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The Budgeting Trick That Will Give You Financial Independence

By U.S. News & World Report

The U.S. Census Bureau recently reported that more than 30 percent of people aged 18 to 34 still live with their parents. This number works out to be a whopping 42.2 million people, most of whom are college-educated. What’s shocking about that number is that there are more people who are living with their parents now than there were during the recession. While many people choose to live with their parents, many others want to be on their own but don’t have the financial means necessary to do so. However, with one budgeting trick, those who want to be independent can be well on their way sooner than they think.

It might seem too good to be true, but one exceptional way to become accustomed to living on your own is to budget in rent, even if you’re living at your parents’ house for free. This trick not only gets you accustomed to paying for rent or a mortgage regularly, but it will also help you build a substantial enough savings account to allow you to feel comfortable moving out of your parents’ house.

Many parents do not charge their adult children rent, believing that they are being helpful and allowing their children to become more financially aware. However, because children are not responsible for paying to live somewhere, they can easily get lulled into a false security that they have more money than they really do.

I personally use this trick to save for my future car. It’s not exactly the same thing but it’s similar. I have two paid-for cars, but they are both very old and both have high mileage on them. Every month, though, I put $250 in a savings account for a future car.

Sometimes my old cars need repairs and I use the savings for that but ultimately I’m building up towards a larger purchase. Although I’ve never had a car payment because I have driven the same car since I was 16, it still allows me to see how a newer car might fit into my budget, just as factoring in rent to your budget will help you to prepare for the future.

In order to prepare to move out of your parents’ house and live on your own, the absolute best thing you can do is budget in rent. Because many people’s parents don’t actually charge them rent, you can place that money aside. The benefits are that you get used to not spending that amount of money each month, and you build a substantial savings account that will help you when it is time to move.

While factoring in rent (or a mortgage payment) into your budget is the best way to prepare for moving out of your parents’ house, there are some other financial factors that you should consider in addition to this in order to prepare for your big move.

Remember, not only will you have to pay for rent and other bills when you move out, but you might have to pay to actually move too. Even a move in-state can cost on average $1,170 according to U.S. News and World Report, so that’s definitely something to keep in mind.

Having a handle on paying your rent is great, as it’s one of the largest payments you will make once you are out on your own, but if you also conquer some of the financial tasks below, you will be well on your way to not only moving out, but staying out and living on your own for good.

Check Your Credit Report: You can check your credit report at AnnualCreditReport.com. If you have adverse accounts or something else that needs to be corrected, now is the time to do it while you’re under your parents roof. If there is a debt collection that needs to be settled or paid, do that now while you have your parents paying for your rent, food, and other necessities.

Build an Emergency Fund: 76 percent of Americans live paycheck to paycheck, and that’s definitely not a financial situation you want to be in. Most financial experts recommend building a $1,000 to $2,000 emergency fund to start with and then eventually growing it to be six months’ worth of expenses. You don’t want to move out of your parents’ house, then have a major expense you weren’t prepared for that forces you to move back in with them. An emergency fund will help you handle anything unexpected that comes up to allow you to keep living independently.

Assess Your Lifestyle: When you’re living with your parents, it’s easier to afford a nicer car or more expensive clothes because you don’t have to worry as much about spending on the necessities. However, in order to be ready to be on your own financially, assess your lifestyle. Take a long, hard look at your spending and see if you can cut anything out to better prepare you for life on your own.

The Takeaway: Budgeting in rent is one of the most crucial financial tasks that will get you out of your parents’ house, but it’s definitely not the only one. In order to be truly financially ready to live on your own, you also need to make sure your credit is clean of any adverse accounts, save an emergency fund and assess your lifestyle to make sure your spending is in check.

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The Budgeting Trick That Will Give You Financial Independence originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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