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A study by the Melbourne Institute points out that many youngsters, aged 16-23, fall into poverty after leaving their parents’ homes. The study reveals that 17 percent of young women and 10 percent of young men cannot afford to pay utility bills a year after leaving home while one in ten youngsters default on their rent or mortgage payments.

Indeed, moving out of your parents’ home is a momentous decision – emotionally as well as financially. And while it may be daunting to get the finances right in the first go, the same study points out that most of these hardships are temporary. In fact, for both men and women, these difficulties start to disappear within five years of moving out.

 
4 tips to make your way out of your parents’ home
 

Besides, University of Melbourne’s Household, Income and Labour Dynamics in Australia survey reveals that people who move out of the parental home at the age of 21-24 find themselves richer by $185,000 in later life, compared to their peers. Of course, apart from the age you move out, your financial success depends on how disciplined you are with your money and the investment decisions you make.

So, if you think it is time for you to fly out of the comfortable nest your parents have provided you until now, here’s what you need to know to avoid the pitfalls on your journey into adulthood:


Plan the ‘Move’

Once you are mentally prepared to stay on your own, it is time to take stock of your finances to be sure whether you can afford the move or not.

After jotting down all your sources of income as well as expenditure, it is time to meet your best friend for life – a budget! Yes, budgeting is a habit you must adopt early in life if you don’t want to part with your money sooner than it is necessary. You can use this online budget calculator to create a household budget that will help you live within your means, and allow you to meet your financial goals on time.

According to Susan, a HashChing mortgage broker, budgeting also helps youngsters to not fall behind their rental payments or other bills, helping them create a good credit score that will come handy when they go mortgage shopping in the future.


Roommate or alone?

Well, it surely is a lot of fun to stay on your own, but, as they say, misery needs company. Jokes apart, either you have a strong social circle to fall back upon, else it is a good idea to share a house with someone – you get to share the rent, the groceries, the utility bills and other expenses – and you will always have someone around in the space.

But wait, there’s more to sharing a home than sharing common interests. Considering you are going to live under the same roof, apart from clearly dividing household chores, utility bills and expenses, it is also essential that you share similar lifestyles or, at least, respect each other’s routine. For example, if your roomie likes to chill at night with loud music and you need to wake up early for work, there could be room for conflict.

It is best to be upfront about stuff like cleaning, expenses and lifestyle before you double up with a roommate to ensure a pleasant stay together.


Buy health insurance

Now that you are out of your parents’ nest, it is time to buy your health insurance policy to avoid paying for any medical emergencies in the future. As a healthy young adult, you are likely to get a policy at a lower premium, which means you save more throughout the policy term.

Susan recommends that you must only pay for the cover you need – there isn’t much sense in paying for features you don’t need. It is advisable to speak to an expert who can guide you towards choosing the right cover depending on your lifestyle. For example, a sportsperson is expected to pay much more to a physiotherapist as compared to some lawyer or IT personnel.

Did you know if you don’t take out health insurance before 1 July following your 31st birthday, you could end up paying an annual 2% financial loading, in addition to the base rate premium for private hospital cover?


Build an emergency fund

Living independently is synonymous with financial independence, which means you must be prepared for emergencies. Especially in the first few months of moving out, it is difficult to have any savings, thanks to many unexpected costs that crop up once you are living on your own. To get yourself in the habit of managing household expenditure, it could be a good idea to start paying rent to your parents for a few months before you move out. You could also begin helping with utility bills or groceries. Besides, you could request your family to have a utility bill in your name, such as the cable connection, so that you can build a credit history that will be required when you go house hunting.

Youngsters are advised to build an emergency fund of at least three months’ estimated expenses before they move out to meet any contingency such as illness or loss of a job. Of course, your parents would be there to help you, provided you stay in touch and call them regularly, which is also great for your emotional well-being.

HashChing is a borrower-friendly online mortgage marketplace where you can compare broker pre-negotiated mortgage rates from over 60 lenders across Australia apart from having your home loan queries answered online by experts, absolutely free.

 

By Vidhu Bajaj,
HashChing Content Writer

 

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