Stakeholder Member Login
Opinions expressed in this article are those of the author. Please consult an authorised financial services provider for financial advice.
By Keketso Matlebyane and Khayalakhe Ndlovu
The decision to move out of your family home is an exciting one. However, in the midst of all the anticipation of "living by your own rules", it is important for you to plan your "independence" carefully. Your newfound "freedom" will come with great financial responsibilities. Being equipped with the right information can help ease some of your upcoming financial challenges. Having access to the correct information as well as a plan will assist you with the financial planning required to move into your next life stage. Here are some of the things you need to consider before leaving the nest:
1. Can I afford this decision?
It is important to be realistic about the state of your finances. Have a look at your income and set-up your budget whilst taking into consideration your total expenses. These could include, but is not limited to, the estimated rental, levy, utilities and transport costs. Not forgetting that you will now probably have to do your own laundry and buy your own groceries. A good idea to implement in order to measure your financial readiness to live on your own is to pay "rent" to your parents for a few months before your move. This will help you determine whether this is the best choice for you and your current financial state. In addition, your landlord may want to check your credit score to see how you have managed your credit in the past. If you have not managed your credit well then this may count against you when applying to rent.
2. Save First!
It is important to save as much money as you can while you're still living at home. Moving into your own place requires quite a bit of upfront fees. These include your lease application, a deposit amount equal to your monthly rent, one month's rent in advance and administrative costs related to your utilities, such as sanitation, water and electricity.
3. Look at the fine print
When you are provided with the lease agreement, look into the finer details. Some landlords may increase your rent before 12 months which can be a nasty shock if you have not budgeted for it. Try to find a place where your rent remains unchanged for the first year. You can also negotiate this aspect with the landlord. Make sure you understand the stipulated penalty clauses if you want to move out before the end of the lease period.
Try to find a place that has minimal utilities fees and includes amenity fees within your overall rent (such as the levy). It is always best that you have someone with experience to revise your lease for you; this can help you avoid signing a lease agreement that is not in your best interest.
4. Collect your household goods and store them at home
Avoid making big purchases when you are already out of your parents' home, rather save and buy things ahead of time and place them in a storage until you move out. By doing so you can easily identify what is missing before it becomes an issue when you are on your own. It also limits the chances of you making purchases on credit. Buying appliances on credit is not ideal; cash is king and allows you to negotiate prices, unlike the cost of the instalments where you end up paying double the amount of the actual selling price. As an alternative, second-hand shops can provide you with your household goods at a cheaper price, this is worth looking into.
5. Budgeting – do I need this?
Budgeting requires you to make a list of your income and expenses on a monthly basis. When drafting your budget remember that your expenses should not exceed your income. Having an effective budget provides you with the opportunity to take control of your finances and make informed decisions. For instance, it is not wise to move out if all your expenses leave you without any extra money. Ensure that the cost of moving out does not overburden you financially and that you are still able to save a bit of cash after paying all your expenses. Living on your own includes expenses such as rent, household insurance, groceries and electricity to name a few. It is important to have extra money for unforeseen emergencies, which can be covered by your monthly savings.
6. Lifestyle changes
Taking on the responsibilities associated with moving out will more than likely change how you socialise with your friends in comparison to when you stayed at your parents' home. With less cash to splash, you will have to adapt your budget to your new expenses, because overspending may well cost you the roof over your head. For example, going out and using money that should be reserved for electricity might seem like a you only live once 'YOLO' moment, but you won't be happy when your electricity goes out and you still have three weeks before your next income.
7. Don't rush this process and always ask for help
Wait until you have saved enough money to afford moving on your own. This step shouldn't be influenced by external factors such as peer pressure or arguments with your parents. Moving out prematurely could have serious financial consequences and you might end up moving back home with a heap of debt. Let moving out be an informed decision taken by your state of financial and emotional readiness.