This is a continuation of Moving: Making the Decision, where I talked about the budget I made to help me decide if I could afford to live on my own for the year following college. The budget I made can be downloaded as a PDF, if it helps you to follow along. If you’re just joining us now, please go back and read part 1 first…

Housing

After taxes, it’s the most important thing you’ll have to pay for. Run the numbers for living at home, but remember to compare the numbers for living at home to jobs that you’re likely to get from home. You may be able to get a job in your field in the city your parents live in… or you may not. Keep that in mind. Also, talk to your parents when trying to figure out this number. They, like many parents who’ve had children who return to the nest, may want to charge you rent to live at home!

My parents are fairly lenient about this, charging me only utilities right now. But I know from an older sibling who stayed in the nest a little too long that, eventually, my mom will charge rent!

For rent prices in other cities, a good place to research is Craigslist. You can quickly see pictures of the places, read long descriptions, and it costs nothing to search. And best of all, the site is uncluttered and much easier to use than most apartment search sites.

Definitely keep in mind the idea of a roommate. You, like me, are probably 100% sick of living with roommates at this point, but the money that can be saved is way too big to be ignored. If you can make living with roommates work for a few more years, you will dramatically increase your chances of supporting yourself well.

How Much Should You Spend on Housing? Well, a beach house right on the water in Malibu might sound like a great idea now, but how much is too much to pay? I’m a big fan of the 27% Rule: your housing expenses (including utilities and everything) should not exceed 27% of your gross income. So if you’ve locked down a $50,000/year job, you can afford to spend up to $13,500 per year on housing, or $1125 per month.

One more thing to keep in mind: the incidental costs of renting an apartment. You’ll need to pay utilities, so factor those into your expected rent costs, even if you have to estimate. Also, renters insurance — which you might not think you need, but you probably do. A good estimate for renters insurance is about $20/month. It could be less than that if you bundle it with your car insurance (it could even be free!), but you should assume the higher number for this exercise.

Fixed Expenses

The only truly fixed expenses I have are my student loans. I could get by using payphones and the free internet in libraries, but I can never escape my monthly student loan payments. Student loans are nasty debt — they don’t go away, not even if you declare bankruptcy. So they’re the first expense on the list after housing. Joy. If you don’t know what your student loan payments will be, now is the time to look it up. Don’t know how to find your student loans? Look up what you’ve borrowed in the National Student Loan Data System.

Car insurance is another fixed expense that, although I could sell my car and get rid of it, I’m not likely to. Zack and I looked at one apartment that gave credence to the idea (the Metro station was literally across the street!) but ultimately, it was not to be. So I’m living with the idea that, for at least the next year, I’ll have my car and have to pay the insurance on it. If you’re like me, you’re still under your parents car insurance plan, and you have no idea what it would cost to get your own plan.

There are many, many sites you can use to get insurance quotes. Just beware that with some sites, giving over your phone number and email address will result in getting phone calls and emails from insurance companies that want your business. This is good if you’re looking to get the insurance real soon, but if moving out is actually a ways off, this can be a pain. Try using an email address other than your main one to cut down on unwanted emails. I haven’t received any emails or phone calls after using CarInsurance.com to get a quote, but it only allowed me to look at one quote. You can also try Esurance.

We’ll return to the topic of can insurance at a later time, as I walk through the process of getting my own and moving to another state. It could be an ordeal!

Car Fuel and Maintenance: not exactly fixed expenses, but not exactly not fixed expenses either. If you’ve got a car, chances are you’re driving it at least a little. Depending on what you know about your future situation, you may be able to accurately estimate how much fuel you’ll use. What you can’t predict will be the future price of fuel. (Come on, a year ago, you had no idea gas would be the price it is now. Same goes for next year!) Since I like to do a worst-case-scenario, I took the amount I spent when I was commuting 60 miles a day and gas was near $4/gallon, and projected that out over a year. For maintenance, I use the average spent on repairs, oil changes, etc. over the last two years.

Food is a fixed expense in that you’ve always got to eat, but it’s also pretty variable. There’s a big, big difference between eating ramen noodles and going out for steak and happy hours. The more you eat at home, the more you’ll save, if you shop well. Try to eat healthy, though, to keep health care costs down! (See below.) Estimating a food budget might be tough if you haven’t been buying your own food from a grocery store and keeping track of those numbers. I hear “$40/week per person” thrown around a lot, and that’s as good a number as any if you just want to estimate.

Health Care costs are an expense that many people forget to factor into their calculations. I found out that I’m actually covered under my dad’s health insurance until I turn 26, so I only have to worry about little things, like copays and over-the-counter medication and band-aids. If health insurance is a benefit you’ll be receiving from work, find out if part of the cost will be deducted from your paycheck, and how much. If you won’t have any health insurance through work, you absolutely need to look into getting your own. You’re not Superman, and even if you were, he totally has at least Kryptonite coverage. If you need to get your own coverage, you can use eHealthInsurance to get some quotes for that.

Phone/Cell Phone: you’re on your own for this one. Some people only need a prepaid phone for emergencies, and some people need both a landline and an iPhone with unlimited everything. This is very much a “know thyself” category, so you’ll have to figure out how much you’re likely to spend. Just don’t forget things like “activation costs” if you’re moving off your parents’ plan, and if you’re getting a landline, you might need to factor in the cost of getting an actual phone! (I know I don’t have a landline phone sitting around anymore…)

Internet Access is like $40, unless you get something special (or the companies figure out how to do tiered pricing, in which case we’re all screwed), or it’s less if you’re splitting the cost with a roommate. It might be higher if you get cable internet and the company requires you to get a basic cable package. Ideally, this number should really be factored into “utilities” as a part of your housing costs.

Other Categories

I’ve covered all the expenses that I projected for my first year out of college, but it’s important to note that your life is totally different from mine. Some of my categories may not apply to you at all, and I’ve probably left out at least one category that’s vital for you to prepare for. This list is just meant to get you started and get you thinking about how much things will cost you every month.

Your homework: go through all of these categories and come up with your estimates. Figure out what else you need to include, and estimate that as well. Next time, we’ll start taking a look at the big picture: can you afford all of this, and will there be money left over to save for the goals in your life?

Continue on to Part 3…

Comments or suggestions? Please leave a message in the comments! If you have a questions that you don’t want to share with everyone, you can always email me, as well.

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?

Personal Factors

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.

Financial Decisions

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!

Continue on to Part 2…

Ah, summertime! If you’re relaxing, chilling, or just enjoying the freedom of homework-less-ness while working a cool summer job, I hate you. I managed to graduate, which means I have to start real life stuff now. Like moving out of my parents’ house and getting a job. Pssh — I don’t remember signing up for this!

But life moves on and I am, in fact, moving on. Moving on out of state, that is! And there’s a lot of ground to cover: packing, getting an apartment, (getting a job), re-registering my vehicle, getting off my parent’s insurance and cell phone plans… and a bunch of things that I know I haven’t even thought of yet. Now is a time of change, and you get to come along for the ride. Welcome to the Summer of Moving.

As I work my way through the process of striking out on my own (in more ways than one), you’ll be treated to a summer-long series of posts. I’ll share everything I learn from moving myself and watching my boyfriend and friends get established, too. All posts in the series will be titled “Moving: …” so that you can easily identify them. And I’ll update this page to link to new entries, so you can bookmark this entry if you wish.

But the best way to keep up with the series? Subscribe to Poorer Than You! You can subscribe to the RSS feed or you can subscribe by email.

Making the Decision: (Part 1) (Part 2) (Part 3)
8 Tips to Avoid Scams on Craigslist
Finding an Apartment: (Part 1) (Part 2)
I’ve Moved, Now What? by Grace Boyle
Maximizing Space When Packing Your Car
Tales from the Trip
Titling, Registering, and Insuring Your Car

Got stories about moving out on your own? Share them in the comments, or contact me about writing a guest post!