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Whether you’ve just graduated college or are new to the job market, living with your parents or other relatives can be a practical choice. However, you likely don’t want to live at home forever. The question is, how will you ever afford to move out? While saving up enough to set out on your own may seem daunting, it can actually be more doable than you think. The key is to gradually start building your savings, work on paying down any debt you may have, and establish a realistic moving out budget. Read on for a closer look at how you can save money to move out and get a place of your own.
Starting to Save to Move Out
Before embarking on your journey to move out, there are several key steps you’ll want to take to ensure you are prepared. Here are some to consider.
Determining If You Are Ready to Move Out
Getting your own place is a major responsibility. To evaluate your readiness to move out, you’ll want to first consider your finances. Is your job and income reliable? Are you earning enough to pay rent? A general rule of thumb is to make sure your monthly gross income (before taxes are taken out) is three times your rent or mortgage payment. You’ll also want to consider whether you have the necessary skills and resources to manage living independently. You don’t want to rush into a decision and end up back on your parents’ doorstep six months later.
Creating a Budget
Creating a budget is essential when saving money to move out. Start by looking at the past several months of bank statements to determine how much is coming in, on average, each month and how much is going out, on average, each month. It’s also a good idea to drill down into what you spend on fixed/essential costs as well as non-essential expenses each month. If your spending is close to your earnings (meaning you aren’t saving anything), you’ll want to find places to cut back. One framework for budgeting you might use is the 50/30/20 budget. This breaks down your after-tax income in this way: 50% goes to needs, 30% to wants, and 20% to savings and debt payments beyond the minimum.
Paying Down Debts
When it comes to moving out, is it better to start saving or pay off your debt? It depends on your situation but if you have high-interest credit card debt, it generally makes sense to pay it down before putting your extra money in a “moving out” savings account. The reason: Paying off high-interest debt will free up cash that’s currently going to interest each month. You can then use this cash to save for your move and, later, to pay your rent.
Assessing Rental Fees and Deposits
It’s a good idea to research rental fees and deposits in the area where you plan to move. You’ll want to be prepared for upfront costs such as:
First (and possibly last) month’s rent A landlord typically requires one or two month’s worth of rent up front.
Rental application fees The landlord might charge an application fee to cover a credit or background check.
Security deposit This is a refundable amount, usually equalling one month of rent, for the landlord to keep until you move out. This can cover any damages you inflict on the rental.
Pet fee or deposit Planning on bringing your furry friend? It may cost you an extra non-refundable fee at the outset, or a pet security deposit returned to you at the end of your lease agreement.
Realtor fees If you require (and can afford) the help of a realtor to find a place, their fee can be equal to one month’s rent or a percentage of the monthly or annual rent, depending on where you live.
Developing Saving Habits
One of the best (and easiest) ways to cultivate a saving habit is to automate your savings. To do this, you may first want to open a separate savings account (such as a high-yield savings account) dedicated to your moving fund. Next, you can set up a recurring transfer from checking to that savings account for a set amount on the same day each month, perhaps the day your paycheck clears. (This is typically easy to do, even if checking and savings accounts are at separate banks.)Even if it’s only a small transfer each month, the balance will grow over time since it’s happening each and every month no matter what.
Building Your Credit
Your credit rating can impact your chances of being approved to rent a property, and even impact your rental terms. The reason is that landlords and property managers will often check an applicant’s credit history as part of the screening process to determine if they’ve been responsible with money in the past.Some ways to build a positive credit profile include:
Paying down your debts
Paying your bills on time
Checking your credit reports for inaccuracies
Keeping old accounts open (a longer credit history can have a positive impact on your credit scores)
Common Moving Expenses to Be Aware Of
Moving comes with various expenses that you should be aware of to plan your finances effectively. Here are some common moving expenses:
Moving company fees If you hire a professional moving company, factor in the cost of their services, including packing, loading, transportation, unloading, and tips.
Rental truck or van If you choose a do-it-yourself move, consider the rental cost of a truck or van, along with any additional fees for mileage or fuel.
Packing supplies Boxes, tape, bubble wrap, and other packing materials can add up. Estimate the number of supplies you'll need and budget accordingly.
Utility set-up Plan for the costs associated with setting up utilities at your new residence, such as electricity, water, internet, and cable.
Furniture and household Items If you need to purchase new furniture or essential household items, budget for these expenses in advance.
Storage costs Maybe your new place has limited closet space, or your parents are demanding that you finally get all your boxes out of their garage. You may need to rent a storage unit for some of your belongings.
The Takeaway
Moving out of your parents’ house and into your own place is an exciting adventure and one of life’s major milestones. But it can also be stressful. You can alleviate a lot of the worry by pricing out moving costs, creating a budget, opening a “moving out” savings account, and automating your savings. Even if you can only transfer a small amount to savings each month, it can add up to a significant sum over time.To get the best return on your “moving out” money, you’ll want to look for a savings account that offers a competitive annual percentage yield (APY) and doesn’t charge any monthly fees. Lantern by SoFi can help you find the best high-yield savings accounts. Compare and scope out the best rates to start saving for your new apartment today.Lantern can help you compare online savings accounts and find today’s best rate.
Frequently Asked Questions
How much money should you save before moving out?
How much money should I save to move out at 18?
What age should you start saving to move out?
Photo credit: iStock/Hispanolistic
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About the Author
Emily Greenhill Pierce
Emily Greenhill Pierce has been a writer in the areas of finance, lifestyle, travel, and health for over 15 years, contributing online content to Lantern, Google, and Frommer’s Travel Guides. She holds degrees from Emerson College and Fairleigh Dickinson University, including an MFA in Creative Writing for Young Adults and Children. She has authored two middle grade books.
