Free Guide: Moving out of home and & Managing your finances
Moving out of home for the first time is an exciting milestone, but it also brings new responsibilities—especially financial ones. Managing your money effectively is essential to ensure you can cover your day-to-day expenses, save for future goals, and avoid financial stress.
A number of studies show that financial stress can be one of the most significant issues for young people that transition from school to further study or work[1]. A recent study indicates that 18.2% of young people never experience financial difficulties, that means that 81.8% DO experience financial difficulty.
In this guide, we'll walk through the basics of budgeting, step-by-step, to help you or your young adult get on top of finances from day one. Please send it onto them - it’s doesn’t cost anything!
Using this material might also be a good opportunity to start this discussion with your young adult. There are so many things to pass along to help make their transition to independence a positive experience!
Understanding Income vs. Expenses
The first step in budgeting is understanding the difference between income and expenses. Income is the money you have coming in, typically from a job, government support like Youth Allowance, or even financial support from family. Expenses, on the other hand, include everything you spend money on, like rent, utilities, groceries, and transportation.
Fixed expenses are the non-negotiables that must be paid every month. These include:
· Rent: Likely your biggest expense.
· Utilities: Electricity, gas, water, and internet.
· Groceries: Food costs can vary, but planning ahead can save you money.
· Transport: This could be car-related expenses or public transport.
Variable expenses are things you can control or adjust, like entertainment, clothing, or dining out. Being aware of these is crucial to avoid overspending in non-essential areas.
Creating a Budget
Start by listing out your monthly income and then do the same for your fixed expenses. It’s important to make sure your income can cover your basic costs first. Once you have that covered, you can move on to planning for savings and non-essential spending.
While it might sound boring, this is such an important element of managing finances. At a personal level you need to know where your funds are going before you get them, rather than wondering why you don’t have any money at the end of the month/pay period. On a lower income or study allowances it’s just so easy to spend on a few different things and suddenly you don’t have enough money to pay for your rent or eat properly.
It's also easy to dial in meals because you’re tired or haven’t got groceries, but this can cost you more than you’ve budgeted for the whole month in a week!
Example:
· Income: $2,000/month (job, Youth Allowance, etc.)
· Expenses:
o Rent: $800
o Groceries: $300
o Utilities: $150
o Transport: $100
o Savings: $200 (make sure to save!)
o Entertainment: $150
o Miscellaneous: $100
In this scenario, you’ll want to ensure your income always exceeds your total monthly expenses. If not, adjustments will need to be made—perhaps reducing spending on entertainment or finding a more affordable living situation.
Note to young adults: Warning….tough love…coming.
This is where it gets real and as an independent adult this is your responsibility - managing your resources!!! It doesn’t mean that you can’t talk about this with your parents and that they can’t help you - that’s part of their role to guide you. But it doesn’t mean spending all the funds you have available, or not planning ahead and having to ask them to bail you out regularly.
Tips for Staying on Track
Track your spending: Use apps like Mint or Pocketbook to keep track of what you’re spending. This will help identify areas where you might be overspending.
Automate savings: Set up automatic transfers into a savings account each payday. That way, you “pay yourself first” before spending elsewhere.
Plan for irregular expenses: Budget for costs that don't come up every month, like car repairs or holiday travel. Set aside a small amount each month so you’re prepared when they do arise.
Start an emergency fund: Aim to have at least a small amount, such as $500, set aside for unexpected expenses. This can prevent financial panic if something like a car breakdown occurs.
Common Pitfalls to Avoid
Underestimating daily expenses: Costs like coffee runs and take-out can add up fast. Set limits on these splurge expenses to avoid draining your account unknowingly.
Not planning for the unexpected: Emergencies happen. Whether it's a medical bill or a sudden job change, having an emergency fund is a financial lifesaver.
Relying on credit: Avoid getting into the habit of paying for non-essentials with credit. Interest on credit card debt can pile up, leading to more financial stress down the line.
The Importance of Conscious Spending
As you begin managing your money, focus on conscious spending—making deliberate decisions about where your money goes and ensuring that it aligns with your financial goals. For example, ask yourself: "Does this purchase add value to my life?" or "Am I spending out of habit or for a quick fix?"
Also, when you start out, savings might be difficult. However, even small amounts add up and it’s good to know you have a bit of a buffer for those emergencies that will definitely arise.
Quick Summary: Budgeting Tips for First-Time Movers
Understand Income vs. Expenses: List out all your income and necessary fixed expenses first to ensure your basics are covered.
Create a Realistic Budget: Plan for rent, utilities, groceries, and savings. Balance this against variable expenses like entertainment.
Track Your Spending: Stay on top of where your money is going and identify areas to cut back if necessary, see if your financial institution has an App to help you do this.
Automate Savings: Set up automatic transfers to a savings account to build a buffer.
Plan for Emergencies: Have a small emergency fund in place to avoid financial stress when unexpected costs arise.
[1] https://www.monash.edu/news/articles/new-report-reveals-young-australians-are-struggling-financially
Want More?
Here’s how the full course: “Life Skills: Moving out of home & beyond” can help:
Comprehensive Tools: From budgeting templates to expense trackers, the course offers exclusive resources to simplify your young adult’s financial planning.
Real-Life Scenarios: Get step-by-step walkthroughs of common budgeting mistakes and how to avoid them, tailored specifically to first-time movers.
Long-Term Financial Success: We don’t just focus on day-to-day budgeting. Learn how to save for future goals like travel, buying a car, or even a first home!
Ongoing Support: With expert advice and practical tips, you’ll feel confident your child is making the right financial choices every step of the way.
Don’t let money management become a stress point. Enrol in Life Skills: Moving Out of Home & Beyond and equip your young adult with the tools they need to thrive financially!