Print

Email story

Comment

Email editor

10 Tips: Making a budget when you're out on your own

BUDGET WISELY WHEN YOU'RE OUT ON YOUR OWN

By LAURA COFFEY
Published February 11, 2007

BUDGET WISELY WHEN YOU'RE OUT ON YOUR OWN

There's so much to think about when you move out on your own for the first time: finding just the right place to rent, tracking down furniture for it, figuring out how to pay an abundance of new bills. Here are some tips to help you find some balance:

1 Devise a spending plan. Make sense of where your money is going, or needs to be going, by tracking your spending in writing for one month. Remember to factor in fixed costs such as rent along with debt payments and other expenses, which may include entertainment, clothes, haircuts, magazines, sports equipment and the like.

2 Pick the right bank. Don't just open an account at the first bank you see. Instead, shop around and ask plenty of questions. The bank you choose should provide free checking, direct deposit, online bill paying, decent interest rates and many convenient branches and ATMs.

3 Avoid monthly banking fees. You may not have a ton of money at this stage of your life, and that means many banks will charge you monthly fees for failing to maintain their minimum account balances. You might be able to get those fees waived if you have your paycheck deposited directly into your account and if you don't do face-to-face business with tellers.

4 Save, save, save. Since you'll be depositing your paycheck directly into your account anyway, find out whether you can have a portion of it sent straight to savings. Many online-only, FDIC-insured savings and money market accounts are offering annual percentage yields between 4 and 5 percent or higher.

5 Avoid credit card debt. Be careful not to saddle yourself with debt or overextend your budget by relying on credit cards. Instead, opt for a debit card, which is limited by the amount of money you have in your checking account.

6 Parents, avoid co-signing. Young adults with no credit history may ask their parents to cosign an apartment lease or a car loan. Parents should look into every other alternative before agreeing to do this at a time when their children should be on the road to financial independence.

7 Share the risks. Young adults and their roommates should understand that the person whose name appears on the lease and utilities is liable for the bills. If you have roommates, ask your landlord to put more than one name on the lease so the responsibility can be shared.

8 Don't blow a lot of money decorating. It's easy to go a little crazy in the excitement over having your own place, but try to resist the urge. You can furnish your first apartment through garage sales, classified ads and used furniture stores.

9 Make sure you have enough insurance. If your first job doesn't offer health benefits or if your health coverage won't kick in for several months, at least secure a low-cost catastrophic health insurance plan with a high deductible or a short-term health plan to tide you over. Snatch up a good disability-insurance package if your employer offers it.

10 Sign up for that 401(k). Saving for retirement may seem like your lowest priority when you're young and confronted with so many new expenses. But in many cases, you can view your 401(k) contributions as a pay raise because many employers will match your contributions up to a certain point. Laura T. Coffey

Sources: MSN Money (http://moneycentral.msn.com/home.asp); Consumer Reports Money Adviser (www.consumerreports.org); Baltimore Sun (www.baltimoresun.com).

[Last modified February 9, 2007, 23:32:02]