How much should you save before moving out?
I recently wrote a post for Moneyville called My money mistake? Moving out too soon, where I talked about how I should have never moved out of my parents house before I finished school. Had I taken my parents’ advice and stayed at home, I would have come out of college with significantly less debt than I had. But it was my stubbornness and naive attitude that resulted in a disastrous 8 months of living independently, and ended with me eventually moving back home. Anyway, that post generated a lot of really interesting discussion, as well as a few e-mails that came my way.
A reader sent me this e-mail yesterday, which is what prompted me to write this post:
I read your article in the Toronto Star and I was wondering how much money should one have saved before moving out? Your article brings great interest to me since I am approaching my late 20’s and I am seeing friends of mine get places on their own.
By the way, great article.
First a little background into my specific situation:
I moved out the summer after graduating high school – at age 17 – and moved to Michigan to go to University. Because of my hard work growing up, I received a full athletic scholarship. I had a wonderful two years there, but due to personal reasons, I decided to leave the team and move back home. I was 19 when I moved back home, and stayed there until I was 21 – when I moved out on my own again. It was at this point that I started to accumulate debt. I ended up moving back home at age 22 when I realized I couldn’t cut it on my own. I finished college and finally moved out of my parents’ house for the last time at age 25.
I don’t blame my parents for my lack of budgeting or my financial irresponsibility. While I do agree that it’s important to educate teenagers and young adults about money management, the fact remains that I was an adult and I made the decision on my own. I had a lot of growing up to do, and unfortunately I made a mistake. But, just like any other money mistake I’ve made in the past (and will make in the future), you learn and grow from them, and you make sure to do everything you can not to let it happen again.
How much should you save before moving out?
That’s a really good question. It’s obviously going to differ, depending on where you live and what you’re looking for – so I can’t really suggest you need to save X amount of dollars. Instead, here is a list of expenses to think about before taking the plunge and moving out on your own:
- Cost of rent – you can significantly cut the cost of rent if you decide to live with roommates. This could be a good option because you have less of a financial strain put on your shoulders, and you have a built-in support system. Which might make it less intimidating to finally leave home. On the other hand, if you crave total independence, be prepared to pay for it! Don’t forget about any damage deposit (usually 1/2 months rent), or having to pay first and last months rent up front.
- Apartment insurance – This can run anywhere from $10-25/month, depending on what you need covered. You might not think you need it, but you’ll be sorry if something happens and you don’t have it! Protect yourself and your stuff.
- Utilities – you will now be responsible for utilities (hydro, gas, phone, etc.), as well as cable & internet if you choose to. Don’t forget about set-up fees to start service.
- Groceries – I know first-hand that stocking your fridge/pantry for the very first time is expensive! During my move last month, I spent probably close to $400 on food and essentials (flour, rice, olive oil, etc.) – and my fridge is still pretty bare.
- Furniture – if you’re moving out for the first time, chances are you’ll need at least a few pieces of furniture. When I moved out, I was lucky to get hand-me-down furniture from relatives, but I still had to make a few trips to IKEA. Make a list of exactly what you need, not what you want. One of the smartest decisions I made was to live with used and hand-me-down furniture for years. It was only until I bought my townhouse last month that I decided to invest and buy real furniture – and even then, half of it was used, and the other half was from IKEA.
- Miscellaneous – it’s surprising how fast the little things add up. Don’t forget about cleaning supplies, forwarding your mail, packing supplies, boxes, renting a moving van, and replacing anything that has been damaged during the move.
Ideally you will want to have some money saved up should an emergency arise. The great thing about renting is that most major problems fall on the shoulders of your landlord or apartment management company to fix. But if (knock on wood) you get sick or lose your job, the last thing you want to have to think about is where your next rent cheque is going to come from. The general rule of thumb is to have 3-6 months worth of expenses in your Emergency Fund, but that might not be feasible for someone who is just starting out. Save whatever amount you feel comfortable with, but I would recommend at least one full month of living expenses to start with.
Create a budget
This is where I completely failed when I moved out on my own. I didn’t make my first budget, or write down any sort of expense-to-income numbers until I graduated college in 2006. How scary is that? Take a good hard look at how much money you’re making, how much you will need to save (based on the expenses above), how much you will need each month, and see if you can truly afford it. Nothing is worse than the sinking feeling of moving everything into a new apartment and having your dream of independence crushed when you realize that you’re in the red every month.
Books to help you out
Here are a couple of my favourite books that just might help you save a little money and balance that budget:
- The Wealthy Barber (by Dave Chilton) – This is one of the most popular finance books ever printed.
- Debt-Free Forever: Take Control of Your Money and Your Life (by Gail Vaz-Oxlade) – A great way to help you get a handle on your finances.
- 397 Ways to Save Money: Spend Smarter & Live Well on Less (by Kerry Taylor of Squawk Fox) – great tips on how to cut costs!
Does anyone have anything else to add? Costs I missed out on, or advice for Mike?
Author: Krystal Yee
I’m a personal finance blogger and marketing professional based in Vancouver. I’m a former Toronto Star (Moneyville) columnist, author of The Beginner’s Guide to Saving and Investing, and co-founder of the Canadian Personal Finance Conference. When I’m not working, you can usually find me running, climbing, playing field hockey, or plotting my next adventure.