I remember the day I moved out of home as the most exciting day of my adolescence. I was finally out of my mom’s house and on my own, where I would make the rules, and everything will be so much more relaxed. It wasn’t long until reality hit me.
Living on my own was a huge responsibility, no matter how prepared I thought I was. Sharing your living space with a peer was supposed to be cool and fun, right? Wrong. Some of my biggest nightmares and stress came from roommates.
So I decided on another big step – living entirely on my own. And let me tell you, it was the learning experience I had ever signed up for.
There’s no better feeling in the world of living on your own. But it comes with strings attached. It takes good personal finance knowledge, patience and courage to make it. So I’ll help you go through the thing I wish I knew about the cost of living on your own.
Housing is your biggest expense and can take one-third of your income; utility bills, transportation, and groceries are the second-largest expense, together with cell phone bills and pet expenses. So just covering the basic costs of living on your own can cost you 50% of your income.
Basic Costs Of Living On Your Own
You can go without things when starting to live independently, like restaurant dinners, weekend getaways, and expensive cars, but some expenses are essential. Here’s what they are and how much they’ll eat up from your budget each month.
Housing costs vary depending on your location, and they aren’t cheap. On average, the rent for a one-bedroom apartment in the US in the first quarter of 2021 was $950. But, of course, there are cheaper and more expensive ones.
In Cleveland, you can rent a one-bedroom apartment for $525, while in San Francisco, you’ll need $3,600 to do that! The good news is that rents move almost proportionally with the average salary in the region.
For example, the average salary in Cleveland is $63,000, while in San Francisco, it is $100,000, which explains the difference in rents.
Managing your housing expenses doesn’t end with finding rent you can afford. To make sure you’ll be able to pay the same rent at least for a while, sign a lease and look for a rent-controlled apartment.
Don’t exclude the option to negotiate a lower rent after you’ve been living in the apartment for a while!
Utility bills include electricity, gas, water, and waste. It’s your second largest expense that you have little influence over.
Air conditioning, water heating, appliances, and lighting contribute to the size of your utility bill. Energy-efficient appliances and controlled air conditioning might help you lower the bill.
Cutting water waste is not only good for the environment, but it will save you some bucks. You also need internet, and with the abundance of streaming services, it won’t be hard to pick the most affordable one and skip cable.
There are specific ways to cut in the utility bill that require a little effort, like drying your clothes on a rack instead of turning on the tumble dryer and skipping the AC when possible.
Purchasing energy-efficient appliances and light bulbs and turning every light out when leaving the house or in an unoccupied room might seem silly, but it saves a ton over the year!
Transportation, car expenses, gas, and parking, are some significant expenses to have in mind. For example, if the apartment doesn’t come with parking on-street parking, you might pay thousands of dollars yearly for a parking spot.
You might get away with parking on the street in some places, but you can also get a fine the size of the yearly parking fee.
Transportation costs vary depending on if you’re a car owner or use public transport. Public transport, while not as flexible, it’s significantly cheaper than car upkeep and parking.
If you’re used to carpooling with your parents, roommate, or sibling, moving out will deprive you of that comfort. Experts suggest budgeting an astonishing 15% of your income for transportation costs!
A single adult is expected to spend between $175 and $345 monthly on groceries. Of course, the amount varies depending on your income, food preferences, diet, and how often you go out to eat.
For me, realizing how much I was spending on food was shocking. Unfortunately, it’s a daily necessity that can cost us a lot, especially if you’re the type that wants to order take-out a couple of nights a week or go out for brunch every weekend.
You can cut your grocery bill by purchasing store-brand products at supermarkets like Aldi, Costco, Market Basket, Food4less, Walmart, or Trader Joe’s. In addition, packing your work lunch, meal prepping, and skipping dining out every so often will help you lower the food bill.
You were probably buying your clothes on your own, even when you weren’t living alone, so this expense won’t be new to you. What’s different now is the amount you’ll budget for a new spring or winter wardrobe.
Not having the costs mentioned above leaves you with greater freedom for splurging on much-desired clothes.
When starting to live on your own, you’ll have to restrict your shopping binge and stick to buying necessary garments only. You might even create a capsule wardrobe each season from the things you already own.
Follow seasonal sales where you can get some new items and save some bucks.
Car and renter’s insurance are some hefty bills you need to budget for. If you’re renting, your landlord’s insurance doesn’t cover you; you must pay your own insurance to be protected if something happens.
If the building gets demolished, you won’t get compensated for your things by your landlord’s insurance. Renter’s insurance is on average $15 a month.
A car comes with many costs, and insurance is one of the biggest. Depending on your location, credit score, and age, full coverage insurance is on average $140 a month.
Suppose you’re carrying student debt; think how much you can afford to pay on it while living on your own. If you’re dragging other debt as personal loan, credit card debt, or car loan, calculate your monthly payments.
Debt should not be left unpaid when living on your own. Make at least the minimum payments on each.
Burring the burden under the carpet will lead to a higher interest rate, growing the debt to more than half of the borrowed amount.
Living on your own makes you think about your future more seriously. This is the right time to look into your employer’s 401k match plan, open a Roth IRA or other retirement savings account.
If you already have one, schedule automatic contributions; 401k, for example, is not limited to a minimum amount, so you can send as much as you have.
Savings should not be neglected just because you’re facing higher bills right now.
What you invest in now will make your future more comfortable. If you can’t manage retirement savings contributions for a while, it’s okay. But once you settle, look for places where you can make some cuts or take on a side gig to ensure pleasant retirement.
There’s no better time to have an emergency fund than when living on your own. If you haven’t set up and funded an emergency fund while still living at home or with roommates, start right away.
Imagine losing your job while living on your own. Not having a safety net will lead to some unpleasant moves, conversations, stress, and debt.
Rent is due each month, and you’ll have to resort to taking on any job or borrowing money not to get evicted. However, an emergency fund with at least 3 months’ worth of living expenses will help you get out of the situation.
If an appliance fails or your car breaks, it’s good to have that extra money to take the pressure off at the moment.
Living on your own is fun! Well, those few moments when you’re not working, not thinking about work, and not paying bills.
But fun shouldn’t cost a fortune. So while you should set a hundred or two as personal fun money, there are free things you can enjoy when low on cash.
One of the perks of living alone is inviting people to dinner instead of going out. You can manage a night in for less than $50 for a couple of friends. Organize game nights, cooking competitions, marathon movie watching, etc.
How To Budget For Living On Your Own For The First Time
Follow the basic rule 50/30/20 until you settle. Allow 50% of your income to go to all the living costs, 30% for your personal expenses, and 20% for savings. This formula is highly flexible; it should serve you as a guide for the first few months.
It’s essential to manage your personal finance the right way; overspending will leave you broke few days before paycheck each month. Living on your own for the first time can be challenging, and a written budget can help you track your mistakes.
Keep a close eye on the category you tend to overspend and look for ways to eliminate that.
Make a bill payment calendar where you’ll track payments and due dates. A forgotten bill can lead to an obnoxious situation!
The Cheapest Way To Live Alone
As mentioned earlier, managing all the costs can be tricky with a lower-paying job, but you shouldn’t give up the idea.
Try renting a room or living with roommates. It’s better than staying at home, and you’ll still feel independent. Sharing rent and utilities significantly lowers the cost of living alone.
Millennials are set to give 45% of their income between the ages of 22 and 29 for rent. Nearly 1 in 5 has given up the idea of owning a home and plans on renting forever. This means you can probably find a friend or two to share rent!
Can You Afford To Live On Your Own With An Average Salary
Depending on where you live, as a single person, you might be able to afford to live alone with as little as $22,000 a year.
This is the money that will help you live over the poverty line, but it will restrict you from indulgences like vacations, going out, and investing.
With a median income of $60,000 and adequate personal finance management, you can afford to live on your own, splurge now and then, and invest a solid amount into your future.
Living on your own is the greatest teacher you can have. It will teach you finances, home management, life skills, savings methods, and you’ll make mistakes, but it’s part of the process.
If you’re eager to move out on your own but aren’t confident in your finances, try to secure a second gig that will cover some of the expenses.
It costs a lot to live on your own, but it’s the price we pay for comfort, peace, and self-development.
Do you live on your own? What’s the best tip you’ve got for first-timers?