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When you fly the nest and start out in life, you should have your finances in order. You’ll have a bunch of new expenses coming at you and, if you’re on your own, you can’t expect anybody else to pay them. Here we have some tips on remaining financially stable when accepting new responsibilities.
If you’re just starting out and looking for somewhere to live, you may have bad credit. It can be difficult to find an apartment with bad credit but there are options available for first-time renters.
Do These If You Are Starting Out On Your Own In Life
Start A Budget
When living independently, you can’t afford to live beyond your means. Overspending can be dangerous, especially if it means you miss out on paying your first set of bills, so you should start a budget. Budgets serve people well throughout their entire lives, so it’s a habit that’s best learned early.
To budget, just tally up your fixed and recurring expenses and then take that figure away from your monthly income. That’s how much you have left to live and do with as you see fit. Nobody finds the right balance straight away but, through trial and error, you can budget until you’re comfortable but living frugally at the same time.
Staying on budget is important for our next tip – building long-term savings. Once again, it’s possible to budget, live comfortably, and save money for the future at the same time when you manage your expectations and your finances properly.
You should try to build some savings as soon as possible. This will be chipped away from the money you have after-tax and after committing some to groceries and amenities. There are several reasons that people save but, as somebody starting out, you should try to gather somewhere between three to six months of your paycheck. This can be used as emergency savings if unexpected costs appear out of nowhere.
You can start saving by throwing your cash into a savings account, where it can accrue interest, or set up automatic payments. By setting up automatic payments, you can save money before your paycheck lands in your main account.
Pay Bills ASAP
Whether it’s paying your rent or your credit card bill, bills should be paid as soon as possible. Along with keeping a roof over your head, staying on top of bills will help build your credit score. A good credit score can help you negotiate more favorable terms in the future with lenders, allowing you access to more financing when you need it or want to start a business.
If bills go unpaid, they will typically heap late payment fees onto you. This means you pay even more while your credit score suffers, so it’s a lose-lose situation. Defaulting on any loans or bills can subject you to a collections process that also takes your money (including assets) while cratering your credit score.
Many online services can remind you of bills through email or text alerts if you’re the forgetful type. You can also organize it yourself with a calendar app on your phone. Some online banking services allow you to set up automatic payments too, making the process convenient and taking stress off your shoulders.
Invest Your Spare Time
When you’re alone, you’ll have a lot of spare time to clear. While everybody should have hobbies and pursuits that they do for fun, it’s also the best time to pick up new skills and invest in yourself.
With new skills come potential job opportunities that could earn more than you do today. By earning more, you can then keep more cash after budgeting and paying your expenses. Some hobbies can be monetized later on in life if you get good at them.
You should also stay healthy by eating well and getting physical activity several times a week, even if it’s just a brisk walk. If you get injured or fall ill, you’ll need to take time off and you may stop earning cash, which could put you in a precarious financial position.
Meet The Neighbors
Part of being on your own is self-reliance but there are still ways to establish safety nets around yourself. If you have neighbors that are close by, like in an apartment building, you should get to know them.
Neighbors can let you know if anything suspicious happens in the area, allowing you to protect yourself and your possessions, and they can also bring new opportunities into your life. If neighbors are hard to come by, insurance can protect you and your possessions.
You’ve just started, so you’re not in any rush to think about retirement yet. That’s understandable but, if you’re young, you should still think about your long-term future. Once you’re practicing all of the above steps and you’re doing well, take a look at your pension situation.
Once your emergency savings are built up, you can divert those funds to a retirement account instead. This will be an IRA/Roth IRA unless your employer offers a 401(k), in which case you should maximize contributions to get more money from your boss.