Oh sweet, you graduated! Or maybe you didn’t, but you’re moving on anyway. Moving out (and moving up) may seem like the natural progression from here, but more and more grads (and non-grads) are deciding to return to the nest for a while. According to a survey conducted on CollegeGrad.com, 77% of college grad job seekers moved back home in 2008, up from 73% in 2007, and 67% in 2006. Pair that with the National Association of Colleges and Employers annual student survey, which found that only 20% of 2009 college graduates who applied for a job actually had one by the end of April, down from half in 2007.
Basically, we new grads don’t have jobs, and trend of moving back home is growing. So should we? Or is it time to leave the nest, job or no job?
Some people don’t have a great relationship with their parents, for whatever reason. Moving back in might not be smart, or safe. Or maybe you’ve just got crazy helicopter parents that will want you back home by 11pm each night. Maybe you’ve got a lot of younger siblings and your parents just don’t have the space for you to come back home. There could be a lot of reasons why moving home just isn’t right for your situation.
Or perhaps it has nothing to do with your parents at all — you might just have a gut feeling that it’s time to fly the coup for good. Go with your gut on this one. Sure, you could write out a long list of pros and cons, spend a lot of time researching areas you might want to move to, etc. etc., but I honestly don’t think it will help you in this decision. You will be swamped with more information than you can reasonably juggle, and your decision-making skill won’t improve any for your trouble (that is, if chapter four of Malcolm Gladwell’s book Blink is to be believed).
Your life, so far, has been building up to this moment. You have in the back of your mind all of the information you need to decide what to do at this crossroads. Listen to your heart — it knows the way right now.
However, coming up with the money to support the decision to move out may be another matter entirely. It’s one thing to know if moving out on your own is the right thing to do on a personal level, but can you financially support yourself right now? How do you even figure that out?
During my last term of college, I took a personal finance course. I was pretty cocky about the course — taking it pretty much to get an easy A. I mean, I’m a personal finance blogger! Don’t I know everything there is to know already? (Alright, I didn’t really think that. But I did correctly anticipate that I would be bored during the first few weeks.) But some parts of the class really surprised me, including the final project. We were asked to write up a budget for our first year out of college, and to weigh choices we might have to make, and to run the numbers on different possible scenarios.
I, as you might imagine, went above and beyond on this particular assignment. Partially because I already had a lot of the information I needed on hand (like my exact spending patterns for the past two years, the cost of living in the areas I was considering moving to, etc.), but mostly because I just like this sort of stuff. (Obviously, or this site wouldn’t exist!) I was still genuinely surprised at how much I learned from the act of writing out that budget, and how much more secure I feel in the decisions I will make over the course of this year. So, while my advice is usually the opposite (I don’t budget!), I am actually going to suggest you write a budget for your first year on your own. Even if “on your own” means living at home with your parents!
How to Start a Speculative Budget
You’ll want to figure out what will likely happen in different scenarios. What will your income be if you live at home? If you move to one city, or another? What will you make if you get your dream job? What will you make if there are no jobs available in your field, and you have to take a 20 hour per week minimum wage job? What’s the minimum wage in the cities you’re looking at? This may not paint a pretty picture of the next year, but as I wrote in my budget report, “I use the worst case scenario throughout this report, because it is easier to adjust a budget if things go better than you think than if things go worse.”
My best-worst-case scenario (that is, if I manage to juggle a part-time job, a paid internship, and my freelance work) had me making only $16,542 during my first year out of college. Even this number feels a little ambitious considering the amount of time that’s passed since I wrote that report, four months, and the fact that I haven’t found a job during that time. But that, of course, it’s why it’s the best-worst-case scenario! My worst case had me earning $6,000 for the year, and I had a mid-level scenario where I would earn $9,292.
Taxes: These income numbers I came up with are gross income, so I still had to factor in taxes. In may case, freelance income (like the money I earn from Poorer Than You) is taxed as self employment income, so I have to pay double in social security and Medicare taxes. Just something to keep in mind if your income estimates include any freelancing or self employment. If not, you can just use something like PaycheckCity’s Paycheck Calculator.
Where to go from here? There’s a lot more ground to cover — including fixed expenses, variable expenses, savings, and planning for the unexpected. I don’t want to overwhelm you with a big project, so we’ll take it in chunks. Your homework is to estimate your income in three different scenarios of your choosing. You don’t have to share it in the comments, but please let me know that you did it!