By Sarah Morgan
Moving away from home for the first time can bring forth a variety of emotions. Whether you are leaving for school, work, or to get away from your helicopter parents, this is a huge milestone and may include excitement, nervousness and a little confusion.
I moved away from home for the first time at seventeen and have since seen it all. I’ve lived on my own in a foreign country, lived at school with four other female roommates, lived with a significant other, and have moved back home for periods in between. With each new living arrangement, I’ve learned a lot about myself and will cherish those memories for years to come, even if they may not have been pleasant at the time.
Picture a mixed dorm in a small French city where you had to take seven flights of stairs and your alarm clock being 6:00 a.m. closing time at the Irish pub underneath. If anything, the memories make for good stories and a few laughs now.
If you are moving away from home soon, you may feel a little overwhelmed with the process, and that’s normal. This is likely the first time you will be taking a significant role in your finances. Many people document the fun side of moving, like buying furniture and grocery shopping but fail to report the other side, like arranging hydro and budgeting expenses.
Regardless of your experience, let’s look at ways to help steer you in the right direction and make this exciting transition in your life a smoother one.
You need to have a budget when you move out
Before you make a move into your new crib, or even before you sign a lease, there are a few essential steps you should take. The first being a thorough budget overhaul. You won’t be leaving for long unless you can afford it. Make a realistic budget of your expected inflows (income) vs. outflows (expenses) and see how things add up.
Most people typically spend between 35% to 50% of income on housing and utilities. A crazy number that makes living at mom and dads seem a little nicer, I’m sure. In addition to rental or mortgage payments, this includes the cost to heat your home, electricity, telephone and cable service, and water. It would help if you considered other monthly expenses, including groceries, transportation costs such as parking or public transit, and entertainment costs such as alcohol or eating out. According to Credit Canada’s Budget Planner, your monthly expenses will look like this as a percentage:
- Housing & Utilities: 45%
- Food: 15%
- Transportation: 15%
- Debt Payments: 5%
- Savings: 5%
- Personal & Discretionary: 5%
- Clothing: 2.5%
- Medical: 2.5%
These numbers don’t consider an individual’s unique needs and should be tailored to your situation. When analyzing your budget, always ensure that 5% or more of your income is put aside into savings for the future or a rainy day. If you’ve budgeted out your spending and don’t have 5% leftover for savings, something needs to be changed. A budget is excellent; however, unanticipated expenses often arise, and you don’t want to be worried every month that you won’t be able to cover the unexpected and the unavoidable.
Focus on managing your income streams
Analyzing your budget will surely lead you to some realizations. Either your finances are in good shape for move-out day, or you need to make some changes. Maybe you already knew that you would require additional funds; however, the budgeting piece will give you a clearer idea of what those additional funds should be.
The level of financial independence you have will look different to each person when moving out for the first time. Family members may partially or fully fund you, you may already be in the workforce with a full-time job, or receive funding through student loans or a part-time job. Everyone is at different stages in life, and none are superior. The key is to manage your income streams and make sure they work for you.
When I first left home at seventeen, I had no income of my own and was being fully funded by my parents. Although I was very fortunate to have their support and have open conversations with them surrounding money, I realize that this may not always be the case. Money can create tensions and misunderstandings between family members if essential discussions aren’t taking place. I have friends who still feel pressure from family members over money, even though there is a surplus of funds. Gifting money creates an agreement between two parties, and without a breakdown of the necessary details, it’s easy for one side to feel slighted.
If you are receiving funding from family members, I recommend sitting down before move-out day to discuss how that will look. They may only want to fund certain expenses such as phone or cable bills, or they may wish to provide you with a monthly allowance used at your discretion. They may have no boundaries; however, having the conversation will keep you both on the same page and avoid future issues.
If you aren’t receiving enough income through work, family members, or student loans, you will have to consider other income streams before moving out. This could include picking up additional hours or taking on a part-time job. Getting that in place before leaving will significantly reduce an already stressful moving experience.
An emergency fund is essential
For anyone taking more control of their finances, one of the first steps is to set up an emergency fund. Depending on your unique situation, an emergency fund should make up between 3 – 6 months of your expenses. Things happen, unexpected expenses come up, and income streams may be interrupted (insert *2020*). You don’t want a situation where you are unable to pay rent due to these circumstances.
Before moving out, it may be unrealistic to save your entire emergency fund; however, you should have a few months’ worths and continuously add to it.
Don’t forget about tenant’s insurance when you move out
Although tenant’s insurance is not required in all parts of Canada, I highly suggest acquiring a plan before renting. They are relatively affordable and protect you from various home-related issues. Each plan is unique; however, most policies cover your belongings, accidents in your home, and unanticipated living expenses.
Coverage for your belongings covers anything in your home that is lost in an unfortunate event. Coverage for accidents, or liability insurance, protects you if someone gets hurt on your property and wishes to sue. Unanticipated living expenses cover the cost of relocating temporarily should your unit be uninhabitable for some time.
Another insurance consideration when leaving home is making sure your current coverage remains the same. If you are receiving coverage under your parents, for example, healthcare coverage, you should reach out to the company and ensure that this won’t result in any interruptions. They will likely want to have your updated address information as well.
Remember to set up your necessary services
When you first move-out, you may be surprised that some services, like water, aren’t automatic and need to be set up. I know that I was. Before you move-in, make sure that your utilities such as heat, hydro, water, and cable are set up.
Choosing an energy provider in Canada may be different for every region. Some provinces, such as Alberta, have more options because their market offers many deregulated providers. Deregulated providers operate in the market like any business, competing with each other based on service and price. Markets that only offer regulated providers have much fewer options as governing bodies set prices.
I didn’t know before moving out that energy costs vary based on the time of use. If you are interested in reducing your energy bill, consider running appliances later in the evening when rates are lower. I went several years waiting until 7:00 p.m. to use the dishwasher, and sometimes still do.
Have ‘The Talk’ with your roommates
When you leave home for the first time, you may be moving in with a significant other or roommate(s). Often, most of us do. Roommates make the financial load a lot easier and provide emotional support. If you are moving in with others, you should have a conversation about shared expenses.
Each living situation is different. I’ve had instances where I’ve shared everything with my roommates, such as groceries and minor expenses, I’ve shared some things like splitting the cost of furniture, and I’ve also kept things completely separate. Before you move in, you should have a conversation about what you want and what is expected of everyone.
If nothing else, you will have to share the services mentioned above and develop a payment plan. Likely, one person will front the bill, and others will pay them back. You may decide to divide the bills at the end of each month, or you may choose to combine your money in a pool before-hand, to be drawn down during your time together. As long as all members are ok with the arrangement and are holding up their end of the bargain, you’re golden.
Leaving home for the first time is a huge milestone and should be filled with excitement, maybe a few tears from mom and dad, but not an unnecessary amount of stress. As an extensive future planner myself, I understand that you may feel nervous about the unknowns. If topics like tenant insurance and hydro providers are confusing to you, that’s completely normal. By simply reading this article and taking notes, you’re in a far better place than I was at seventeen. All will be figured out, and soon, the only thing you’ll be missing is home-cooked meals.