A Time to Save - Part 1
I was most active on this blog back when I was maintaining an apartment with roommates, and to a degree, that makes sense. There are a lot more financial issues to think about when you’re running a household.
But there are a lot of people who have moved in or who are still living with family. This encompasses both young people living with parents and parent or grandparents who have moved in with their children. These multigenerational households were fairly normal through much of history and still are in many cultures, and seem to be making a comeback in the U.S.
Particularly if you’re single, there are a lot of socially and financially smart reasons to live with your parents or other family members. Even if you’re chipping in to maintain the household, this is usually cheaper than maintaining your own place. The dark temptation is to view these savings as disposable income rather than a chance to build a nest egg.
Certainly it’s fine to have a little play money. However, it’s wise to recognize that life is unpredictable. For a number of reasons, you could find yourself suddenly needing to move out and maintain your own living space. To a degree, age and current savings play a huge factor in your budgeting. If you are retired and working a minimum wage job mainly for the physical and mental exercise, but able to draw social security and have a sizable retirement account, then sure go ahead and use your new income for trips and gifts.
However if you are a young person who isn’t independently wealthy or a middle-aged person with minimal savings, then you need to keep your potential and not just current circumstances in mind.
Let’s say, out of your $1000/mo income after tax, you currently contribute $200 towards household expenses and your relatives are happy with that. That leaves you $800 for other things. It’s really easy to spend $800 a month if you don’t feel a pressing need to save. But have you bought into a lifestyle that you couldn’t maintain if you suddenly needed to move out?
Doing a quick search in my area (just outside of Nashville), the cheapest studio apartments are listed at $580 (and they fill up quick), and one-bedroom apartments are starting at $720. That’s a pretty significant chunk of $1000. If you take on a $425 car payment, then you may be living in your car if something happens to your current situation.
In previous posts, we’ve recommended you set your Emergency Fund Savings goal to cover 6-months of independent living rather than reflect your current expenses for 6-months. We’re also recommending you practice setting your budget to reflect independent living, particularly if you are hoping to get your own place.
This post got a little long, so we’ll continue with an example in the next entry.
But there are a lot of people who have moved in or who are still living with family. This encompasses both young people living with parents and parent or grandparents who have moved in with their children. These multigenerational households were fairly normal through much of history and still are in many cultures, and seem to be making a comeback in the U.S.
Particularly if you’re single, there are a lot of socially and financially smart reasons to live with your parents or other family members. Even if you’re chipping in to maintain the household, this is usually cheaper than maintaining your own place. The dark temptation is to view these savings as disposable income rather than a chance to build a nest egg.
Certainly it’s fine to have a little play money. However, it’s wise to recognize that life is unpredictable. For a number of reasons, you could find yourself suddenly needing to move out and maintain your own living space. To a degree, age and current savings play a huge factor in your budgeting. If you are retired and working a minimum wage job mainly for the physical and mental exercise, but able to draw social security and have a sizable retirement account, then sure go ahead and use your new income for trips and gifts.
However if you are a young person who isn’t independently wealthy or a middle-aged person with minimal savings, then you need to keep your potential and not just current circumstances in mind.
Let’s say, out of your $1000/mo income after tax, you currently contribute $200 towards household expenses and your relatives are happy with that. That leaves you $800 for other things. It’s really easy to spend $800 a month if you don’t feel a pressing need to save. But have you bought into a lifestyle that you couldn’t maintain if you suddenly needed to move out?
Doing a quick search in my area (just outside of Nashville), the cheapest studio apartments are listed at $580 (and they fill up quick), and one-bedroom apartments are starting at $720. That’s a pretty significant chunk of $1000. If you take on a $425 car payment, then you may be living in your car if something happens to your current situation.
In previous posts, we’ve recommended you set your Emergency Fund Savings goal to cover 6-months of independent living rather than reflect your current expenses for 6-months. We’re also recommending you practice setting your budget to reflect independent living, particularly if you are hoping to get your own place.
This post got a little long, so we’ll continue with an example in the next entry.