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You’ve found the perfect apartment, packed your bags, and you’re ready to spread your wings for the first time. Not so fast! Before you move out on your own, there are a few things you need to know about managing your money as an independent adult.
You can learn more about money management by reading the below mentioned questions and answers, brought to you by Togetherwerich.com.
Most experts recommend spending no more than 30% of your monthly gross income (that’s before taxes) on rent and utilities. If you have student loan debt, you may need to spend less. This can be tough to do when you’re not earning much, especially if you live in a high cost-of-living area. If you can’t find a one-bedroom apartment in your budget, look for a roommate.
Friends are a great place to start looking for roommates, but if you don’t know anyone who needs a space, there are other ways to find a housemate. Craigslist, Facebook Marketplace, and roommate finder apps are popular methods; just be sure to interview potential roommates before signing a lease.
You can only live out of boxes for so long. Eventually, you’ll want to furnish your new apartment, but after paying a security deposit and first and last month’s rent, your wallet is looking pretty sparse. Avoid renting furniture and instead, buy secondhand furniture through online marketplaces, at thrift and consignment stores, and at yard sales. Hard furniture is usually a safe bet when buying secondhand, but if you’re worried about pests or odors, opt for new mattresses and upholstered furniture.
If you’re under 26, you can stay on your parent’s health insurance policy with some exceptions. However, if your job offers better coverage or you live outside your parent’s provider network, you may want to switch anyway. If your job offers health insurance, this is usually the best deal for coverage. Otherwise, you can buy coverage and possibly qualify for a subsidy through the healthcare marketplace.
Renter’s insurance covers your stuff if it gets stolen or damaged. Some landlords require tenants to carry renter’s insurance. However, even if it’s not required, you might still want a policy if you have electronics, bikes, jewelry, or other valuables you can’t afford to replace. You may be able to get a discount on renter’s insurance by bundling it with your car insurance policy.
It may seem far off, but you may want to own a home someday. You’ll need to save up for a down payment, but you may be surprised to learn that you can buy a home with less than five percent down, assuming you meet credit and income requirements. However, committing to a larger down payment does have its advantages because you’ll be borrowing less, which means lower monthly payments and that you’ll owe less in interest. Additionally, if you happen to be in the National Guard reserves, you will be eligible for a VA loan once you meet length-of-service standards. This is a great way to become a home buyer since VA loans don’t require mortgage insurance or a down payment, and they usually have lower interest rates than conventional loans.
Also, most young adults assume they don’t need life insurance, but if you’re planning to start a family at some point, now is a good time to start exploring your options. A life insurance policycovers any immediate expenses — such as medical bills — that someone else would be responsible for if you died. The payout can also take care of funeral expenses.
You’ve probably heard a few things about how credit cards are good for building your credit. So does that mean you should get one? It’s true that credit cards can be a great financial tool when used responsibly, but wait to get one until you’re comfortable budgeting and living within your means. When you do get a credit card, look into a student card or secured credit card as your first one.
These aren’t all of the money questions you’ll encounter as you experience living on your own for the first time, but they’ll get you started on the right foot.
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