Everyone’s seen the headlines about Millennials living in their parents’ houses after college. So many people move back in and try to save money, but they end up taking so much longer getting established than they need to, leading to the frequent joke of parents having to have them forcibly removed.
Why are so many young people still living with their parents and how do we move on and strike out on our own?
A Lesson about the Economy
There’s a lot of talk about this generation (Millennials and Gen-Z) being lazy and unable to really make their own way in the world. However, that couldn’t be further from the truth. I won’t spout statistics, but these generations on average have the highest levels of education and are involved in the most activism and outreach of any prior generation.
There is a deeper problem. The world around us is outpacing our earnings. Unfortunately, the growing burden of the economy has made life difficult for people not yet established. Particularly after the economic crisis beginning in 2008, the cost of living has increased disproportionately with income.
Add in the fact that, as other areas of learning have been emphasized, financial education has become less important in schools, and you have an ill-equipped generation to tackle the perils of a volatile economy. That’s one of the main reasons I’ve made this blog – to be a source of financial education so that people can tackle their debt, begin developing stable sources of income, and prepare themselves for whatever shifts the economy brings at them.
What You Need to Know Before Moving Out
So, you’re still living in mom and dad’s basement? That’s perfectly acceptable. In fact, approximately 25% of millennials and younger people still live at home after completing their education or going off into the workforce. But how do you escape this lifestyle and begin to strike out on your own, both for the sanity of you and your parents and for the ability to build wealth and a life of your own?
There are a few major steps you can take to set you along the path of self-made living. These items don’t take into consideration all the many small things you have to figure out, like how to move your stuff and where you want to bank, but it will give you the architecture to support striking out by yourself.
Start A Budget
The first step to moving out of your parents’ basement is starting up a budget. This is a lot simpler than it sounds, especially because these younger generations are typically more technologically educated than older ones. Open up a spreadsheet or just look through your old bank statements and begin developing a financial plan.
There are some major things you need to include in the budget before you can start factoring in your spare money for fun and other things.
- Rent and housing payments
- Transportation costs
- Utilities like electricity, water, and natural gas
After you’ve got the big things budgeted in, you can start to figure out how much flexible spending money you have available and how much you can put towards savings. Take a look at my post on Building a Budget for how best to structure your spending.
Begin Saving Money
The next step is to begin saving money. While you’re still living on someone else’s dime, you have a lot more flexible income that you can put towards savings. That means, this time before you move out is the best time for savings.
A good rule of thumb is to start living by your budget, and every dollar that you save by living with your parents can go towards savings. This means you can save everything you’d be spending on rent, electricity, groceries, and water, if you’re parents aren’t making you pay them back for what you’re using.
Having savings when you first get started out is very useful. Seeing as most Americans still live paycheck to paycheck and don’t have substantial savings, you’ll be ahead of the curve. Beyond that, you’ll soon learn that there are many unexpected expenses in the first few months of living on your own, not to mention the expected ones. You’ll also probably have to have some money set aside for all the pizza you buy for the friends helping you move.
Know What Costs You’ll Have When You Live On Your Own
There are some things you can begin to plan for prior to moving out, and this will help you establish your budget a little bit better. Knowing in advance what your expenses will be helps steer your spending in the right way. There are a few major expenses you can know of in advance and plan for:
- Rent payments – whether you’re sharing with a roommate or not, you can look up the price of rent at various places near you to get an estimate.
- Utilities – you may not be able to predict this perfectly, but you can estimate these prices. Most cities have published statistics about residential utility usage, so you can make a plan for how much you’ll be spending.
- Groceries – you may already be buying your own groceries, but you’ll likely learn that keeping a kitchen well stocked at all times is difficult. What’s worse is that not keeping it stocked is more expensive, because you’ll be eating out and spending more money frequently.
Take a Leap
There are also going to be many expenses for which you can’t prepare. You don’t know that you’re going to wreck your car 3 months after moving out on your own, preventing you from using your parents’ car as a backup. Or maybe you get water damage in your apartment and have to buy some new furniture. These unexpected expenses are part of life, but they’re not fun to deal with.
You can try to plan for as many of these eventualities as you can, but sometimes it’s important to just take a leap and start living. Living on your own involves a lot of uncertainty, so you’ll need to go into it realizing that you’ll face difficult times.
An important thing is that the savings you established before moving out will go a long way to helping you conquer the unexpected expenses. If you saved appropriately, you should have plenty to tackle a down payment on a new car or some new pieces of Ikea furniture.
Act, Adapt, Readapt, React
The infamous Michael Scott quote (from NBC’s The Office) says that part of management is learning to “act, adapt, readapt, and react”. While the character of Michael Scott may not be the paragon of financial security and wisdom, this quote, while humorous, does also embody some important advice.
Flexibility is an important aspect of financial security when you strike out on your own. Because you will encounter many things you don’t expect, it is important to be able to adapt to your circumstances. When life throws you a curve ball, try and be flexible. Adjust your spending, use some savings, and persevere through difficult times. On the opposite end, when life gives you special gifts (for instance, a bonus or any other type of windfall), save them for when you need them more, and let your money grow so that you always have something on which to fall back.
Call Your Parents
Always call your parents. They’ll appreciate keeping in touch with you, and more importantly, they’ve been through many of the same trials you’re experiencing. How do you think they learned not to put dish soap in the dishwasher or to remove the lint from the lint trap in the dryer after every cycle? Tap into their prior knowledge so you can navigate the perils of adulthood more easily.
As excited as they will be to have their house back, they’ll be equally pleased to hear from you frequently. Don’t forget that they were the ones who put you up so that you could get on your feet. No matter how hard things become as an adult, your parents will be their to support you.