How much do I need to save before moving?
We get asked this question a lot, so here’s a repeat of a post from last year.
When you are planning to move out on your own you’ll need be able to cover three types of expenses: 1.) your monthly rent and utilities and 2.) all upfront fees and moving costs and 3.) furnishing your apartment. The first two are musts; the third one offers more flexibility.
1.) The first biggie to answer is how much rent should I pay? You may not know how much rent you can afford, but your Uncle Sam does. The US Housing Department guideline says that your rent should be no more than 25-30% of your gross salary. The way landlords in major cities interpret this is by requiring you to make annually at least 40 times your monthly rent. This makes figuring your rent budget easy – just divide your annual salary by 40. Also, this formula leaves enough money after taxes to pay for food, transportation to work, utilities and even a little left over for a night out every now and then. You may think that you can stretch a bit, because your family will chip in, but we have news for you. According to our poll, 78% said that they get nothing, nada, zip from their family towards their rent. So, be prepared to foot the whole bill yourself!
2.) Before you even start paying rent, there is another big money hurdle to jump. You’ll need to have two months of rent to hand over your landlord before you move in – one month security deposit and first month’s rent. And if you used a broker, write another check for broker’s fees equal to at least one month’s rent.
3.) The good news about furnishing your new place is that you do not need much if you are willing to scavenge and rough it -a sleeping bag will get you started- but a little cash goes a long way at IKEA, Target, Ebay and Craigslist. According to another poll we did, 58% said they spent $500-$1,000 to furnish their first apartment. Our guest blogger Jeff had a budget of $800 and it was more than enough. Our guest blogger Jessica had a $1200 budget and also tells in detail how she spent it. As a rule of thumb, you might want to budget an amount equal to one month’s rent for furnishing your place.
So,if you have just started your first job making $35,000, what’s the magic number you’ll need in the bank before you are ready to move out on your own? First month’s rent $875 + Security deposit $875 + Furniture $875 = $2,625 plus a few hundred to cover utility deposits, some household and pantry basics (toilet paper, six-pack of beer, etc.) and a rental of a van, bring the total to about $3,000. And if you use a broker add another $1,000 or so to the number. It won’t be cheap, but having your own place is worth it!