Moving out on your own brings with it some mixed emotions.
On the one hand, you’re finally spreading your wings. You achieve a new sense of independence and have taken another step in your life’s journey.
On the other, you now have a bunch of new responsibilities to keep in mind. Your monthly outgoings will shoot up because you’re not relying on other people. It’s a bit of a shock, especially for people who might not have contributed to household expenses before.
You need to prepare a budget so that you know exactly what to expect.
This article takes a look at the most common costs that you’ll face when you move out on your own. It also offers a few tips to help you save a few dollars that you can put towards your expenses.
Let’s start with your expenses. You’ll have both regular expenses and occasional expenses to consider when you move out on your own. You need to create a budget that accounts for all of them to ensure your financial stability.
The regular expenses include the following:
Regular Expense #1 - Mortgage/Rent Payments
This is the most obvious and vital expense that you have to deal with. The amount you pay each month depends on the cost of the property you’ve bought or the rent that the landlord sets. It’s best to set up a direct debit to handle this payment automatically. Missing a mortgage or rent payment can have a serious impact on your credit score. It also only takes a few missed payments to default on a home loan. Speak to your lender if you anticipate running into trouble.
Regular Expense #2 - Council Rates
Again, these vary depending on the property. You’ll generally find that you pay higher council rates for a house than you would for an apartment. The rates also vary depending on the state and region.
Regular Expense #3 - Insurance Costs
You need insurance to cover yourself if something happens to the property or its contents. It’s generally a good idea to have both home and contents insurance. You may also pay for insurance for a vehicle or a business, which adds to your regular costs.
Regular Expense #4 – Transportation
Whether you take public transport or own a car, you’re going to spend money on transportation. You particularly need to budget for your commute. After all, if you can’t get to work, you can’t earn money.
If you drive, try to come up with a figure based on the amount of fuel that you use. It’s a little easier to anticipate how much you’ll spend if you use public transport.
Regular Expense #5 – Utilities and Bills
How much you pay for utilities and bills depends on your situation.
If you’re a new homeowner, you have to cover everything. That means you’re paying for water, gas, and electricity. You also have to pay for a phone line and for the internet.
Renters may find that they get a reprieve here. Some landlords build their utilities costs into the rent payment. Or, they may just handle them for you. Either way, it makes them a lot easier to deal with.
Regular Expense #6 – Food
You’re going to do the weekly grocery shopping for yourself now. That means you need to set aside a few hundred dollars every month for your food.
The amount you spend obviously depends on the types of food that you buy. As an early tip, try to avoid buying too many name brands. They add dollars to your outgoings that you really don’t need to spend.
Regular Expense #7 – Subscriptions and Memberships
Most of these come with a monthly fee that you have to meet. Thankfully, you can also get out of most of them fairly easily if you find they become too much of a burden.
The exception comes for contracts that lock you in for long periods of time. In those cases, you may have to pay an additional fee to break the contract.
Where possible, try to sign a rolling contract that offers flexibility.
Regular Expense #8 – Your Savings
It’s worth classing your savings as an expense so that you get in a routine of not spending the money.
You also need savings to cover you in case something goes wrong around the house. They’re your rainy day fund and your key to buying more expensive items later on.
You don’t have to save a lot right off the bat. Even putting $50 per month into a savings account is a good start. The key is to build saving money into your budget and prepare for the future.
The Other Expenses
That covers most of the outgoings that you’ll face on a weekly or monthly basis. However, it doesn’t cover all of the one-time expenses that you’ll have to deal with. These include, but aren’t limited to, the following:
There are many more one-off and unexpected expenses that you may face besides these. However, there’s enough there for you to build a decent budget that covers most of your costs.
Of course, knowing your expenses is only the first step. You still need to meet those financial obligations. And for someone who’s living alone for the first time, things can get a little tight.
These tips will help you to save money here and there that you can put towards your expenses.
Tip #1 – Eat Home-Cooked Meals
We all know the temptation of going out for food or ordering in after a tough day at work. You tell yourself that you don’t have the time to make yourself a decent meal. You end up spending money on having someone else make your food for you.
That’s fine as an occasional treat. However, it’ll cost you hundreds of dollars more than preparing your own meals over the course of a month.
Take the time to cook for yourself wherever possible.
Tip #2 – Turn off the Lights
Utilities bills can really weigh down on you if you’re not ready for them. Unfortunately, your own energy usage habits can raise your costs even further.
Take a more energy-efficient approach to life in order to save a few dollars on the bills. Turn off the lights in any room that you’re not actively using. Don’t leave appliances on standby, as that slowly drains electricity. Plus, you can crack open a window instead of always relying on the air conditioning to cool you down.
Those are just a few suggestions. Taking shorter showers means you spend less money on water. Buying newer energy-efficient appliances will save you a lot of money in the long run.
Go green and you’ll end up with more money in your pockets.
Tip #3 – Ditch the Credit Card
Ditch may be too strong a word. A credit card can prove handy for helping you to deal with emergency expenses.
However, you do need to control how much you spend on credit. Remember that debts pile up. You not only have to repay the money that you spent, but you also have to pay interest. That’s without mentioning the fees and penalties a credit card company may charge you for missing a payment.
Going without is the best advice here. To avoid interest charges, pay your monthly credit card bills in full before the due date. If your budget doesn’t allow you to buy something comfortably, avoid putting it on credit. You could end up in a lot of trouble, especially if you’re only just covering your expenses in the first place.
Tip #4 – Don’t Make Impulse Purchases
This is a touchy one because so many shops try to encourage impulse purchases. They put desirable items near the tills in the hopes that you’ll pick something up. Or, they’ll create layouts that practically force you to walk past things you might want.
Self-control is the key. Impulse purchases may give you a little rush of satisfaction. But that rush starts to ring hollow if the purchase has a bad effect on your budget.
Make a list of the things that you need to buy before going to the shop. Withdraw the money you need and then leave the cards at home. If you don’t have extra money at your disposal, you can’t make impulse purchases.
Tip #5 – Revisit Your Budget Regularly
You’ll base the first budget that you create on a bunch of assumptions. After living on your own for a few months, you’ll have a much better idea about the expenses you face.
That means it’s time to revisit your budget. You may find that you’re spending less money on utilities that you thought. That’s great because you can shift that money elsewhere. You may also find that other expenses cost more than you anticipated. Again, you’ll have to adapt to that.
The key is that your budget isn’t a one and done thing. It’s a fluid concept that changes depending on your circumstances and priorities. Revisit it every three or four months to see where you might be able to save and where you can afford to spend a little more.
Here’s the most important thing to remember when you move out on your own:
Don’t get scared.
Proper preparation helps you to avoid the pitfalls that many new renters and homeowners fall into. If your budget for every expense that you can think of, you’ll find yourself in a comfortable position.
Consider every expense on this list and try to put the money-saving tips into action. It all gets easier with experience too.
And if you need help finding cost-effective and high-quality furniture, Luxo Living can help. Check out our huge range to find furniture that suits any style and budget.