If you’re used to relying on the bank of mum and dad and living rent-free at your parents, moving out of the family home can be a shock to the system. Now you’re suddenly responsible for paying rent or a mortgage, groceries, utilities and all the little extras you took for granted. Understanding how to be financially secure when you leave the family nest will ensure you can stand on your feet independently.
Check out these tips on how to be financially secure when moving out of home for the first time.
Know What You Earn
A reliable income is non-negotiable. If you’re more of an entrepreneurial spirit that has a work-from-home hustle or a start-up, it’s advisable to evaluate your average income each month and work out an average over three to six months. You will need to know this when you’re calculating your living expenses and working out your budget.
Build Savings And An Emergency Cash Stash
Moving out from the family home is expensive, not only for first-timers but even an adult who must relocate will require some savings to cope. In today’s property market, rent prices are skyrocketing and you will also need to pay a bond—not to mention moving costs, removalists, white goods, transport, and food just to name a few.
It is also advisable to have an emergency cash fund in the event of urgent, unexpected costs, such as your car breaking down, losing your job, or recovering from a natural disaster.
Create A Budget And Stick To It
Make a list of all your fixed expenses, prioritising rent, food and utilities. If possible, set aside 20 per cent towards a high-interest savings account and divide the rest between what you need. If there’s any leftover, you can use that to spend on entertainment or luxuries—or put it aside for a rainy day. If you are not used to paying bills and budgeting for the necessities, a financial advisor can help you create a budget and payment plans for any debts you have incurred.
Salary Sacrificing
Some employers offer the opportunity for you to sacrifice salary, this may also be known as a salary package or remuneration package. It can go towards property, loan repayments or super funds. Even though you receive a little less in your wages each week, you’ll pay less tax. Talk to a financial advisor to ensure your salary sacrifice is structured so you are entitled to claim tax benefits at the end of the financial year.
Avoid Racking Up Debt
Only spend what you can afford. Try to avoid buying luxuries on ‘buy now, pay later’ payment plans as those small repayments quickly add up and before you know it, it’s getting out of control. It’s easier to rationalise the spending on credit when you can take the purchase home immediately, and you don’t have to pay the full amount up front.
Get A Good Credit History
It can be hard to secure a mortgage or get finance for a car when you don’t have a good credit history. Before you leave home, make a few hire purchases, but be sure to pay them off in full as quickly as possible. Property managers and mortgage brokers will all want to know what your credit score is to see if you are a financial risk before renting a property or lending you money. It can also help to pay board to mum and dad, so you have proof you are able to make regular payments. You may even be able to talk them into putting any board payments into a high-yield account so that when it comes time to move out, they can gift you a lump sum of cash to start your new life.
Now check these tips to help you maximise your entitlements this EOFY.
Design credit: Dom Lonsdale
Gerry Incollingo is the Managing Director of LCI Partners in 1998, an established accounting, finance and legal firm based in Parramatta. Since that time, the firm has expanded with six divisions and is now based in Sydney, Parramatta, and southern Sydney.