Most of us who grew up in Asian houses don’t intend to leave our parents’ home until we get married and move into a BTO.
However, you may decide to take the plunge and move out because you are ready for some independence and no longer wish to be nagged about chores or because you are sick of your siblings taking up all of your closet space.
Unfortunately, your bank account will feel the pinch if you decide to leave home and fend for yourself at a younger age.
In a DBS article, they spoke with young adults in Singapore who made the leap to independence in their twenties and gleaned towards these following 5 financial tips:
Have three to six months' worth of emergency funds on hand
Before you even think about packing your belongings, you should have at least a three-month emergency fund saved up.
A young adult who moved out on a whim for personal reasons told DBS, “I made the mistake of only taking into account the money needed for rent for the first month, and the deposit.”
A second young millennial agrees, saying, “You really understand that you need to have an emergency fund because you may have to deal with things like stamp duty or buy things you’ve never had to bother with before, like bedsheets and utensils.”
Even though you’re putting money aside specifically for your upcoming move, you should still aim to have at least three to six months’ worth of living expenses stashed away. A solid rule of thumb is to save at least 10% of your gross income per year.
After that, it’s crucial that you put aside some cash for unexpected expenses, such as your monthly rent. The expenses, such as purchasing new furnishings and filling up on kitchen supplies, could be reduced with the money you set up.
Maintain a debt servicing ratio that is no more than 35% of your income
You’ve had three to five months’ worth of rent saved up, and now you’re trying to figure out where to live that won’t break the bank.
The Debt Servicing Ratio is a useful indicator of financial health because it prevents you from spending more than 35% of your monthly gross income on debt payments.
If you’re a millennial and you’ve just turned 19, moving out of your parents’ home may not be the most glamorous experience, so don’t overpay for an apartment just to show off.
The Debt Servicing Ratio is a useful tool for making sure you won’t run out of money while paying off your debts. It’s not a good idea to put all your money into an excessive rent payment if you’re already living paycheck to paycheck or have a mountain of debt.
Manage your money using a money tracking app
Make a plan for your monthly and yearly spending and savings. Keep a monthly or quarterly record of your success in reaching your goals and sticking to your spending plan.
It’s useful to keep track of your expenditures and consolidate your accounts. You may both protect yourself from going into debt by recklessly overspending (a la “Bling Empire”) and increase your wealth by taking advantage of this opportunity to save money.
You can easily keep tabs on your spending by using an app to check the in and out of your money such as Household Account Book, Spendee, and etc.. In addition, you may see which of your spending categories is responsible for the largest outflow of funds. If your bubble tea habit is eating up your funds, you just cannot continue to deny the problem any longer.
Do your own cooking instead than going out to restaurants
“Cooking my own food has helped me save quite a bit,” a millennial says. While it may seem like common sense, preparing your own meals at home is a great way to save money, eat better, and have more say over what goes into your body than if you ate out.
Apply for a credit card that offers rewards for everyday purchases like food, Internet service, and utility bills.
Expenses like groceries and utilities are fixed costs that can’t be avoided every month, so any way to reduce their impact on your budget is welcome.
You should apply for a credit card that offers rebates on services like electricity, phone service, and internet service. When you’re living on your own, you’ll almost certainly be doing your own grocery shopping, so cashback on groceries is wonderful.
Develop a long-term source of supplemental income
When you’re on your own and paying your own way, having a little extra cash on hand can be a lifesaver when the bills start piling up.
If you want your savings to increase, you need to diversify your income. This will guarantee that your savings will increase at a quicker rate than your rent, and that your income will be much higher.
Get going, already!
Talk to a financial advisor if you want an honest assessment of your current financial situation. The best thing is that it requires no effort on your behalf; we will calculate your cash flow and give you financial advice.