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Ask Savvy: Leaving the Nest Budget


Dear Savvy,

I moved back in with my parents about a year and a half ago to get my finances under control. I want to move out in the next few months but don't have a clue what my budget should look like. I want to live on my own (or with roommates) and be financially solvent — unlike the last time I was on my own. My current "living with the parents in the suburbs budget" is working great but I don't know how to translate it into a "living on my own in NYC" budget.

Because I have been home I haven't had to pay for groceries, trips to the laundromat, and utilities. I am lost in terms of how much to budget for each of those categories and I don't even know what is the maximum amount of rent I can afford. My current monthly income is about $2,000 a month. I want to be able to save money, continue to pay off my debt but not feel like I'm depriving myself. I also want to figure out if it would be worthwhile to continue living with my parents until I get a raise.

To see my answer, read more.

Savvy says: Since you're unsure of your future expenses, you need to build a spending plan that includes all of your foreseeable costs — the total will let you know whether or not you can afford to move. I'm not sure how much debt you're carrying, but if you have a fair amount of high interest credit card debt or personal loans, you might want to consider paying more of your debt before taking on more expenses. That being said, if you're on track to be debt-free before you leave the nest or will be finished with it soon, here's what I would do.

First thing's first, do some research. Find out what rent will cost in the neighborhoods where you'd want to live by looking online, making calls, and talking to friends. Rent will take up the largest percentage of your income, but you shouldn't spend more than about 30 percent of your income on housing costs. Assuming your $2,000 is after tax income that means you can afford to pay about $600 in rent.

You need to include debt repayment in your future costs, and I would allocate no less than three times the minimum payment. If you're only paying the minimum, you're not really making a dent in your debt. Make a spreadsheet that includes rent, debt repayment, utilities, cell phone bill, groceries, transportation, any personal costs like prescription meds, health insurance, car insurance, car payment, Internet service, cable bill, and savings.

I can't tell you what to enter for each expense, and its likely that not all of them apply, but you can roughly estimate (ask around to friends and family) for each to get an idea of whether or not you'll end up in the black or red each month after covering your basic costs. If the answer isn't the one that you want, I'd continue living at home for a while and possibly consider picking up a job on the side to increase your income.

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