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:
Hi Krystal,
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.
Mike
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.
Emergency Fund
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.
Does anyone have anything else to add? Costs I missed out on, or advice for Mike?
18 Responses to “How much should you save before moving out?”
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You definitely want to have enough to cover bond and initial rent, plus some more reserve funds. People here don't tend to live alone especially for the first time, so furniture isn't usually an issue – you'll just move into an already furnished house. Beds are still expensive though! I'm also amazed that some people just have no idea what to expect in terms of utility costs (okay, I guess I didn't either when I started out) and don't even think about insurance and the like.
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Great post!
I just wanted to add one quick note. I'm not sure about BC's tenant laws, but in Ontario (where I assume Mike is from) damage deposits are illegal. The landlord can't charge any additional fee other than last month's rent.
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Thanks for mentioning that Melissa, especially since i will be looking for a place in a few months :)
Transportation can be a big cost – $50-60/month for a bus pass or metro pass. If you used to rely on your parents for transportation and suddenly don't have access to their vehicle anymore, that adds up fast. Laundry doesn't cost a fortune, but even if you're doing a couple loads a week, that's $20/month plus buying detergent, fabric softener, etc…it's something that's easy to take for granted when you live with your parents. I moved out at 18, and I recommend living at home as long as possible :)
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Good one! Transportation can definitely add up. However, if your parents live in the suburbs, and you plan on moving somewhere within walking distance of work/school, perhaps you might even save money by not needing a bus/metro pass.
I lived at home off and on until 24, and am grateful that I was able to stay for so long. :)
Another thing to consider in this department is the transportation schedule. You may be able to find cheap rent on a bus route, but if the frequency drops to only once an hour in the evening (or no evening service at all), you may find yourself frequently shelling out for a cab ride home. I'd definitely build in a little financial buffer for that.
If they're driving and aren't in a metro friendly area, I'd definitely recommend putting aside some money for emergency mechanical repairs (at least $1000) and your first year's routine maintenance.
Prescription costs, glasses, dental. All things covered by your parents or their benefit programs will no longer be covered if not under their roof anymore. Do you have enough coverage through your own work benefits? What percentage does it cover? Do you even have benefits? If not it may be worthwhile to purchase a plan on your own or just budget a portion of your savings for it monthly. With no coverage these things can be VERY expensive.
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As for a damage deposit – which is usually required – I would say don't expect to get it back. If you plan to not get it back, then there won't be any surprises if something happens.
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The MV article was interesting. If I could add another viewpoint, I don't necessarily agree that it was a "big mistake" to move out too soon.
While it might not have been the best move, it was also a great learning experience that might have helped you to form subsequent good financial habits.
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I find its the little things that add up the most – the things that are always "just there" when you live with your parents. Laundry detergent, dish soap, toilet paper and paper towel. Thank goodness for places like Wal-Mart, but even then! I never think of these little items as actual costs.
For myself I wanted to make sure I have $5,000 in the bank before I moved out. I rented a room at a flat rate which really cut down on my living expenses. If you end up renting with a bunch of people and one moves out you get stuck splitting their portion until you find another renter. I wanted to ensure I had enough for any emergencies and sure enough I had to get some dental work done which put me back about $1000. I think the more money you have when you leave the better but $5000 worked fine for me.
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Still think this issue is much more complicated than this. Moving out has a lot more to do with being ready emotionally than financially. I moved out at 18 and have no regrets. It builds character when one has to eat ramen noodles for every meal, etc., for a while.
I totally agree. But I do think that you need a good balance between being both emotionally mature and financially ready to move out, otherwise it will end in failure. Some people can do it as soon as they graduate from high school, and others need just a little more time.
This is a good list to start with. I would definitely recommend sitting down and creating a realistic budget. That alone will help Mike figure out how much he will need before he moves out. Having an emergency fund will also help with unexpected expenses.
I think for college students moving out for the first time — it's wise to save money where you can. Hit up Value Village etc for reusable essentials, like plates/pots/utensils and other things — you can probably even find some cool accessories/decor for cheap. Being practical and realistic goes a long way. If you're 20 and have two other roommates, no one will care if your dishes are Royal Doulton or not.
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In college, I also worked $9/hr jobs, but they were extremely helpful in beefing up my work experience in my resume. Sometimes I regret not getting a waitress gig that could have gotten me $30+/hr from tips. But in hind sight, I would not have advanced so quickly in my IT career without those $9/hr IT jobs. I also would not have graduated with so much debt, hah.
Although you may consider moving out too early a "money mistake", in the larger sense that 'mistake' has lead you, in a way, to your PF career and who you are today. Mistake? I think not :)
In college I went through a phase when I couldn't keep up with paying rent because of my excessive spending on unimportant things such as clothes, coffee and other material possessions. The rent racked up and I had to work part time so that I can pay them off without my parents knowing I'm in debt. I think it's helpful to have a weekly budget and stick with it not only during bad times but consistently.
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As a young adult, it is their responsibility for the financial decisions they make, but I feel that there is a big piece of the puzzle that is missing for a lot of kids as they grow up. We as parents need to do more to teach our children how to handle money. I like the list you created and think it is a good example. I will pass it on to some of the young people I know.
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