The following post about how to take care of your finances before moving out of your parent’s house was written by Christopher Haymon from Adulting Digest. Leaving college and entering the “real world,” Christopher Haymon learned a valuable lesson in the perils of not budgeting or saving. He writes about finances in his spare time in an effort to help others. He created Adulting Digest to help others who need help navigating the world of adult finances.
Moving Out of Your Parent’s House? Make the Most of It by Taking Care of Your Finances
Venturing out on your own for the first time is exciting. There’s a world of options available to you, jobs to do, relationships to form, and experiences to be had. While some lessons need to be learned through mistakes, protecting your finances is something you want to be proactive about so that you can avoid as many mistakes as possible.
In this day and age, it’s easy to have your identity stolen, end up in terrible debt or have your accounts hacked. Let’s talk about some ways you can protect your wallets as you set out on your own:
Managing Your Credit Score
We live in a world where we need debt to build a credit score so that we can buy a house and car, or get a good loan to finance a business. However, it’s a balancing act that requires us to be diligent and not allow debt to mount so high that it harms our credit scores. Also, be smart about how much credit you apply for, because applying too many times and having too many lines open can be harmful. Furthermore, be wise about the interest rates. With credit card rates at a 25-year high, borrowers are facing interest accumulations that can drown a borrower in debt.
Planning for the Worst-Case Scenario
Unless you’ve been saving since you were born, you likely don’t have a large savings account. If you’re living paycheck to paycheck, paying down debt, have outstanding loans, have a 20- to 30-year mortgage, or have/plan to have kids, then life insurance is a great way to plan for those expenses in the event of your passing. A 20-year term life insurance policy may be just the right fit for you, taking into account your lifestyle and responsibilities. You will be setting your loved ones up for success instead of leaving them with the heavy burden of trying to pay for medical bills or funeral costs.
Identity Theft Protection and Insurance
Every year, we hear about how hackers stole personal information of millions of people in a single breach. These thefts include not only your name, address, medical information and social security number, they also include your financial information (including your card numbers).
That online purchase of a great pair of sunglasses or shoes has the potential to drain your bank account overnight if the wrong person gets their hands on your information. For a low fee, a company not only can monitor your accounts for suspicious activity, they can also insure you in case of a breach.
The Habit of Budgeting
One of the biggest mistakes people make in their finances is not budgeting. Telling your money where to go and when not only makes you the master of your money, it also does the following:
- Prevents you from missing bill payments
- Prevents late fees and overdrafts
- Saves you from overspending
- Sets you up to save
- Allows you to see what’s a priority and what can be cut
- Creates the opportunity to dream and set financial goals
Budgeting shouldn’t be looked at as an annual endeavor; rather, it should be created monthly or weekly and readjusted as income and expenses arise.
Buying Your First Home
It may seem far off, but one day you may like to buy a home of your own, and setting a budget will go a long way toward making home ownership a reality. If you’re going to be purchasing a home, you’ll need to be able to afford the mortgage payment and the upfront costs of a down payment. While many believe you have to put 20 percent down, you can make a lower down payment if you purchase mortgage insurance. Many FHA loans require a much lower down payment and have less strict credit and income standards.
Many things in life are worth learning through experience, and many things should be left to spontaneity. But financial security doesn’t fit into those categories. If there’s anything to become wise in early on, it’s how to protect yourself from financial harm, how to choose life insurance to cover your responsibilities, and how to get your money to work for you. Establishing good finances now will lay the foundation of good practices for the rest of your life.
Photo Credit: Burst
Final Thoughts
What a great article! Chris hit on so many major points to think about prior to moving out of your parent’s house and how it important it is to take care of your finances. These are all important points to consider and keep in mind even before you move out. Your financial health is in your hands, are you maintaining it?
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