How Not to Move Back in With Your Parents
Finances After Graduation Podcast Episodes
What To Do If You Do Move Back in with Your Parents
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Pete and Alex start Season 4 of the podcast with considerations for what to do if you do move back in with your parents.
Read the Show Notes
Now that we’ve gotten into Spring semester, it’s that time again – it may seem early, but we’re talking graduation preparations on Season 4 of How Not to Move Back in With Your Parents. Our first topic is likely one you’re not ready to think about (as a student or a parent). But to speak from the perspective of someone who successfully graduated from college with a full-time job, I can safely say that it’s a often a reality for recent college graduates. And if you have a MoneySmart plan to go along with your decision to move back home, it won’t be the end of the world.
Recent alumni in particular move back home after college for a majority of reasons. And while the ramifications that come with moving back home might seem uncomfortable at first, keeping on track with your timeline and the goals you want to achieve while you get back on your feet will likely help speed up the time.
Pete and Alex’s main tips for this week include three steps when moving back home with your folks:
1. Set a timeline: Your time at home should have a shelf life. Make this one of your top priorities, even before you decide where you’re moving once you graduate. If you know exactly where you plan to go and figure out how and for how long it will work into your budget, that’s the very first tip to starting on the right foot. Without a plan or a deadline, you may be setting yourself up for an “anything goes” mentality, which can leave you with likely too much room for bad habits and eventual setbacks. It gets harder to move out and stay on top of your expenses that way.
2. Create a budget like you’ve already moved out: You have to remember that your expenses when you graduate will fluctuate. If you’re taking out federal loans, the government gives you a 6-9 month grace period before your loans start going back into full-blown repayment. While that’s a nice flexibility gap to get your finances, work, and living situation in order, you want to be mindful that it won’t last forever. And the bills for repayment can be a huge shock, particularly if you have never seen them before or aren’t used to a repayment schedule. Start doing your calculations now for how much you owe back with interest, and build that into your mindset (and your paycheck) as a set expense. Get a handle on what the rest of your expenses will look like, too. Pete mentions that it’s easier to start off with a tighter financial situation and loosen up when you have the space to do so as opposed to being forced to do it the other way around. It’s hard enough to be in a position where you feel stable when you’re in a place of flux for the first several months. The last thing you would want to do is spend recklessly early on, because you’ll be less likely to be able to set a baseline for yourself before the bills start rolling in. And once they do, it’ll be harder to try to get yourself in order and try to cut back after the fact.
3. Assess your net worth: Know your expenses and what you can do realistically. Alex asks, how much time can you spend like you have no loans after you move back home with your parents? You don’t want to find out the hard way. You want to know as early as possible how much you have coming in, what debts you have, how much you will have to pay out, and what room you have to cover your day-to-day expenses, even before you start making bill payments.
In addition to Pete and Alex’s short list, we want to add a few more points to consider:
4. Figure out the “why”: If you’re in the process now of even considering moving back home, ask yourself some questions to better assess what your needs are and what you are trying to achieve. If you’re thinking about using the time to “get back on your feet,” define what that phrase means to you. Are you moving back home to help you in the relocation process and finding the right place for yourself? Are you job searching and need additional time? Are you doing it to get your finances in order for a large purchase associated with a big move? Whatever the case may be, if you are thinking about making that move, make sure you have a set plan with a goal in mind that is measurable and realistic – preferably one you can share with your family so you can stay on track.
5. Know your financial aid repayment situation: If, for example, you find that once your student loans go into repayment that you miscalculated the interest, or you just weren’t quite ready for that first bill, it’s important to know your options. Look into exactly how many student loans you have and how much you owe back, and familiarize yourself with the interest associated with each of them. Once your repayment date arrives, if you think you may still struggle to make payments even before you move out, realize that you have loan repayment plan options. You are automatically enrolled in the 10-year standard repayment plan by default, unless you make any changes. It’s important to know that you have the option to call your lender and discuss their additional repayment plans that can work more realistically with your salary (and not just because you want to maintain a habit of spending more than you can afford every month).
6. Think about what this means for after you move out: One of the upsides of moving back home is that you are buying yourself time. While you’re there, you may want to utilize that time to create some hypothetical budgets for the realistic living situation you want. Use our budget calculator and this NACE annual salary calculator to help you out. If you have options on where you can move, browse the cost of living in each place, assess levels of convenience to places like grocery stores, restaurants, and public transportation between where you want to live and work. Do some research to find out and what your expenses will look like overall if you rent or buy a home in a certain place and what your spending situation might look like there, and places where you can save money to keep in your budget. Find out how much your average utilities will be, and adjust your budget based on a practical, realistic financial lifestyle for you. While you’re figuring it all out, start finding ways early to become more financial independent and less reliant on your parents, even while you may be living under their roof.
Finally, one of the most important things to recognize is that everything you do when you graduate is up in the air. Not just your financial situation, but your social life, your work schedule, and your regular routine are likely to change a number of times before you get in your post-grad life groove. So, give yourself the flexibility, but be smart and consider all your options. Maybe moving back in with your parents will be one of the more MoneySmart moves you make.Season 4: 01/20/2015