If you live with your family or roommates, the costs of housing can quite easily slip through the net. This is not only because it tends to be cheaper, but also because you might not be the roommate in charge of the household finances or paying the bills.
With that in mind, it may come as a shock when you decide it’s time to fly out of the nest and realize that budgeting properly is an important part of living alone.
Before considering how to afford living alone, it’s important to realize that your rent is not the only expense you’ll have. There are also other essential costs: utility bills, health, insurance, internet or phone bills, and groceries. On top of this, you need to factor in other non-essential expenditure, including leisure activities, debt repayments, and a rainy day fund.
Therefore, if you’re asking yourself, “can I afford to live on my own?”, a good place to start is to calculate whether or not your annual income is as close to around 40 times your monthly rent as possible.
If you find yourself fitting into this category, then following these tips on how to budget for living alone will allow for a smooth transition.
Work Out Your Post-Tax Income
There’s no use trying to figure out how to afford living alone if you’re working off unrealistic figures that don’t properly reflect how much you earn after paying taxes.
Depending on your salary, an average of almost 30% of your yearly earnings could be going towards taxes, just as it did for the average American in 2018.
Therefore, make sure you take into account the amount you'll spend each month on automatic tax deductions. This will give you a more realistic picture of your financial flexibility.
If you’re wondering how to afford an apartment by yourself, there are several techniques you can use to save money as well as reorganize your finances. This is otherwise known as budgeting. Here are a few planning methods we recommend:
- Envelopes - One way is to take out your paycheck in cash as soon as you receive it. Once you have done this, you can separate the money into different envelopes to control how much you are spending, and on what. Different envelope labels could include groceries, internet, and entertainment.
- 50/30/20 - This budgeting plan divides your post-tax income up into three categories: 50% for necessities -- such as rent, utilities, transportation, and groceries -- 30% for wants, and then 20% for savings. This helps you ensure you’re saving a healthy proportion of your monthly income each time you get paid.
- Zero-based Budgeting - Zero-based budgeting is, quite literally, what it says. It starts your budget from zero at the start of each new month. This is a good way to make sure you’re living off your previous month’s earnings, rather than the wages you are about to earn.
If you’re looking for a creative way to raise funds for a solo move, why not sign your spare room up for storage with Stache.
Keep an eye on your progress
There are a wide range of both paid and free budgeting apps, such as Pocketsmith and Mint. These can be useful tools for forecasting your finances and organizing your savings. In addition, if you discover you’re not quite on track with sticking to your budget one month, you can take control of the situation as soon as possible. The good news is that if you’re the only person living in your house, you can control the cost of your bills.
You decide whether or not to turn the central heating on, you decide how many showers to take a day, how often to wash your clothes, and so on.
Make Saving Automatic
Disciplining yourself to store a portion of your salary away each month for saving is harder than you might think. Regardless of your intentions to put that extra $100 away in your savings account for a rainy day, if it sits there in your checking account it will most probably get spent before you can even bat an eyelid.
However, if you set up a direct debit each month to ensure that a set amount of money is automatically transferred from your checking to your savings account, then the likelihood is that you will be saving each month without even noticing.
Can’t bring yourself to set up a direct debit? Nominate a friend or a family member to hold you accountable!
Review Your Budget Every Half Year
The most important thing to remember about budgeting while living alone is that financial situations change over time. The amount of money you’re spending each month might vary seasonally. Who knows when you might end up changing jobs or taking on more financial commitments? And unexpected costs have the tendency to spring up out of the blue.
Don’t be hard on yourself if you realize your budgeting plan isn’t quite working out the way you might have hoped. Simply revisit and modify it! Making slight changes or adjustments could work wonders for your progress.
If you’re looking for extra ways to supplement your income from home, check the 8 Legit Ways to Make Money From Home.
Still not sure how to afford living alone? Well, there’s no better way to fully know whether or not it will work than simply taking the plunge.