You’re finally earning your own money and moving out of your family’s house into your own spot – nice. While you’re about to be the master of your own destiny, you’ll know that with this power comes responsibility too. Financially, it’s now up to you to make your money stretch as far as possible, so you can cover all those new expenses that come with living in your own place. To help you stay on top of all things financial, here are five things you’ll need to budget for:
- Rent
This will be one of your biggest expenses, so be sure that you create a budget and know how much you can afford to pay each month before you splash out on that penthouse apartment. Perhaps there’s a flatshare with friends where you can rent a room, which helps reduce your bills? Bear in mind that it isn’t only rent you’ll need to cover – you’ll also probably need to put down a security deposit upfront (usually one or two months’ rent), as well as paying monthly for utilities like water and electricity, an internet connection and then extras such as your Netflix or DSTV subscription.
- Furniture and appliances
If you’ve been living with your parents, you probably haven’t had to think about acquiring basic furniture such as a bed, chairs, tables, cupboards and cabinets before – but you’ll need these things if you’re renting an unfurnished apartment. There are many ways to do this more affordably, such as borrowing from friends, buying secondhand options online, upcycling or restoring items you may find at a charity store, or finding affordable gems at your local flea market. You’ll also need to think about other basics like linen, towels, kitchen utensils, a fridge, a microwave or hob, a kettle and even a washing machine and television.
- Emergency fund
You’re on your own now and emergencies are going to come your way – maybe your cellphone breaks, or you need new tyres for your car, or you lose your job unexpectedly. That’s where an emergency fund comes in: it’s a sum of money that you build on each month that you can dip into when you really need it. You’ll hear financial experts say that a true emergency fund should be equivalent to 3-6 months of your living expenses, but if that seems out of reach, start small. Putting a little away each month is better than none at all, especially because you can benefit from compound interest where you earn ‘interest on your interest’ over time. If you open a savings account to do this, make sure there are no penalties attached if you need to withdraw the money at short notice.
- Medical aid
While it can be difficult to think of this as a priority if you’re young and healthy, the fact is that medical aid is a crucial financial safety net should you become sick or be involved in an accident and need to go to hospital. While comprehensive medical plans can take a chunk of your monthly income, more affordable hospital plans are entering the market that cater to people who are otherwise healthy but still need basic medical aid cover. For example, Fedhealth’s flexiFED Savvy is one of the most affordable medical aid plans on the market. For just R945 per month, you get solid network in-hospital cover plus the option to use it as a flexible savings plan for day-to-day medical expenses if you need it.
- Paying off debt
Chances are that when you move out of home you may have debt to your name – whether that’s a student loan, a personal loan or credit card debt. While paying off debt is not the most exciting prospect, it’s something you should prioritise – even if it’s only a little each month. Staying on top of your debt will ensure that you don’t get into a debt spiral, where the interest you’ll incur makes your debt bill higher each month. Commit to paying an amount towards your debt every month, and set yourself the goal of squashing your debt altogether within a certain time frame.
Moving out of home is an exciting time of anyone’s life. It’s exhilarating to be an independent adult earning your own money and living in your own place. But it can also be daunting financially – especially given the rising cost of living and the fact that your salary could be fairly low if you’re just starting your career. However, being smart about your budget and putting money aside for these five categories means you’ll be well on your way to mastering your finances…and living your best life.
