Leaving the family home could be the key point in a person’s life where they feel they have become truly independent, suggests a study. However, in a more recent study in the UK, at least 39% of parents are of the belief that independence among their children will likely come later than it happened for them. The inability to afford real estate among the younger generation is seen as the primary obstacle to independence.
This decline in homeownership among millennials is not out of generational desire. In fact, a 2018 report from Bank of America indicated that 72% of millennials actually consider homeownership as a priority. So why this downturn in homeownership? Millennials can’t afford it. Hence, the rise in renting. But just how costly can renting be if you plan to live independently?
How Expensive Is It to Live Alone?
The average monthly expenses of Americans are calculated per “consumer unit.” According to the Bureau of Labor Statistics (BLS), a consumer unit can be a family, a single person living by himself or co-living with others but are financially independent of each other, or two or more individuals co-living and sharing expenses.
On average, a consumer unit spends about $5,102 monthly. Two thousand eighteen data show that about $1,600 of this goes to housing and more than $800 goes to transportation. Personal healthcare and insurance share 20% of the figure. All the other usual expenses, such as groceries, dining, clothes, education, and personal care, etc., share the remaining 30% of the monthly budget.
In general, the foremost concern among renters is making the monthly payments. Rent may sometimes be inclusive of utilities, but most renters pay utility bills separately. Common utility expenditures are toward electricity, water, gas, heat, and air conditioning. Electricity alone can run you $30 to $100 a month, depending on usage. Water, which typically includes sewage service, may cost around $40 a month—less with fewer occupants. If the residential unit does not provide amenities for in-house laundry, laundromat services will tally anywhere between $6 and $12 a month, on average.
How to Manage the Costs of Living Alone
Below are a few tips on how to manage expenses if you are a consumer unit that’s renting.
Rent. Many financial experts recommend following the “30% Rule” in terms of rent you can afford. The rule suggests that your budget for rent should not exceed 1/3 of your monthly income before taxes. Some go with the 50/30/20 standard of budgeting. This means that 50% of your income should be devoted to fixed monthly payments like housing, transportation, utilities, and groceries. The 30% goes to the “non-essentials” such as shopping, dining out, and entertainment. The 20% is for savings and paying off loans or debts.
Transportation. Curtailing car usage significantly helps cut costs. You save on gasoline, parking, and car maintenance services. Take advantage of public transport, take your bike, even walk if possible. Cabs and ride-sharing may add up, too, so utilize sparingly. Like only when it’s raining or late in the night.
Food. Plan your meals, both for dining out and eating in. Carrying snacks or handy food and water, especially when you’re traveling, will help stave off hunger while you’re stuck in a place where only pricey restaurants are close by.
Groceries. When you buy grocery goods, the per-piece price is usually less when you buy the items in bulk. For instance, instead of buying just a pint of cooking oil or a tube of toothpaste, consider buying a gallon or a 3-pack. This way, you maximize every trip to the grocery, too. Buying in small amounts or quantities will mean more trips to the grocery as you run out. This also means you spend more on transportation and everything else you normally spend when going out.
Daily spending. Take control of your daily spending by recording your expenses. A coffee a day can add up fast. Once you can handle what you spend every day, week, and month, it will be easier to figure out what’s necessary and what you can pass up on.
Recreation. Especially when you live in the city, it will not be hard to spot the occasional free concerts in the park or mall, film screenings, book readings, gallery openings, and other unique events usually staged for marketing.
Co-living. Consider sharing living space. Get roommates who can share with the monthly expenses such as rent, utilities, food and groceries, and heating or AC maintenance and repairs. Even renters’ insurance can become more valuable as coverage will be for all your belongings combined.
Living alone can be a true adventure; it can expand your horizons. You can discover new interesting places and things as you seek out the free or budget-friendly. The trick to being able to afford to live independently is to stay prepared for the unexpected.