How to budget plan when you move out of home for the first time
I remember the first time I lived alone.
After university, I started on a graduate scheme that was based at the other end of the country. I’d lived away from home throughout all university but this time was the first bout of living alone ‘proper’.
I had decided that I didn’t want to live with others. So I did some sums, worked out how much I could afford to spend on rent, and set about finding somewhere to live.
About six months in, I was kind of broke.
While in theory I could afford the place I’d chosen, in practice I couldn’t. Largely because I didn’t have a proper budget plan in place. When I was figuring out the cost of living I made two mistakes:
- I didn’t leave any real wiggle room in my budget. No extra money each month for irregular expenses such as birthdays, travel or anything like that.
- I didn’t go back and revisit those numbers once I’d moved out to make sure I was actually keeping to them.
I’m now at a point that I’m having to re-do all of this planning.
This summer I’m planning to move out of my flat share to a new place on my own. I feel much more confident doing this second time around as I’ve had the benefit of budget planning for many years now.
Due to that confidence I figured it would be a good idea to take you through my process, in the hope it’ll help anyone in the same position.
Where to start.
First we have to ascertain what our take home pay is going to be. If you’re already in the job and you’re just moving out of say, your parents for the first time, this will be easy. If you’re fresh out of uni and moving away like I was, you’ll need to use a salary take home calculator. I always use this one from MSE.com.
If you want just a basic idea, all you’ll need to know is your salary. However, if you want a more accurate result you’ll need some more info.
- Pension contributions you’ll be making – your new employer should have told that somewhere in the offer details/contract.
- Tax code – research online based on your situation should be able to provide you with this.
- Student loan situation – whether you started uni pre or post 2012.
When you have that monthly take home page, get a new Excel spreadsheet loaded
Or, if like me you don’t want to pay for Office 365, use Google Sheets (it’s free).
There, you want to create a simple table with your salary at the top, and a list of potential expenditures. Here is an example: There I’ve listed some examples of monthly/regular expenditure. You may have more or less depending on your circumstances.
Next, you’re going to need to start filling this in.
Try and work out the values of everything in your list, apart from the home and food shop expenses.
It’s an idea to go through a couple of months of bank statements to get an idea of how much you’re spending. I would try and look at these quite conservatively so if you’ve only been spending £30 a month on average on health and beauty, but know you haven’t had to repurchase anything big like your foundation or skincare routine you might want to enter £40 instead.
At this stage you have to be really honest with yourself and what you’re spending. At this point there’s no need to start adding it up but then putting in a lower number ‘because you know you’ll spend less once you move’. This needs to be an honest look as to your regular expenses.
Your sheet should then look a little something like this. Next you need to start getting an idea of rents.
Hopefully you have an idea of where you want to live. I always head to Rightmove to get an idea of average rents in a place. Always do some general location research online to get an idea of what a place is like. Seen a cheap flat that looks amazing? Make sure it isn’t in a part of town that no one wants to live in – high crime rates, no public transport etc.
When you’ve worked out what you think a reasonable rent is, pop it in the spreadsheet. You’ll then need to work out the council tax. The Rightmove ad should have the ‘band’ of the property and so from there you’ll just need to go to the local Council’s website and find out how much that band costs a year.
Some things to note on council tax – it’s paid over 10 months, not 12 so be sure to work out the monthly amount correctly. Also, if you are choosing to live alone, you’ll receive a 25% single person discount on the council tax.
Next you need to think about bills
Aside from gas, electricity and water, there’s also things like TV licence, internet and things like Netflix you need to add in. In my current two bed flat my share of the bills each quarter is around £150. Depending on where you live it will be more or less, and this is probably the part with the most guess work. Overestimating the amount is a lot better than underestimating it. On the basis that I won’t watching TV and so won’t need a TV licence I’d budget £100 a month to cover basics, internet and Netflix.
Something to watch out for in flats are hidden fees
I call them hidden, because they’re not in the upfront price of the rent. These are usually service charges and parking space charges. Take a look at some of the Rightmove ads for the properties you’ve seen. Do they make mention of either of those? If they do, add them onto the spreadsheet to be on the safe side.
Finally, you need to start thinking about work related expenses.
Will your petrol costs be going up because you’ll be commuting further? Will you need to buy lunch every day? Do you need to pay for parking at the job? These will all need to be factored in and added to the spreadsheet.
Your spreadsheet should now be filling up nicely.
Hopefully at this point you haven’t already maxed out your monthly take home pay!
We’re finally onto talking about the food shop.
I left this until last because it’s probably what tripped me up the most when I first lived alone. I didn’t do meal planning and I ate out far too much. There was way too much temptation on the walk home from work to eat ready meals or takeaways sadly and so I prepared very few meals for myself.
It’s worth doing a week of fake meal planning and then doing a dummy food order online with the supermarket of your choice. There you’ll be able to get an idea of how much you’d expect to spend each week. When doing this, be sure to not forget about all the extras – snacks, fruit, drinks and household goods. They can quickly add up.
When you’ve got a number you’re comfortable with, pop it in the sheet and see what your total comes out to. If yours looks like the one above you might be thinking ‘great!’ but I’m afraid that’s not the end of it (sorry).
There’s two other costs you need to factor in:
- Moving costs
- Yearly costs
Take a look at the Rightmove ads again; what are the deposits requested? If you don’t have the savings to cover it, you’ll need to think about how you’re going to pay it. It’s the same for any furniture you may need to buy and the costs of the move itself such as hiring a van. If you need to stick it on a credit card, you’ll need to pay it off quickly to cut down on interest.
There may also be some yearly only costs that you’re not factoring into your sums such as car insurance. You may want to work out what that equates to each month and add in a line for that so you’re effectively saving up for them. The same can also be said for present purchasing. Have you factored things like that into your budget plan? You may want to revisit it.
Also finally, do you have a savings goal? If you don’t, I recommend having one. Just putting away a small amount each month can help with unexpected costs or just being able to take a holiday each year.
What does your finished spreadsheet look like?
Does it look a little something like this?It’s no bad thing if it does. It shows you’ve been really honest with yourself about your regular costs and this should be a bit of a worst case scenario.
If mine looked like the above I would have a couple of options open to me:
- If I know that it’ll cost me £1000 to move that I need to put on my credit card, I know that it’ll only take me five months to pay off (less if I put less in savings). Therefore, the above budget should only be a short term issue and once the credit card is paid off, my outgoings are all manageable (and I’ll be able to pay more into savings).
- Can I make any economies in other areas (even just temporarily) to create some wiggle room each month? Can I cut down on my hobby spends? Be honest with yourself at this point. There’s no point saying you’ll do it if you know you never will.
- Can I look at cheaper properties? What will £750 get me instead?
- Finally, should I naturally be curbing some of my spending? Is £100 a month too much realistically on socialising for example?
The hope is that by the end of that reflection, you’ve got the numbers to work in a way you’re comfortable with.
Unfortunately, this isn’t the end of your budget planning. Reviewing and keeping to your budget is the key to not ending up in debt. If you’d like to know how I budget plan each month, my post detailing it is here.
Once you start tracking your expenditure each month your budget planning will become far easier. If you know how much you are actually spending on food and it’s less than what you originally thought you can start reassessing the budget. Maybe you can let yourself spend a bit more on health and beauty each month so you can upgrade your make up routine? Or maybe you can put a bit more in savings each month and go on a nice holiday?
Hopefully this has been a useful guide to moving out.
Please drop a comment if you have any questions or let me know if you think there’s something this guide is missing?