Getting out on your own can be a gamble if your not ready for the challenges ahead. Discover these tips and financial advice for young adults leaving home for the first time.
Moving out on your own, leaving home for the first time can seem daunting. Learning how to be independent is a steep learning curve, but don’t worry. Follow these simple tips to protect your wallet, your credit score, and yourself as you venture out on your own and explore the world around you.
Create a Budget
The most important step when venturing out on your own is to create a realistic budget and stick to it. You need to ensure that you have enough money each month to pay your rent and cover groceries, so carefully calculate your income and expenses. Create line items for rent, food, your vehicle, personal care, and entertainment; there are many budget worksheets that will help you see exactly where you’re at. You may have to find areas you can cut back on spending, such as changing your phone plan or cooking at home more often.
Saving for a Down Payment
As you grow your short term savings and feel financially secure, you can set up your long-term savings goals. At the top of this list is saving for the down payment on your first home. Not only will you enjoy the freedom of owning your own home, but investing in real estate also has great returns. Saving for this long-term goal will take discipline and careful planning, so look for ways you can adjust your spending habits to put more toward your future savings goals. To meet your savings goals, be sure to follow your budget, pick up extra work, and keep an eye on your credit score. Before you buy a home, you’ll need to have enough saved for the down payment and have a secure income to pay for the mortgage payments and homeowner’s insurance.
Protect Your Health
One major change when you leave home is in healthcare coverage. As an independent adult, you won’t be covered under your parents’ health insurance, so plan ahead and get your own coverage as soon as possible. A single hospital visit can set you back thousands of dollars, so protect your health with an insurance plan. Check with your employer or university for lower-cost insurance plans and save money while protecting your health.
Protect Your Identity
When moving out on your own for the first time, it can be hard to know who to trust. Identity theft is becoming more and more common, so always be careful with your personal information, and don’t give out sensitive information over the phone. Protect your Social Security number, and never carry it with you in your wallet. Don’t tell anyone your Social Security number without asking why it’s needed and ensuring it will be protected. Pick secure passwords by using a strong password, and always use a mixture of letters, numbers, and special characters. Finally, monitor your financial statements and watch for any suspicious activity.
Build Your Credit Score
To build and protect your credit score, you’ll need to use your credit card each month. Carefully stick to your budget to avoid going into debt! When you use your credit card and faithfully pay it off each month, your credit score will improve. If you rack up credit card debt or miss payments, your credit score will take a hit, so use your credit card responsibly.
Short Term Savings
Once you have a budget that’s keeping you on track, create a savings account for emergencies. Start small, with 1 percent of each paycheck. This savings account will be a lifesaver in the event of emergencies such as a car breakdown or a flight across the country to visit a sick relative. The best way to save is to automate the process. When your paycheck is electronically deposited to your account, set up a direct transfer to your savings account so you’ll save without having to make a decision about it every month.
When leaving home for the first time, be sure you’re protecting your wallet, your credit scores, and yourself. Follow these financial tips for a smooth transition into independence.