Globe and Mail Update

If you put your time and money to good use while living at home with your parents, you will begin life as a self-sufficient adult. Living at home offers you the time to increase your savings for your first apartment and pay down a large portion of student debt. Whether your income is from part-time work or your first full-time position, you will never have more disposable income than while living in the family home. Set a time limit for how long you will stay, and begin now to plan the steps you need to take for a place of your own.

1. Begin with a Savings Plan

Before you bolt out the door, you need to consider how much money you will need to get started.

Prudent financial wisdom recommends that you have an emergency fund equal to three to six months’ income. While you are still living in the family home, create a simple savings plan, which may look similar to this:

• 30 per cent of your (after tax) income to your apartment fund and emergency fund.

• 30 per cent toward your debt (student loans plus credit cards).

• 40 per cent for your transportation, cellphone, Internet, clothing, entertainment, vacations, etc.

Now consider your starting point. What is the value of your assets? How much do you owe? The difference between these two numbers is your net worth.

How much money do you earn each month? What are your fixed monthly expenses? What is remaining? A cash flow statement can show this information and will indicate if there is a surplus or a shortfall.

2. Selecting an Apartment

The first step is to create a budget. Include all of your existing commitments such as transportation costs, cellphone, loan payments, and so on. If you have a vehicle, include the cost of insurance, gas, and regular maintenance.

Start with your budget in mind. A good rule of thumb is that your rent should not exceed 30 per cent of your after-tax income. You may want to consider shared accommodation just to be closer to your job and to reduce your rent. Remember the less you spend on rent, the more money you have left over for other things.

Consider transportation between your apartment, work, and family and friends. Your apartment should be easily accessible to the places you frequent the most. How long will it take you to get to work or to travel to visit friends and family?

Where you live will have a great bearing on the cost. Large cities can have very high rents, forcing you to spend more, live in a less desirable neighbourhood, or live on the outskirts of the city. If you live on the outskirts of the city, that could mean an increase in gas mileage if your job is in the city centre. If you don’t have a vehicle, you will need to consider whether or not public transportation will be adequate. Also consider the amount of time you will spend commuting.

If you have a budget, and you have a good idea of the area in which you would like to live, start looking at some options within your budget. Inspect at least 10 apartments in different buildings. Take a day or two to consider your choices before signing a lease. Once you have identified an apartment you like, ask for a copy of the lease, take it home with you, and read it. Understand what you are signing, and if you are not sure, use a highlighter and ask the landlord for an explanation of highlighted sections.

Make sure you ask what utilities are included in the rent (e.g., electricity, gas, parking, cable, Internet). If utilities aren’t included, you will need to determine how much the additional costs will be. Add these extra costs to the rental amount. Make sure you are still within your budget.

If you are responsible for paying for your own utilities, call the providers and ask about security deposits. Each of these may be several hundreds of dollars.

You should do a walk-through with the landlord. If there is any damage to the place, it should be noted by both the landlord and you – preferably written down and signed by both you and the landlord. It may also be a good idea to take pictures of any damages to the rental property before you move in, so when you move out, you can prove you did not contribute to the previously documented damages (this should also be done with the landlord present). Ask the landlord if, prior to you moving in, the apartment will be painted, carpets cleaned, and appliances cleaned and inspected.

Sometimes it is possible to negotiate the rent. Do not be shy; if you ask politely and you clearly state your other options, you may find you are able to reduce the rent from the original asking price.

When you have found the place you want, you will be asked to sign a lease. Most leases have a one-year term and can usually be renewed annually. As you sign the lease your landlord will request a two-month deposit. Half will be applied to your first month’s rent. The balance will be held as either the last month’s rent or a security deposit.

Congratulations! You are now a fully self-reliant adult. Thank your parents for their love and support as you start your new life in your new home. Better yet, invite them over for a nice dinner!