How can I afford to live on my own?
Stepping into the world on your own can be an exciting experience, but you have to be prepared. Whether you want to level up your budget savvy, find affordable (make that very affordable) rental options, or get smarter about how you shop, use these tips to help get you closer to independence.
1. Find a budgeting technique that works for you.
If you want to live on your own and have done some research, you're probably experiencing some sticker shock. You’ll be paying out of pocket for everything from rent and utilities to travel and groceries—all of which have increased in cost over the past few years.
Creating a budget you can actually follow is the key to living successfully on your own. Budget making doesn’t have to be difficult. Start by selecting a budgeting technique (or app) that works best for you. Check out these options:
- Use the 50/30/20 rule. The benefit of this budget method is its simplicity. You take your after tax income and divide it into three categories—50% to needs 30% to wants, and 20% to long-term savings. Put an emphasis on achieving your independence and reaching your long-term goals by using the 50/30/20 rule.
- Slice your budget into categories. Using percentages for specific expenses (like 10-20% for insurance or 5-10% for utilities) allows you to create a budget that flexes with your income and prioritizes your spending. When you start to categorize your budget, you can see what could be eating up too much of your budget and what you could change.
- Envelope Budgeting. This classic approach is based on cash or you can use a digital version. The method is to divide up your paycheck into a variety of cash envelope categories (Rent, groceries, utilities, etc.) When you need to pay the bill use the money from the appropriate envelope. Once your envelope is empty, you’ve reached your limit. A digital or hybrid envelope budget system is safer and can be created with your bank or an app.
2. Create your budget.
Creating and sticking to a budget can help you: Get clarity on your monthly expenses, pinpoint areas where you may be overspending, and help tailor spending to your income. In other words, live within your means. There are 3 key steps to creating a budget:
- Add up your monthly income—your job, money from a side hustle or freelance, and any other money you receive regularly.
- Add up all your expenses. Start with your everyday expenses (ones you pay every month like rent, utilities including wireless phone charges, insurance premiums, and debt payments).
- Add up your variable expenses—groceries, clothing, dining out, gas and car maintenance, and travel. Then add up your fixed and variable expenses together, then subtract the total from your monthly income. (Ideally, you will have money left over but if not, see what spending you can trim or eliminate to balance your budget). Learn more about creating a budget>>
Once you’ve created your budget, do your best to avoid common budgeting mistakes. New budgeters tend to make rookie mistakes that can make the process more challenging.
- Budgeting too aggressively. It's common to create a budget based on what you think you spend, not based on your actual spending habits. Before creating your budget, track everything you spend for a least a month, so you can base your budget on realistic expenses.
- Not including one-off expenses. Another common budgeting mistake is to account for your monthly expenses but forget about random yearly expenses. Costs like annual subscription renewals, credit card annual fees, taxes or insurance can add up and not reflect your actual budget. Tip: Create a special category for this and add money to account for one-off expenses.
3. Explore your rental options.
Cost and location. These two factors are typically the key drivers for searching for an apartment. Naturally, you want to find an affordable apartment in an area you like. But finding the right apartment requires a deeper dive into specific questions to make sure your needs are being met:
- Are utilities included? (Electricity, water, gas).
- Is there an in-unit or in-building washer and dryer?
- Is there designated parking?
- Are pets allowed and what are the fees?
After you’ve signed the lease, you have to get there! If you’re just starting out, you may not have that much to move. But even a few pieces of furniture, kitchen items, and clothing can take more space than you realize. The question is, how do you get your things there? The average full-service in-town move can cost anywhere from $550 to $2,000 and that’s before you pay for any additional services like packing and insurance. A DIY move can cost a fraction of what you’d pay for a full-service move.
- Selling unwanted items can reduce the items you need to move and help make some extra money.
- As you plan to move, make categories—keep, sell, donate, and throw away.
- Decide if you need a moving van or if you can borrow a truck or trailer from a friend to save on expenses.
5. Break bad spending habits and build discipline.
Are your spending habits cutting into your paycheck and making it hard to save for the future? Taking an honest inventory of your patterns can help you identify places to cut back. From keeping up with your friends spending to impulse online shopping check out these 5 top spending habits to break.
If you're used to a cycle of earning and spending and running out of money, learning to build a disciplined financial life may be challenging, but it's doable and worth it. Start by following the money—figure out where you’re spending money now and create a plan and budget for where you want it to in the future. Cultivating financial discipline takes time, so be patient with yourself.
6. Shop smart for necessities.
According to a recent survey, the average American spends between $100 and $200 a week on groceries. You can work to reduce that amount with these 13 ways to shop on a budget. For example:
- Use store apps to look for coupons and rebates.
- Bring only cash to the grocery store. This will help you focus on the buying only the items you need.
- Buy generic products whenever possible. This applies to a wide variety of foods, including grains and dairy products.
- Avoid wasting food. According to the U.S. Department of Agriculture, 30 to 40 percent of food is wasted in America. Avoid adding to that statistic in your own kitchen by making sure to use food or freeze it before it goes bad.
Finally, start thinking about how you can spend your money more mindfully. Being aware empowers you to control your spending habits.
- Consider your values and priorities. Separate wants from needs. Think back and see if there is anything you regret spending money on?
- Prioritize experiences over things. While material goods may seem to last longer than experiences, the same isn't necessarily true for the happiness they generate.
- Create spending goals. This is an effective approach to making saving fun. You open a savings account (or use an existing one) to put money away for a specific expense like a reunion or trip. Once you use the balance, rename the account and start on your next spending goal.
Living on your own is a significant milestone, and with careful planning and financial discipline, it can be an enjoyable and fulfilling experience. By creating a realistic budget, exploring affordable rental options, and adopting smart shopping habits, you can navigate the challenges of independent living while building a strong foundation for your financial future.