to be much more inspirational than renting would (and who knows, I may end up being there in a few months anyway). While renting would be the safe bet and be more applicable, it would also be a pretty boring choice in that I have locked in everything I could (no fluctuating utilities, no need to buy furnishing, etc). Locking in these costs when renting is the financially prudent thing to do, but it also doesn’t allow for many situations where I would need to make hard choices. I believe that by traveling, I will have much more opportunity to go through the decision-making process of choices before me. I believe it’s that decision process and looking at options creatively that ends up being a fundamental skill that can help people save money no matter the situation. I will certainly have to have my creative money-saving juices flowing to make this work…

Next entry: Car or Carless

(Photo courtesy of katerha)