As a kid, you can’t wait to grow up and become a real adult like your parents. You can’t wait to have that freedom to go wherever you want, whenever you want. There is definitely a freedom that comes with adulthood. There are also a number of big responsibilities. Your cost of living and regular monthly payments may be a bit of a change when you finally reach adulthood.
When you first set out on your own, you’re on a bit of a learning curve for “adulting.” There are a number of things you may be doing on your own for the first time. It’s time to start preparing for those extra costs and the budget you’ll make to afford all your different living expenses. No matter your financial situation or the amount of money you have to start with, you can learn the best solution for your long-term expenses. Here are some tips to help you budget as you begin adulting for real.
Consider the cost of buying or renting your living space.
The largest expense you will have will be your rent or mortgage. Putting a roof over your head can often take a third to half of your paycheck. Whether you want to be a homeowner or you’re renting, you will have a down payment and monthly payments for your living space. If you’re looking at a new home, you’ll want to consider your mortgage payments and what you can reasonably afford as a borrower.
Use a mortgage loan calculator to figure your loan amount and the interest rates over the life of the loan. The beauty of owning a home is that the money you pay to the financial institution is an investment in your future. When you rent an apartment or townhome, you end up spending money without actually owning the property down the line. Be prepared to spend a large percentage of your income on your living expenses as you begin adulting.
Be prepared for utilities and repair costs.
Rent or a mortgage is simply the cost of the four walls and a roof over your head. You’ll also need to budget for utilities and repairs to your property. Set aside money for your energy costs, water bill, cable and wifi, and other utilities. You’ll also want a savings fund in case anything goes wrong and you need to pay for repairs.
A broken window is a great example of this. No one plans for your windowpane to shatter or problems to occur. However, you may need a window glass replacement at some point in time. Rely on the best company to replace your entire window or put in a new pane of glass. Look for high qualifications and companies that are upfront about the cost to fix a broken pane. Get a good deal for quality work when you’re repairing certain areas of your home.
Understand your transportation needs.
As a kid, your parents would help drive you around to your various activities. As an adult, you’re going to have your own transportation costs that will vary depending on where you live. If you are located in a big city, you’ll have more access to public transportation. While this is still a cost, it may be less than owning a car. If you do decide to buy a car, you’ll have to face the extra costs of car insurance and handle any other expenses to do with your transportation.
Pay off student loans and other debts.
If you are starting your adult life after college, there’s a good chance you’re bringing some debt with you. Student loans can be a huge hindrance to your credit and savings. Try your best to pay off these and any other debts as quickly as possible. Overall, this will help with your credit score as you look for the best deals on future loans.
Be prepared to start a savings account.
Becoming an adult means assuming certain responsibilities. A big one is starting your own savings account. It’s good to have a rainy-day fund in case you get into an accident or have unexpected costs out of nowhere. It’s also always a good time to start saving for retirement or your child’s college expenses. Set up accounts like a 401K or a 529 so you can be prepared for all the future expenses life may throw at you.
Insurance of all kinds can be pricey.
Another cost that can be a huge part of your budget will be your insurance. From the health insurance costs that come out of your paycheck to the home and car insurance you pay for out of pocket, be prepared to invest in these services. Most insurance is required and will help you in the long run if you’re ever involved in an accident of any kind.