For most Millennials, the first major milestone is getting your own place. So how does a young person today gather enough money to afford to move out? At the same time, it is important that major milestones like moving out do not end up with you drowning in debt. Here are some moving out tips for Millennials to keep your finances in good standing.
Moving Out Tips for Millennials
1. Rent or Buy?
Owning a home may be your ultimate dream! However, the first thing you need to come to terms with is that buying a home may not be the best option for you right away. Once you make the choice of moving out, your decision to either rent or buy will depend on a few factors including: the relative costs of each in your area, what kind interest rate you can lock in for a mortgage, and how long you want to stay where you are.
On the other hand, renting is a more feasible option for you if you are considering a move to a different city in the near future. All you need is a shelter for the lowest possible cost to avoid racking up consumer debt. In addition, reasons such as higher property taxes or lower credit rating can make you choose to rent as your moving out option. Either way, it is important that you weigh the pros and cons of each option before you set your mind on one option.
2. Tackle Your Debt
Take stock of all your debt and prioritize setting your credit card debt with high-interest rates. The less money going out in interest and another fees, the more there is to save. Also, take a note of car loans that may eat up a big chunk of your monthly income. You’re better off paying down all these debts and more as quickly as possible to prepare for the next financial challenge you will face in your housing choice. Once you are heading in the right direction to eliminate debt, it’s easier to save each month for a home or an apartment.
3. Focus Your Savings
A good savings strategy to consider is creating a separate account dedicated exclusively to your moving out plans. The crucial thing is to keep your day-to-day care separate from this savings account. Most online banking apps offer the option to set multiple saving goals or accounts. Make use of this feature so that you are constantly in touch with your goal.
4. Set an All-Inclusive Savings Goal
If you haven’t lived on your own before, it might surprise you to know how much you’ll end up spending on electricity, water and other basics. Therefore, before you make the big “moving out” decision, make sure you have that extra bit of cash to settle these bills. It’s safe to assume that 20% to 25% of the cost of rent or mortgage will cover these other costs. For instance, if your rent is $1,000 per month, set aside around $200 for utilities, etc.
Whether you choose to rent or buy, there is a significant amount of money you will need to pay upfront along with the regular bills. A downpayment is a larger savings goal, but an apartment can sometimes require 3 months upfront. Finally, balance your housing costs within the rest of your budget; typically it’s best to spend 30% or less in this category.