How Much Money Should I Have Saved Before Moving Out?
Moving out on your own for the first time is an exciting milestone, but it's important to make sure you're financially prepared. Having sufficient savings is key to a smooth transition into independent living. So how much should you aim to save before taking the leap? Let's break it down.
Upfront Costs to Budget For
Before you even start packing boxes, there are several one-time expenses you'll need to have cash saved up for:
Security Deposit
Landlords typically charge a security deposit equal to 1-2 months of rent. You'll get this back at the end of your lease if you leave the rental in good condition with no damages. But be prepared to pay this substantial amount upfront.
First and Last Month's Rent
Many landlords also require the first and last month's rent to be paid before you move in. So in addition to the security deposit, have another 2 months of rent saved up.
Application Fees
Some rentals require a non-refundable application fee to cover the cost of background and credit checks on potential tenants. These can cost up to $50-75 per person applying.
Moving Costs
Whether you hire professional movers, rent a truck to DIY, or just need to buy boxes and packing tape, be sure to set aside funds for physically transporting your belongings to the new place. Don’t forget to budget for a move out cleaning service to ensure your old space is spotless for the next occupants.
Utility Deposits and Connection Fees
Setting up accounts for electricity, gas, water, internet, etc. in a new residence often comes with initial deposits or connection fees. Contact local utility providers in advance so you know how much to budget for getting everything switched on.
A good rule of thumb is to save up at least 3 months worth of rent to cover the upfront costs of moving.
For example, if you're looking at places that cost $1000/month, aim for a minimum of $3000 set aside just for getting into the rental. Having extra wouldn't hurt though, in case unexpected move-in expenses pop up.
Ongoing Monthly Expenses
Your monthly budget is just as important to plan out as the initial costs. In addition to rent, you'll be on the hook for a number of new recurring bills.
Utilities
Electricity, gas, water, trash, internet, etc. can really add up. A good estimate is to budget around 20% of your monthly rent cost for utilities.
Renters Insurance
Protecting your belongings with a basic renters insurance policy usually costs around $15-30 per month. Some landlords require proof of insurance, so factor this into your monthly expenses.
Groceries and Household Items
The exact amount you'll spend on food and household goods will vary a lot based on your eating habits and if you split groceries with roommates. But be realistic and set aside adequate funds for stocking the fridge and pantry.
Transportation
If you drive, you'll need to pay for gas, car insurance, and maintenance. If you rely on public transit or ride-shares, budget accordingly for the monthly cost of getting around.
Subscriptions
Recurring subscriptions like streaming services, music platforms, gym memberships, etc. have a way of sneaking up on you. Comb through your bank statements and make a list of all your monthly subscriptions so you can budget properly.
Discretionary Spending
Don't forget to factor in some fun money for dining out, entertainment, shopping, hobbies or other wants. Depriving yourself too much can backfire, so work a realistic amount of discretionary spending into your monthly budget.
Financial experts recommend following the 30% rule - spend no more than 30% of your gross (pre-tax) income on rent/housing. So if you earn $4000/month, you shouldn't pay more than $1200/month in rent.
Use the 30% figure as a starting point for deciding your rental budget. Then, tally up estimates for all your other essential monthly expenses like the ones listed above.
Ideally, the total of your monthly rent + living expenses should be no more than 50% of your take-home pay. If you're looking at places above that threshold, you may be stretching yourself too thin.
Building an Emergency Fund
Life has a way of throwing curveballs when we least expect it. At some point, you may have to deal with surprise expenses like car repairs, medical bills, or even job loss.
It's crucial to have extra savings on hand as a safety net so you don't end up in debt when the unexpected happens. Most financial advisors recommend keeping an emergency fund that could cover 3-6 months' worth of your living expenses.
To calculate this, add up how much you spend in a typical month on essentials like rent, utilities, food, transportation, insurance, etc. Then, multiply that by 3-6 to determine your emergency fund savings goal.
For example, if your core monthly expenses are $2000, aim to gradually build up $6000-$12000 in a separate savings account that you only tap for true emergencies.
It may sound like a lot, but having a robust rainy day fund is so important for your financial security and peace of mind.
When you're just starting out on your own, it's okay if your emergency fund isn't fully funded yet.
It takes time to save up several months of expenses. Having a smaller emergency buffer of even $1000-$2000 can still protect you from a lot of financial stress.
The key is to make consistent contributions to your emergency fund, even if it's just a little from each paycheck.
Automate transfers to your savings account and increase them whenever you get a raise or bonus. With time and discipline, you'll eventually reach your 3-6 month savings target.
What Should Your Bank Account Look Like Before Moving Out?
Let's put it all together with a sample savings scenario for moving out on your own:
Monthly rent: $1200
Upfront costs (3x rent): $3600
Monthly living expenses: $2000
Emergency fund (3 months): $6000
Total savings target: $9600+
Of course, the exact dollar amounts will vary depending on your specific circumstances, like your income, your spending habits, and the cost of living in your particular area.
But as a general goal, aim to have around $10,000 saved up before renting your first solo place.
It may seem like a daunting number, but you don't have to save it all up at once.
The earlier you start saving, the more time you'll have to work toward your goal. Even stashing $100-200 per month can really add up over a year or two.
If you're still living at home, take full advantage of the opportunity to save as much as possible. Practice budgeting and tracking your income and expenses so you'll be in the habit when you're on your own.
Pick up extra shifts at your job or start a side hustle for additional income to boost your savings. Sell clothes, furniture or tech items you no longer use for extra cash.
When you do move out, consider splitting costs with a roommate rather than living alone. Furnish your new place gradually with low-cost, second-hand or hand-me-down items rather than buying everything new. Also, think about sharing the expense of an apartment cleaning service to keep your space neat without extra stress.
Moving out is a huge, exciting step and proper financial planning is key to starting off on the right foot. By saving diligently, spending carefully and building a solid safety net, you'll be well prepared to successfully manage living on your own. You've got this!