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How to get out of Mom and Dad's house
If you really want out of your childhood bedroom sooner rather than later, you’ll have to make some hard financial choices, especially if you also have student loan debt. “Entry level assistants who support themselves really don’t wear Prada shoes every day unless daddy bought it or it’s in a movie,” says Ellie Kay, parent of seven college and post-college age kids, author and family finance expert.
“Maybe you never thought about the cost of your basic living expenses in the manner you have become accustomed including rent, utilities, insurance, gas, your car, your expensive smartphone plan and designer clothing, electronics and unlimited activities, because they were paid by Bank ‘O Dad or worse, during college, paid by your student loans,” says Kay. She explains that your parent’s standard of living you are enjoying took 20 or more years to build, but it’s not your starting point and you might be in for a shock when you want to get an apartment of your own.
Don’t want to hear adult preaching? Rachel Ramsey Cruze, 24, agrees on the rude awakening after graduating from college, especially because she had to follow her dad’s advice and get through college with no debt and stick to her monthly cash budget. Her tough financial love dad is outspoken personal finance expert and author Dave Ramsey. “Once I realized that if I overspend or I don’t go to work that I can’t eat or pay rent, it was a whiplash of a reality check,” Cruze said. “If you’re still 25 living at home with Mom and Dad cooking, cleaning and paying for you, then you’re not living as an adult. Parents who allow it beyond a specified amount of time do not help their kids become adults.”
She used her communications degree to earn a position as a speaker and writer for the Dave Ramsey organization, and this year she has given presentations on affording life after college to college students at University of Wyoming, North Georgia College, State University of Georgia and Missouri State College among others. She says that while parents can still help with large expenses to start you out, being out on your own, no matter how hard it is, gives you a level of self respect.
Andrea Woroch, savings expert at Kinoli Inc.
recently presented a “Money Matters” seminar focused on the real costs of living during and after college and advocated for moderation.
Also see: Can the Student Debt Crisis Outshine the Housing Bubble?
Follow our expert advice on ditching excess costs and you will see that affording your life on your own just got a whole lot more realistic:
- 1. Get some roommates: Renting an apartment requires an up-front cash payment of the first month’s rent, the last month’s rent plus a “security” deposit (to cover any repairs) which can total a few thousand dollars, which you may or may not already have saved. On entry-level or minimum wage earnings, you may need two, three or even four roommates to afford that plus the regular monthly rent, says Kay.
- 2. Ditch the nails, the iPhone and the tanning. Cruze learned the difference between needs (food, shelter, electricity and transportation to work) and wants (new car, iPhone, designer clothes, nails, tanning and cable TV) by writing all her expenses into a budget and seeing what extras don’t fit in. Kay advises budgeting some small amount of “fun money” for a monthly splurge to keep things fun.
- 3. Buy a used car for cash. “Car payments are a big budget-buster," Woroch says. "Plus, used cars are valued less and without loans, insurance is cheaper. Get a vehicle with good gas mileage, too.
- 4. Switch up the cable or satellite TV service. “The one-time cost of the network antenna and much lower monthly Netflix or Hulu Plus fees can save you anywhere from $30 to $150 a month,” says Woroch.
- 5. Switch up your Xbox. Sell your Xbox (graphics shmaphics) on Craigslist.org and buy a PS3 to avoid the Xbox live fees. The PS3 game console doubles as a blue-ray DVD player and Netflix/Hulu streaming device.
- 6. Use friends for fitness and food. Forego the gym membership in favor of group hobbies like DIY boot camps, bike riding, hiking, running or free yoga classes you can do with friends (or to make more friends). Woroch advises ditching the take-out food in favor of YouTube tutorials and recipes. "Cooking at home with friends chipping in is so much fun and could save you nearly 40 percent on food overall,” says Woroch.
- 7. Ditch the digital phone. “Don’t ‘bundle’ with services that you don’t need,” cautions Woroch. “You can use Skype or other free voice calling services at home and consider lowering your monthly smartphone calling plan, too.”
- 8. Never pay full price. Kay advises you learn to haggle and find savings. “Always ask for a sales person’s best price and tell him you’re thinking of switching service to a cheaper plan when it comes to internet, wireless and insurance.” Before shopping for anything, use your smartphone to search social media, apps and online for savings. "Every retailer is vying for your dollars by offering discounts and if you don’t use them, you’re just paying more," she adds. Shop the off-price retailers such as Marshall’s, Ross and T.J. Maxx and even thrift shops. “Consignment and second hand shops sell designer items, many times with tags still on them, and you’ll pay just 10 to 20% of the mall price,” adds Woroch.
- 9. Just say “no” to credit cards. Cruze carries cash and uses her Dad’s “envelope system” for categories where she tends to overspend, such as clothes shopping. Once the cash in the envelope is gone, the spending stops. “Things ultimately cost more on a credit card and debt steals your future income from you. It’s a smart choice not to use a credit card and I had to learn to say ‘No’ to myself,” says Cruze.
- 10. Start a student loan debt snowball. Following Dave Ramsey’s general debt snowball advice means paying as much as possible beyond the minimum to the lowest balance loan and getting rid of it as fast as possible. Then apply that same amount plus what you were paying to the next smallest balance until those loans are paid. Getting rid of student loan debt means you can start adding back in little luxuries and building emergency savings.
“I’m a natural spender and I admit that all this money stuff is tough," Cruze says. "I’ve had to adjust my behavior to learn and apply it to life on my own. I have a tiny cubicle just like everyone else and I’ve had to tell myself ‘If you can pay for it, you can have it,’ so I know how it feels. But nothing compares to the feeling of being in control of my own life.”
Also see: Rural Areas Give Incentives to those with Student Loan Debt