How to move out of your parents’ house and not go completely broke

Living with your parents after you graduated was financially essential.

But now you’ve got a pretty good job, your debts are under control (specifically, consumer debts like credit card balances), and you’re ready for what comes next.

Here’s how to get yourself organized to be a financially independent adult and finally fly the coop. You’ll want to do all of this before you start packing.

Get your banking accounts organized

If you’ve got accounts all over the place and some are joint with your parents while some are not, you’ll want to clear the clutter and have these three low-to-no-fee accounts just in your name. First, a chequing account where your pay goes into and where your rent, groceries, student loans and utilities will be paid from. Second, a savings account that will be used as an emergency fund. Third, another savings account you’ll use for bigger purchases throughout the year like an eventual trip to Europe.

New to saving? Start with this; once you’ve moved out, when you get paid, put three per cent of your pay cheque (the amount being deposited, also known as your net pay) into your emergency fund and another three per cent into your bigger purchases account. Automate these transfers so that you never forget to do this important savings.

Set up an investment account for the long-term

The TFSA is a great starting place to begin your investing journey (this is the money you’ll use way down the road, and that grows through the power of compounded interest and reinvested returns). These accounts can be opened at your local bank, through a robo-advisor or through a financial planner. If you’ve got a work pension plan, sign up for that as well because your employer might add money to your account through a matching program — that’s free money!

As your income grows, adding an RRSP and possibly the new Tax-free First Home Savings Account (if you want to be a homeowner eventually) are other accounts for consideration.

My advice if you’ve never invested a single penny is to earmark four per cent of your net to go into a TFSA once you’re launched.

Make a budget

Make a “once I move out” budget based on the income you have left over after you’ve done your saving and investing … in other words, plan to live off of 90 per cent of what you take home.

Whether you want to use an app or a Google sheets template or a tool promoted on TikTok, a budget is key to being the boss of your money. You’ll input your earnings, add the saving and investing amounts I mentioned above and then your expected living costs. The goal is to make sure you’re not spending more money than what you have, otherwise you’ll go into debt.

Quickly, you’ll get a sense of what you might be able to afford for rent, utilities, cellphone, groceries and transit. Armed with this information, check the rental listings that would work with your budget.

Keep your scores in check

You’ll need some savings to get launched, and a good credit score.

Landlords will need a security deposit and one month’s rent up front. And, the only way they’ll agree to lease to you is if you have a reasonably good credit score (typically over 650).

If you don’t have savings or a good credit score, your next steps are super simple — start saving with each pay cheque and ensure you’re making your loan and credit card payments on time (and in full, if you can). This could take a few months, but only good things can come from saving and using credit responsibly.

Still not enough?

You might discover that you don’t make enough money to have everything you want, and that’s when financial creativity can go a long way.

Heard about the singles tax? To sum it up, it’s the unfortunate reality that living 100 per cent on your own, without a partner or a roommate, is extremely expensive. There are only two ways to resolve this; make more or spend less. I’m a fan of always finding ways to make more money no matter what stage of life you’re in. It could be looking for a better job, taking on more shifts, freelancing or side-hustling — anything goes, especially if you’re in an expensive city.

And, when it comes to spending less, this is simply that you’ll need to find less expensive rent, cheaper places to buy groceries, bundled discounts for insurance and so on. You’ll want to be frugal because saving money on essentials gives you more money for the fun stuff. Or, house share. You won’t have roommates forever, but having them can make living independently now a reality. Just be mindful who you choose to live with.

When you’re ready, share your plans with your parents so that they can make their own plans and hopefully celebrate with you in this exciting new chapter of your life.

This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star.