Common expenses when living on your own
Living on your own represents a significant milestone — one that most young adults are eager to embrace. But before packing your boxes and hiring a moving truck, take a moment for a reality check about the costs of living independently.
If you’ve never lived on your own before, you might be surprised — or shocked, depending on where you live — to learn about the actual costs of living. Hint: it’s about so much more than just rent. The better you understand the myriad living expenses you’re likely to face, the more prepared you’ll be when budgeting for your first apartment or home in Washington.
To set yourself up for success, there are a number of things you’ll want to consider when budgeting for some of the common expenses that come with living on your own, as well as some of the hidden expenses. Start with these tips for estimating your potential living expenses and creating an effective budget that will get you on the right path during this exciting and pivotal time in your life.
Estimate your monthly living expenses
The high cost of renting is the elephant in the room when it comes to considering monthly expenses. And, unfortunately, when it comes to anticipating your budget for rent, there is no one-size-fits-all answer to the question, “How much should I spend on rent?” The reason is that the cost of renting varies widely, depending on geographical location and individual needs or financial situations.
In some Washington areas, rent is much higher than in other areas. For example, rent in Western Washington urban areas is much higher than in Eastern Washington rural or suburban areas. You can opt for an area with a lower cost of living, but that’s not always easy or even possible to do if you have a job that requires proximity.
A good rule of thumb to follow for budgeting your rent is to avoid paying more than 30% of your income on rent. While the appeal of living alone for the first time may be great, it may also be worth considering a roommate to help share living expenses so you can lower your monthly rental expenditure — especially if you live in one of the more expensive areas of Washington.
The 30% rule of your take-home pay may sound like too little, especially when considering some local rent prices. However, there are other expenses you’ll need to think about, and they add up quickly. You can get a better handle on your budget projections by considering some of the following monthly expenses you can expect when living on your own.
Renters often overlook the cost of utilities until they receive their first utility bills — and then, boom! — the light goes on. Don’t let this expense sneak up on you.
First, find out whether you’re responsible for the utilities for your unit. Depending on the type of place you’re renting, your water and sewage bill may be included in your rent. This is often the case with larger apartment complexes.
However, if you rent from private owners or rent a house instead of an apartment, you may find that you’re responsible for much more. That may include:
- Sewage and garbage collection
- Natural gas or oil
- Cellphone service
- Cable or internet service
- Security systems and monitoring
Also, keep in mind that these utilities do not include services such as gaming or video streaming that you may subscribe to.
In addition to budgeting for auto insurance if you own a car, you will also want to budget for renters insurance. A common misconception for renters is that a property owner's insurance will cover the renter’s belongings if there is a fire or a flood. Most home insurance or property insurance policies specifically state that a renter's property is not covered. This means you must purchase renters insurance to protect everything in your home.
Renters insurance not only covers your property and belongings from natural disasters, but it may also help if you experience a burglary. Also, if you’re displaced due to a fire or flood, or if your rental is uninhabitable for other reasons, renters insurance may cover the difference in the cost between your rent and a hotel or temporary rental until your home is habitable again. Before moving out, get a quote for renters insurance in the area you’re considering living in. Different ZIP codes have different prices, so keep that in mind.
New renters often feel a bit queasy once they learn how much they’re paying each month for food. The easiest way to blow your food budget is to dine out. Even if you’re only eating fast-food or takeout, the costs quickly add up when compared to preparing simple meals at home.
Fortunately, you can help rein in your food costs and expenses — without resorting to ramen noodles for the last half of the month — but it takes planning and discipline. Consider the following cost-savings tips to keep your food budget in check:
- Shop local ads for discounted food bargains.
- Plan a menu for the week.
- Cook once a week to create leftovers for the remainder of the week and reduce the temptation to dine out when you’re busy.
- Join a home-delivery service that drops off recipes and ingredients at your door.
Following these suggestions will help you not only cut costs but also keep a healthier assortment of foods available in your home.
Basic home essentials
When you’re moving into a new place, you’ll need to feather your nest. If you’ve never lived on your own before, it’s likely you’ll need to stock up on basic home furnishings and essentials, such as:
- Living room, dining room and bedroom furniture
- Towels and bathroom linens
- Cookware and bakeware
- Dishes and utensils for eating
- Small kitchen appliances, such as a microwave or coffee maker
The cost of these essential items can really balloon, especially if you’re purchasing them in one fell swoop. To help minimize the costs of these basic needs, consider purchasing your home essentials from discount stores or second-hand shops over a period of a couple of months.
Transportation and parking
Transportation is a budget item that people often completely overlook when determining their monthly living expenses. However, it’s a very important expense to include, especially if you own a car in certain Washington cities where parking is at a premium and you can pay dearly for the privilege.
For example, in many Seattle neighborhoods, daily street parking is expensive, and monthly parking fees can be prohibitive, with MonthlyParking.org reporting monthly parking fees between $125 and $350 per month.
In addition, you’ll need to budget for gas, auto insurance, and car maintenance and repairs.
If you don’t own a car, you’ll likely need to budget for public transportation such as the bus or light rail, or for car services such as Uber or Lyft. When you factor in your transportation expenses in addition to rent, utilities, food and other expenditures, it can be a significant blow to your budget, so don’t overlook this important expense.
Existing debt repayment
Taking on new expenses when you’re living on your own doesn’t absolve you from paying your existing debts. These debts can be in the form of auto loans, student loans, credit card debt or countless other types of payments you may owe. It’s essential to incorporate your existing debts into your new budget so you can determine how much rent you can afford and whether you might need to consider alternatives to living on your own.
Last but certainly not least, don’t forget to set aside money for entertainment. Be sure to leave plenty of wiggle room in your budget for things that make life enjoyable, such as outings with friends, dates, concerts, movies, sports and travel. That also means you’ll need to set limits for your entertainment budget so that it doesn’t eclipse necessities like your rent, utilities and food.
Of course, this list of monthly living expenses is not exhaustive; it doesn’t include expenses like laundry or dry-cleaning costs (especially if your apartment doesn’t have a washer and dryer in the unit) or luxury items like manicures and pedicures, house cleaning services, and other expenses. It also doesn’t include personal care and hygiene, as these expenses vary from one person to the next.
Another item missing from the list is clothing. Plan for your clothing expenses by building it into your budget so that you can comfortably purchase new clothes whenever you want to update or refresh your wardrobe, whether annually or seasonally.
Creating an effective budget for living on your own
If, after estimating your living expenses, you still feel that you’re ready to live on your own, now is the time to sit down and plan a budget. Following the right steps can help you craft an effective budget that helps you accomplish your financial goals and achieve greater financial success.
The first step is to determine your take-home pay (net pay) for each pay period along with any other income. This will give you the total amount that you’ll have to work with each month for renting an apartment and living on your own, as well as an amount to set aside for savings or to put toward specific goals.
The second step is to create a list of your current and anticipated monthly living expenditures. This list can help you determine how much you are spending, on average, for the necessities in your life. To help keep your expenses consistent from month to month, you may want to consider things like “level pay” programs with utility companies and prepaid mobile phones. This will allow you to budget more effectively by spreading out costs over a 12-month period. It will also help you avoid tight funds when things, such as your winter electricity use or your monthly cellular use, may be higher than normal.
Next, there are three things outside of the traditional monthly expenses discussed earlier that you need to understand and include: Your needs versus your wants, your savings plan and your living plan. The better you understand these concepts, the more they can help you when making important budgeting decisions — not only for renting your first apartment, but also for later in life.
Determine your needs versus wants.
When moving out on your own, you should prioritize your budget for needs versus wants. Many people struggle with determining needs and wants; however, when you’re creating a budget, it is essential to objectively identify which of the two categories your various expenses fit into.
First, prioritize your needs, which are things like rent, utilities, food, transportation, etc. Then identify your wants, which are the things that are nice to have but not essential, such as house cleaning services, cable television, streaming services, gym memberships, spa services, etc.
Your needs budget will include your basic necessities, while your wants budget will include things you enjoy but can live without if your budget doesn’t allow for it. Learning these distinctions early can help you enjoy greater financial success throughout your life.
Create a savings plan.
When you’re creating a budget, you need to include savings. It is recommended that you have at least six months of living expenses saved before you move out on your own. You should also strive to save at least 20% of your income per paycheck. It’s a good idea to “pay yourself first” by setting up an automatic transfer or direct deposit of your predetermined savings into a dedicated savings account each month.
Your savings account can be used to cover unexpected expenses, such as expensive car repairs, or it can be used to save for future goals, such as a down payment on your first home. Anytime you create a budget, you should always include savings as a line item. This will help ensure you don’t find yourself in a tough spot if unexpected expenses pop up.
Be sure to leave room for living.
While it can be super exciting to rent your first apartment, it’s also important to understand how to live on your own. Not just by making ends meet, but by really living. Try to make sure you’re not just living from one paycheck to the next without experiencing some amazing moments.
One way to ensure you’re leaving room for living in your budget is by asking yourself, “How much should I spend on rent?” After paying your rent and related necessary living expenses, make sure you’re leaving room for fun activities that create memories and make life worth living. If you can’t find an apartment that fits within your budget, consider alternatives like getting a roommate. While that may not sound ideal, it offers a better arrangement than struggling to make ends meet every month, with nothing left to experience life’s awesome moments.
By now, you should have an estimate next to your monthly expenditures. Add up your estimates in each of the categories on your list, and then compare that total to your net monthly income. This calculation will help you determine if you’re earning or saving enough to afford living on your own or if you need to increase your net pay or decrease other expenditures first. This will also help you to determine how much you can realistically afford to spend on rent, while still having enough money left over to pay for other living expenses — with room for enjoyment.