In “6 Steps to Achieving Financial Independence,” The Motley Fool examines statistics on young adults who are still living with (and in some cases still financially dependent on) their parents. While the numbers of adult children who either haven’t left or “boomeranged” back home aren’t encouraging, the fact that many of those “boomerang kids” surveyed say they cover some household expenses of pay rent may be good news to parents who can foresee their own children returning.
The Motley Fool offers financial guidelines to help young adults still living at home and these parameters are also worth considering even if you are on your own and examining your finances. Sometimes we look at the big things (like housing and transportation) and forget to consider other necessary expenses. (And parents, if your adult children won’t take any advice from you on how they can achieve financial independence, ask if they would be willing to speak with a Fee-Only financial advisor.)
Earnings: Do you earn enough to live the way you envision yourself living? If you move out of your parents’ house without a plan, you could wind up needing to return.
Rent: If you didn’t know, there are formulas to calculate rent. For many years, the standard has been that one shouldn’t spend more than 30% of your gross salary on rent (although people in major metropolitan areas may end up spending more than the recommended 30%). For some landlords, the standard is that a tenant’s annual salary should be 40 times his or her monthly rent.
Furnishings: When you can afford a home, what will go in it? Does your place need to be fully furnished right away? Are you willing to take old furniture from family and friends?
Food: The Motley Fool quotes a poll that found, “the average American spent $151 on food per week, with those with a high income spending on average $180.” You can spend less than the average; just make sure that you don’t leave out food when you do your financial planning.
Savings: You should plan for savings. If your budget is too tight to save even a small amount regularly, you need to make adjustments because you can’t achieve financial independence if you rack up debt or rely too much on credit during financial emergencies.