Few things are more thrilling than moving into your first place. The idea of having your own home to enjoy your independence is invigorating.
However, be careful that the urge to set out on your own does not distract you from factoring in the potential hidden costs of moving out. Being “house poor” can set you back financially and keep, or prolong, you from reaching your long-term financial goals. Here are a handful of potential expenses that you should look out for, and remember to consider, when reviewing your budget:
1. Home furnishings – Furnishing your new place and making it yours is an exciting prospect for someone starting out on their own. It’s an opportunity to make it your space! Did you walk through your new place for the first time and imagine that new sectional couch and a 60-inch TV mounted in the living room? What about the king bed you have always wanted? Or a well-stocked bar? I did, and those dreams quickly disappeared as reality set in – furniture is expensive. The cost of furnishing a new home can set you back extensively, especially if you live alone. Consider asking your parents, relatives, and coworkers if they, or someone they know, have any furniture that they would consider giving to you. Thrift shops and flea markets are also affordable options. It may not be what you want, but it can help you avoid draining your bank account right away.
2. Entertainment – If you are like me, you want to get out and explore your new neighborhood right away. Where are the best places to grab a happy hour drink with friends? What about the best restaurants for fish tacos? As much as you may want to get out and experience your new surroundings, you should be careful not to indulge too much. Going to the bar after work or eating out may seem inexpensive at the time, but over the course of a month it can really start to add up! Also, be weary of where you are moving to; cities like Baltimore or Washington, D.C. have higher costs of living and can be more expensive.
3. Insurance – When you lived with your parents, odds are they covered your insurance premiums. When moving out, you may suddenly be responsible for paying the premiums for multiple insurances all at once. Three types you should keep in mind are renter’s insurance, auto insurance, and health insurance.
Renters insurance is something many people forget about. It provides coverage for a renter’s belongings within rented property. Policies are inexpensive and can help provide protection against having to replace personal property. Auto insurance can be expensive for younger individuals and can increase or decrease depending on where you live. Living in a city can increase your premium unexpectedly, costing you more per month than anticipated. Before moving, consider talking to an insurance agent about your existing policy, or about your options for obtaining a new one.
Because you can remain on your parent’s health insurance until you turn 26, you may have some time before you must start paying healthcare premiums. If you are approaching or are turning 26, you should consider reviewing employer offered health insurance or personal policies to get an understanding of the potential costs and available options.
4. Stocking your home – While many household staple items are inexpensive and easily purchased, they do not automatically replenish themselves. When living with your parents or relatives, laundry detergent and toilet paper always seem to be in abundance. Having to initially stock and continually replenish cleaning supplies, toiletries, and other household necessities can quickly add up each month and tie up your budget. Consider using rewards programs at different stores to take advantage of special discounts available to members. This is also a great way to earn points on things like gas as a secondary benefit.
5. Pets – One of the first things my parents said to me after moving out of their house was: “NO pets”. Many millennials and college students purchase or adopt pets while away at school or when they move out of the house. But unlike living at your parent’s house, you are responsible for all the work that goes into taking care of your pet. Toys, food, and accessories for them can get expensive when your parents are not helping take care of the animal. Instead, you may need to have someone else walk and look after your pet when you are traveling or at work. Many apartments do not allow pets, limiting the choices of where you can live. Those that do allow pets may charge you a deposit or additional monthly fee for having the pet in the building. These can range in price and can be expensive.
While this list does not encompass all the potential expenses you may face when moving out on your own, they should provide you with ideas of other unforeseen expenses you may not have considered. Although they may provide obstacles or delay your move, smart and careful planning can help ensure that you are not kept from launching your independence.
About FAI Wealth Management, Inc.: Located in Columbia, Maryland, FAI focuses on helping clients create the financial future they desire by protecting their wealth, making the most of their assets, and planning for life's uncertainties. The firm combines fee-only, fiduciary-driven guidance with highly personalized, consultative financial planning and investment services that enable individuals, families, and businesses to navigate complex life transitions. Founded in 1987, FAI currently manages more than $350 million in client assets nationwide. For more information about FAI Wealth Management, please visit the website at https://www.faiwealth.com or call 410.715.9200.