Moving Out of Your Parent’s House

by Sean Bryant on June 10, 2013

How to move out of your parents houseGary Dek is a writer for and is always looking for ways to make or invest money. Gary has previously worked for an internet company on their M&A team, as well as in investment banking and private equity.

You’ve finished school and secured your first full time job so now you think you are ready for the next big step, a home of your own. Moving out of your parent’s house and living on your own, whether in a home or apartment, is one of the biggest steps towards independence. If you want to ensure that you can sustain an independent household, there are a few crucial steps you should take before signing a lease or mortgage on your own place. Freedom comes at a price and you need to think about the different expenses you will have to pay and responsibilities you will take on when you leave the security of the nest.

Paying Rent to Parents

While many young adults pay rent to their parents, they are often unaware of all the expenses that their parents pay to keep a household running. In addition to rent, there are electric and water bills, gas, insurance payments, internet services, cable TV, property taxes, the cost of a telephone, groceries, and various maintenance expenses. If you have student loans and/or car payments, you have to deduct your monthly payments from your income to determine how much you can really afford to pay in rent or mortgage payments.

Although living with your parents may be a drag, especially if you lived away from home while you were in college, it does give you an opportunity to prepare for life on your own. A savings account with three to six months expenses will help ensure you do not have to move back in with mom and dad if you lose your job or have an emergency pop up. Paying off credit card debt helps establish a good credit score, which is important when applying for a lease, mortgage, or personal loan and will help keep bills affordable without excessive interest payments burdening your lifestyle.

Whether you are buying or renting a home, there are initial expenses, like security deposits, closing costs, mortgage origination fees, renter’s insurance and to consider. Homes in subdivisions or condos may have home association fees in addition to mortgage payments so be sure to factor this in when deciding how much you can afford to spend. Remember that your monthly housing expenses (rent or mortgage payments) should not exceed one third of your monthly income and do not allow rental or real estate agents to talk you into to looking at homes you cannot comfortably afford.

Preparing A Budget

If you have never lived on a budget, you should start staying within a budget while living with your parents. Your budget can be kept on your computer or in a paper ledger and should list all the expenses you have each month. There are two types of expenses: fixed expenses like rent, mortgage payments and utility bills, and variable expenses like groceries, clothing and entertainment. Living on your own will not be much fun if you do not have enough money left for food after you pay your fixed expenses, so be sure to have a minimum emergency fund of 6 months’ worth of living expenses to cover unexpected shortfalls. Learning to save money each month before moving out can help you get the hang of managing your finances afterwards.

Fixed expenses should include all the bills that must be paid each month. While utility bills may vary depending on how much you use your heat or AC, you should figure an average amount and put any extra away to cover the months when the bills are higher. Credit card debt, car payments, student loans and insurance are part of fixed expenses.

Variable expenses, like groceries, gas, bar tabs, are where you can save some money if you run a little short for a month or two due to unforeseen expenses. When considering clothing expenses, remember to budget for dry cleaning or laundry costs. Include a line item for entertainment since you will want to join your friends for the occasional movie or night out and include a miscellaneous category to cover things like birthday gifts and other small expenditures that are not line items in your budget. If you get in a temporary financial pinch, you can cut back your variable expenses by staying at home or buying less expensive foods.

However, don’t ever sacrifice your health to save a few dollars. Eating Ramen Noodles every day for a year may save you a couple thousand in the short term, but you’ll be paying exponentially more down the line in healthcare costs and insurance premiums. It’s just not worth it.

Build Your Credit

If you have never established a credit line, you may not be able to find an apartment or get a mortgage. Credit history is an important factor when banks or landlords are considering your application. It usually takes six months to a year to even establish a credit score, and longer to build up your score. If you graduate with student debt and loans, you’ll immediately begin building up your credit when you start making payments. The other options are to take out a car loan or get a credit card, but obviously don’t ever take on debt just for the sake up building up your credit history. If you don’t desperately need a car, don’t buy a new one. When applying for secured loans, your parents may have to co-sign your initial application for credit, but once you have a good payment history, you will be able to get credit without a co-signer.

Since banks and landlords also consider debt to income ratio when deciding whether you will be able to pay for your home, pay off high interest credit cards to keep your debt ratio as low as possible. Pay off as much debt as you can while living with your parents so you can have a favorable ratio when you go out to get your first place. This will help you secure the home you want instead of settling for the only place you can get.


Many young adults share the cost of their first place with a roommate to save money, but before choosing a roommate, you may want to run a background and credit check, unless they are your personal friends. If your roommate does not pay their share of the bills, you could be stuck with full financial responsibility for your home or apartment. Even if the roommate is someone you know well, it is a good idea to check out their finances since they may have debts they have not mentioned. Choosing the wrong roommate can leave you in a financial bind, hurt your credit and have a negative impact on your life for years to come.

Living with Mom and Dad can be a drag, but taking the time to financially and emotionally prepare for that last step to independence is important. Moving out before you are ready could mean moving back in with your parents when you are unable to meet your financial obligations. It could also cost thousands of dollars and ruin your credit, making it more difficult to find a home in the future.

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Sean Bryant

Sean Bryant created in 2011 to help pass along his knowledge of finance and economics to others. After graduating from the University of Iowa with a degree in economics he worked as a construction superintendent before jumping into the world of finance. Sean has worked on the trade desk for a commodities brokerage firm, he was a project manager for an investment research company and was a CDO analyst at a big bank. That being said he brings a good understanding of the finance field to the One Smart Dollar community. When not working Sean and he wife are avid world travelers. He enjoys spending time with his daughter Colette and dog Charlie.

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  • Common Cents Wealth

    These are great tips. I bought a house right out of college and it’s been working out great for me, but I know it isn’t the right decision for everyone. I could’ve saved quite a bit of money by living with my parents, but my house has ended up increasing in value enough to almost offset all of that savings. I know I won’t get this money back until I sell, but it’s still nice to know. I think having an emergency fund and living on a budget is crucial before moving out.


      If you take the mortgage interest tax-deductions into consideration, I’m sure your ahead of the game. Not to mention that home prices and rates are going up and you probably wouldn’t get the same deal. Congratulations on being an early homeowner!

  • CanadianBudgetBinder

    Lots of great tips here! I also bought my home just out of University and lived with my parents for a bit before moving to Canada just gone 30 years old. By then I already understood about living on my own but having my parents teach me the basics about money growing up is what really set me down the right path. The budget, well I didn’t have one of those, I would spend less than I earned. I know now I likely could have saved much more but those are times I learned from. Now, we budget and can’t imagine our life without one.

  • Lots of great tips here! I recently wrote about the same topic and have had a bit of a debate about whether or not recent grads should pay rent when living in there parents house. I think a lot of recent grads may not be aware of all of the costs associated with owning your own place. Roommates are a great idea and definitely a way to reduce costs.

    • I think paying rent is a good way to start having financial responsibility. The goal is to save up money to move out so it could even be $50 a month.

      • Makes sense, but what would be even better is them educating themselves on saving/investing and possibly using that $50 to build additional wealth. I do agree though, paying rent definitely builds financial responsibility

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