Moving back home

Why moving back in with your parents isn’t the end of the world

No one wants their first post-graduation move to be back to their parents’ house, but it happens. And when it does, it can be a good thing. Find out how to make the most of your time at home with your folks.

Podcast transcript

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PETE: You’re listening to How Not to Move Back in With Your Parents here on the Are You MoneySmarts Radio Network. I’m your host Pete the Planner joined as always by Alex. Alex, hello.

ALEX: Morning.

PETE: How you doing, buddy?

ALEX: It’s good. It’s good to be back, good to be here.

PETE: Here’s what we’re doing today. What to do if you move back in with your parents?

ALEX: If you completely disregard the title of this podcast.

PETE: Yeah, if you’re like, hey, the title of podcast is How Not To Do This. But I’m not interested in that advice.

ALEX: [LAUGH]

PETE: You know, it’s funny, at one point in time someone emailed me some personal finance questions. I emailed them the answer. And then they emailed back, I don’t want to do that, what should I do now? And I’m like, I got nothing else. Well, today we’re focusing on that something else that is what do you do, what are the rules, the ramifications, the parameters of moving back in with moms and dads upon graduation. How do you make that work without going crazy? What’s fair? What’s not fair? And Alex, from what I understand my good friend.

ALEX: Yep.

PETE: You might find yourself in this situation.

ALEX: Yes, so I am actually going into my final semester here at IU, considering moving back in with my parents for a couple months after graduation to save a little bit of cash.

PETE: So, I have no beef with that, no beef with that at all. I think what we need to deal with though, are we talking strategically, very strategically, or default option. So those are our choices that we’re gonna go over today. Strategically, very strategically, very is a technical term meaning more than.

ALEX: Or much.

PETE: Yeah, and then default. Let’s start with default, because it’s always better to start with the last thing you mentioned.

ALEX: Yeah.

PETE: Default option would be like, I don’t know what I’m gonna do.

ALEX: I don’t know where my job is, I don’t have a job or I just didn’t wanna think about trying to get an apartment somewhere. So I thought I’d just hey, move back in with my parents.

PETE: Or I take my relationship with them for granted or I’m trying to take advantage of them, not strategically or very strategically, just by default.

ALEX: So, if you can tell default is not, it’s not the best thing to do.

PETE: Now, if you can say, look I don’t have a gig, I don’t have a place to go and I think when you start putting a shelf life like an end stamp, date stamp on it and say all right I’m out by October or I’m out by August 7th. Something like that, that would be good.

ALEX: At noon, but yes I definitely think a shelf life is important. Just to keep you accountable, honestly I don’t know, even if you said it with a little bit of leeway in there if you’re not sure what’s going on. You have to set something so that you at least have a goal to be working towards.

PETE: There’s a couple elements at work here. One of the first one’s being that your first student loan payments don’t come due for a little while.

ALEX: Right.

PETE: And so if you all of a sudden use up all of your income, whatever it is within the first couple months of graduation. Setting your new lifestyle, getting an apartment, utility payments, gas to your job and all that sort of stuff. Then when those payments come due, you’ve got no disposable income to be able to handle that student loan debt.

ALEX: Yeah, and that’s why it could help. If you do set up the proper lifestyle which could be a topic for a whole other episode.

PETE: It is a topic for a whole other episode. Yeah, right, so what you do by moving back with your parents is, you try to get a real grasp and a feel of your disposable income, but that can really backfire, especially if you’re not very strategic. So, what some people say, in a strategic way out, is they say, Al right man, expenses are gonna be a little tight, a little rough. I’m going to move back in so I can get some breathing room, which sometimes is a really dangerous phrase cuz then it means I’m gonna spend whatever I want, right?

ALEX: Which obviously, you would hope if you’re in a bit of a prickly financial situation like that was just described that you would have a plan to be good about it while you’re at home. But some people assume when they do go home that they can just, okay I have this breathing room now I don’t have to worry about it anymore. Or I don’t have as much responsibility. So I don’t have to worry about building the good habits and worrying about it.

PETE: And I think it’s much easier to loosen up as you go along, opposed to tighten up as you go along.

ALEX: 100%.

PETE: My wife was a high school English teacher and her theory was on the first day of school she would always be the meanest she was gonna be all year, cuz she could always back out the other way. But if she went in the first day and was like hey, everybody, let’s play, what do you do at school, the games? Heads up, 7-up, did you guys ever play that? Do you have any idea what that is?

ALEX: Yeah, yeah, heads up, 7-up.

PETE: I don’t know if that passes through the generations.

ALEX: Yeah, we definitely did that.

PETE: Yeah, that’s a good game.

ALEX: That’s old school.

PETE: Anyway, so I guess if you tighten up first then you can always loosen up your spending later. And one of those things is, let’s say your first gig no matter what it is, let’s say it’s bringing in $1,500 a month net. I don’t know, don’t care, number doesn’t matter.

ALEX: Arbitrary number.

PETE: Sure. I think the challenge is to say, all right I’m at home. What are the expenses that I have to have? And right off the bat, if you’re living at home and you’ve got a job somewhere else, what would occur to you Alex that are definite expenses you’re gonna have?

ALEX: If you’re living at home obviously the first thing is student loans if you have it. That’s gonna be the first thing you have to pay and take care of. Transportation is another one.

PETE: Sure.

ALEX: If you do have a job or you’re trying to get around, to pay for. It all depends on how much your parents help you too. Some parents will have you pay a little bit of rent, you have to pay for food, things like that. So it kind of depends on the situation.

PETE: Now one of those is a bit tricky because the student loan payments don’t come due for a little while. And so, again, let’s get back to that for a second because I think a lot of people think you graduate and all of a sudden, well, there’s a couple, you know, thoughts, right. A, that I don’t even know how it’s gonna work, right. It’s like, you’ve got student loans coming up. All right, what’s gonna happen?

ALEX: Hopefully, the plan right now is to not worry about the grace period and start paying as soon as I can.

PETE: Okay but you know about the grace period. What do you know?

ALEX: Six months, that’s what I’ve heard and believe.

ALL: [CROSSTALK]

PETE: More or less, yeah.

ALEX: Depending on specific loan, but six months is kind of the usual for that. And then it does not acquire interest during the grace period. You don’t have to worry about it. But it becomes due right after that, and then it’s game on.

PETE: I will say this and I don’t wanna say this, but the grace period has become the norm. People just use the grace period as part of the standard when it’s not. It’s a grace period. It’s we are allowing you to not pay us and that’s not a good thing.

ALEX: And that’s why it’s a problem too because that six months you’ll be spending setting a lifestyle that is not paying student loans, which is a huge problem.

PETE: How much of you moving back into your parents, you’re doing it for what, threeish months? Is that the plan?

ALEX: That’s the hope. Three monthsish just to kind of get settled and then figure out an apartment from there.

PETE: So do you have a dollar amount in mind? We’ve talked net worth on this show before. The idea of putting money towards your financial priorities, whether it’s paying off debt or saving it. From a net worth perspective it has the same effect. Saving money, paying off debt, same net effect. Do you have a dollar amount in mind, over that three-month period, of how your net worth needs to change?

ALEX: I actually have not thought about that specifically.

PETE: Well, come on.

ALEX: [LAUGH]

PETE: What are we doing here? This isn’t a knitting festival here, we’re not just here making scarves for people.

ALEX: That’s true, that’s true.

PETE: Come on, all right, so I’m not gonna make you say the numbers on the air but all right, do you have an idea of what your net take home pay will be upon graduation?

ALEX: Yes.

PETE: Okay, so then the question becomes multiply that by three and then of course take out gas, right?

ALEX: Right, transportation-

PETE: Whatever student loans. Well see but here’s the thing. Making your student loan payment is going to effect your net worth, and that’s the key to this. You’re just gonna spend a lot on food of course, cuz you eat like an animal, right?

ALEX: Well, yes and that’ll be good and I’m honestly not sure on the specifics of my, I guess situation with my parents. The specific if I’m paying a little bit of rent isn’t fully thought out yet. I know I’m obviously gonna be saving a lot of money. But since I won’t have a lot of expenses the vast majority of my money is gonna be going towards student loans during that three months.

PETE: How much is you moving back in does it have to do with your mom’s chicken enchiladas?

ALEX: Probably like a good 85%.

PETE: That’s what I thought, yeah.

ALEX: But she’s got a solid rotation of like 12 to 15 dishes she can knock out at any moment.

PETE: None of them are off of Pinterest. That’s not the generation of lady that gets her recipes off of Pinterest.

ALEX: No, this is like old family recipes from grandmas, great-grandmas, like the real stuff.

PETE: That’s the way it should be. Internet resources. Speaking of internet resources, if you want to learn more about our show go to moneysmarts.iu.edu. Look at me. Moneysmarts.iu.edu. That’s a host move there. Lots of research on how to of course be a college student and not go broke, and then post graduation it’s a big deal. Alex, a lot this semester we’re gonna focus here on this podcast on what it is to be a graduate, college and the financial ramifications of that, so that is this season on how to not move back in with you parents.

ALEX: Yep. So number one take away today is, set a limit on time for how long you’re gonna be there and don’t forget about your student loans, budget like they’re gonna, be there and set that lifestyle so that you can be prepared when it comes.

PETE: And the third one. Set a net worth number that’s gonna change during your time frame at home. Okay, remember net worth goes up for a few different reasons. If you save money, it goes up. If you invest money, it goes up. If your employer matches your contribution to your retirement plan, which we’ll talk about it in another episode. It goes up, if your investments go up your net worth goes up. If you pay on your student loans, your net worth goes up. That’s the goal. Until next time, this has been How Not to Move Back in With Your Parents here on the IU MoneySmarts Radio Network.

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