Disclaimer: This post is sponsored by PSECU, a Pennsylvania-based credit union.
Raise your hand if the idea of living with your parents, on a more or less permanent basis, sounds good?!? ??♀️ ??♀️ ??♀️
Yep, didn't think so. But, with stagnant wages and the rising costs of living, manyyyy people from our generation are stuck living like penniless undergrads. I mean, I'll just keep the number of times I've had ramen for dinner to myself… But ramen doesn't need to be your forever, nor does your parents basement. It just takes a little planning. Take some time to get your finances in order and do some research before making big moves.
6 Tips For Knowing When You're Financially Ready To Make A Big Move
1. Do Your Research
Considering taking a job offer on the other side of the country? Looking to rent your first apartment or buy a starter home? Regardless of the big step you're thinking of taking, doing research now can save you from some major headaches later.
If you're considering moving for a career opportunity, hold off until you're 100% sure the job offer is legitimate, you have the paperwork done, and understand how much (if any) of your move they'll cover. If you're unsure if the new company will cover you, consider how moving expenses may drain your disposable cash. It's also important to understand what you're new cost of living will be; just because you're getting an increase in salary doesn't mean you'll be bringing home more if you're paying significantly more in rent and other expenses.
2. Plan a Budget
Figure out a budget before starting the apartment search and stick to it! Trust me, it'll be very easy to talk yourself into a higher price point when you're standing in your dream kitchen if you aren't totally clear on what you can actually afford. Most experts recommend spending no more than 30 percent of your income on housing, so calculate what's affordable before falling in love with a place that will leave you in the poor house.
Consider factors like commute time when selecting a place to live to estimate fuel costs. Find out what utilities cost in the area and factor those into the equation (even ask the previous owner/tenant for a copy of their last utility bills to get a more exact guesstimate), as well as a weekly food stipend. If you have 20 percent of your income left over for saving and spending then you're probably in good shape to move, but if your living expenses would devour all but $5 of your paycheck, you're probably better off waiting until your finances improve or finding a way to lower the cost of living with a roommate or something.
3. Build Up an Emergency Fund
The importance of an emergency fund cannot be emphasized enough. Financial setbacks such as job layoffs, pricey car repairs or illnesses can strike out of the blue, leaving many reeling and wondering how they'll survive. Considering 40 percent of Americans cannot cover a $400 expense without using credit, having an emergency fund can prevent you from joining that statistic.
Ideally, you should build up sufficient savings to cover six months of living expenses before moving. If that proves difficult, consider budgeting for additional insurance or focus on getting the cost of your annual deductibles in your emergency fund first. Disability coverage can help if illness takes away working ability, and extended car warranties help offset the cost of pricey repairs. Make sure you have enough money each month after other expenses to continue building in-case-of-emergency savings.
4. Check (and Repair) Your Credit
Those wanting to buy a home or even a new car need to keep an eye on their credit scores. The higher the credit score a person has, the lower the interest rate they will pay on major purchases, like their first house. To improve credit quickly, pay down debt as much as possible. The debt-to-income ratio people carry determines whether they'll get approved for large loans. Even those with good credit can face rejection if they owe more than mortgage lenders feel they can comfortably pay.
5. Listen to Your Gut
Does that fabulous new job offer sound almost too good to be true? If it's not a “hell yes!”, ask for more time to consider the offer. Use the time to evaluate whether this is truly the right position for you. Sure, leaving a job that goes south is understandable, but frequent job-hopping can make future employers skeptical.
The same goes for any big decisions. If the butterflies resulting from moving to a new apartment seem more like angry moths, do some soul-searching and ask yourself why. If fear crops up over the uncertainty that you'll be able to pay each month then consider holding off on the move. Waiting will cost nothing while an eviction may make future apartment searches difficult.
Human intuition consists of all the little things our senses perceive , even when our attention is focused elsewhere. Someone who feels off about buying a house may not consciously remember noting a cracked foundation, but the eyes did notice and tucked that factoid away in the brain.
6. Consider Your True Motivations
Finally, consider the underlying reasons for making the big move. Thinking of buying a new car? Is vanity really worth dropping $600 per month on a luxury vehicle more important than being able to afford food? Likewise, consider why it's important to buy the biggest house on the block when living solo. Is it because the extra rooms will someday become nurseries or home offices? Or is it because of the prestige of having the biggest and best, even if it drains the bank account?
Making the Best Money Moves
Making major financial decisions makes everyone a little nervous. However, with careful research and planning, you can make the best decisions about how to spend — or not spend — your hard-earned cash. For information on how to choose the best mortgage for you, check out this helpful infographic created by PSECU, a not-for-profit financial institution from Pennsylvania.