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Financial Adulting 101 (a beginner’s guide)

As we start to understand the value of money and walk out into the world away from the safety of our parents, no one gives us a manual on "adulting." As a result, none of us are totally prepared for living on our own, paying the bills, saving for the future, and handling those unexpected surprises. Surprises occur over our entire lifetime, and while practice helps, preparation makes them less stressful. We’ve all heard, "prepare for the worst and hope for the best." It’s not a bad saying, but hope doesn’t directly make things happen. Hope is good for maintaining a positive attitude, but preparation takes hope even further.

If you’re getting ready to move out on your own, maybe to college, in or out of a marriage, or just moving farther away from family and friends, here are a few things to consider.

  • Income – will you make enough to cover your necessities and add to your savings? Let’s find out by starting with a budget.
  • Budget – start out simple; here's a form to get you started.

What are your necessities/bills?

List all of your bills and estimate what they will cost each month (remember, utilities can increase substantially during warmest and coldest months.) Be sure to consider weekly, monthly and annual bills. Here’s a list to get you started:

  • Rent/house payment
  • Transportation
    • Car payment
    • Maintenance/repairs (oil changes, tires, batteries, car washes)
    • Gasoline
    • Public transportation (bus, bike, scooters)
  • Utilities
    • Electric
    • Natural Gas
    • Water
    • Trash/Recycling
    • Telephone       
  • Groceries – if you are used to mom buying the groceries, start by shopping online and choose what you think you will need for a week, two weeks, or a month. You don’t have to buy. Just use it as an exercise to see what your monthly total will be. Once you’ve picked yourself up off the floor, be sure to plan your meals, so you're not wasting food, buying fruits/veggies in season, and making the most of your grocery purchases. Curbside is quick and convenient and can prevent impulse buys. You know those purchases where you’re standing in line and see the chocolate bar or bag of chips….or smell food at the deli. All are avoided with curbside! Watch for sales. 99 cent 2-liters of soda (34 cents per 24 oz) is a much better bargain than the $2.00 24 ounce drink at the drive-thru. Learn to cook or make some basic simple meals. Rotate meals with friends so you can share different recipes and not have to eat leftovers for multiple days.
  • Healthcare
    • Medical Insurance Premiums
    • Prescriptions
    • Supplies: aspirin, toothpaste, band-aids, etc
    • Emergencies: Co-pay for a trip to ER or minor emergency
    • Co-pays for Dr. visits
  • Car & Renter’s/Homeowner’s Insurance – yes, they are necessary. We all hope we don’t need them, but accidents do happen. I was reminded of this lesson when I came home to my apartment complex in college to find a neighbor who had left a pan on the stove and started a fire. I only had smoke damage, and their insurance covered it. Still, it was also a good reminder that insurance is worth it and yes, double-checking my coffee pot/iron/stove in the morning was a good practice. As we move into homeownership, insurance is also essential. You can’t completely control a tree limb from hitting your house or your neighbor’s car or your grill catching a structure on fire.
  • Laundry & Clothing – Does your apartment/dorm room supply a washer & dryer? Maybe you pay per load at the apartment complex or take your laundry to the laundromat. Better budget those quarters or hope your parents will allow you to bring it home. (This is an excellent way to get a free meal, laundry facilities, and leftovers!) Of course, parents will love to have you home for a few hours. But do help with the meal prep or clean-up and take your own laundry soap. Yes, add laundry soap to the grocery list.
  • Pet Supplies – do you have a pet? You’ll need to budget for food, creature comforts/toys, licensing, vaccinations, and emergency pet care. Not to mention kenneling if you plan to travel and don’t have a family member that can watch your fur-kid.
  • Children – that’s a whole other post as they come with many expenses and surprises. For now, just know that planning a budget for children is an excellent idea. A budget is good any time before, during, or after having children!

Infrequent Expenses

  • Income tax – find an expert to help you choose the proper deductions to make through your W-2. That can help prevent surprises at tax time.
  • Property tax – even if you don’t own your home, you have to pay annual property tax on your vehicle. The newer your car, the higher the tax.
  • Tags – yep, and tag renewals are annual.
  • Celebrations – birthdays, graduations, baby/bridal showers, weddings, holidays
  • Savings & Retirement – some list this as discretionary, but success can depend on making the habit of saving a necessity. Pay yourself first and automate it with prescheduled transfers within online banking. Most experts recommend having an emergency savings with at least $1,000.
  • Discretionary Expenses are things you want but should only buy when you have money left after everything else is paid. And that includes paying yourself. Pick an amount you can be consistent with and put it into your savings account every time you get paid and when you have extra cash. Once you’ve paid your bills and saved for your emergencies and long-term goals, what you have left is meant for discretionary items or non-essential expenses.

It doesn’t mean you can’t have these splurges. It just means that you need to plan for them. Sometimes, it requires sacrificing them entirely until you have more income or share expenses with a roommate, friend, spouse, or family. Take cable, for example. You’re busy going to school, studying, probably working, and yes, you need to sleep. But, how much time do you really have for TV? Is a monthly cable bill really worth it? If there’s something you really want to watch, make dinner or bring snacks for an evening of binge-watching with a friend that has cable! Or visit the student activities center, common areas, or gym that might offer cable for free. What a deal; fitness and cable!

CUA’s financial management partner, GreenPath, deems the following items “The Costly C’s” and suggests you use caution when considering these purchases.

The Costly C’s

  • Cable TV/Streaming services
  • Coffee
  • Carry-out
  • Cigarettes
  • Car
  • Cell phone

Other Costly Items include

  • Concerts
  • Casinos
  • Apps
  • Clothing
  • Entertainment – movies, golf, sports games, bars,
  • Vacation
  • Hobbies

Moving into adulthood and moving out of your childhood home doesn’t mean you have to go without. Planning your budget and doing your best to stay within its parameters will go a long way in being a financially successful adult. Of course, no one is 100% on budget 100% of the time. Like any other good habit, just practice, practice, practice, and get back on track if you relapse. Be sure to visit CUA’s Financial Management page for more financial tips, worksheets, and guidance. You CAN do it! Happy adulting!

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