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19th August 2024
04:15pm BST
Even though it’s becoming something achieved later in life, it still requires careful financial planning to ensure it's a smooth transition.
The first thing you need is a well thought out plan and budget to get started.
Paul Merriman, CEO of Fairstone and askpaul.ie, spoke to Her.ie and explained that the foundation of a successful budget starts with an understanding of your current financial status.
“First, look at your current financial status. This includes tracking your monthly earnings, identifying fixed and variable expenses, as well as calculating your debt-to-income ratio,” says Merriman.
This is all about analysing where your money currently goes, so you can create a budget that not only covers essential expenses like rent, utilities, food, and transportation but also leaves room for savings and unexpected costs.
Once you have a clear picture of your financial situation, the next step is to determine how much you need to save before you can comfortably move out.
According to Merriman: “To derive this amount, begin by considering the cost of living in the place you are intending on going to reside in next time.”
This includes calculating initial costs, like security deposits, first and last month’s rent, and any moving expenses.
Additionally, Merriman says budgeting for basic furniture or household items and setting aside three to six months' worth of living expenses for emergencies provides a solid financial cushion.
This total gives you a savings target to work towards, ensuring you’re financially prepared for the move.
For those who are living at home in their 30s, this period can be a great time to maximise savings without sacrificing your current living standards.
Merriman notes: “Living at home in your 30s can help you save more money by avoiding expensive rent and utility bills.”
The key is to set clear savings goals and automate your savings. This strategy allows you to build up your savings more effectively while maintaining your lifestyle, as you’re able to allocate funds that would otherwise go towards rent and utilities.
When it comes to saving money, you might wonder whether it’s better to save a fixed amount every month or to save more aggressively with bonuses and extra income.
Merriman suggests that both strategies have their benefits.
“While putting aside the same sum of money each month allows people to control cash flows and steadily move toward set goals, aggressive savings along with bonuses and additional sources of income can speed things up.”
Combining regular contributions with any surplus from bonuses or extra income is a highly effective approach, offering a balance between financial stability and accelerated savings.
Finally, choosing the right type of savings account is crucial for meeting short-term goals like moving out.
Merriman recommends considering a high-yield savings account (HYSA), which accumulates interest faster than traditional savings accounts while remaining low-risk.
“A HYSA allows you to get hold of your funds whenever you need them,” he explains.
For those with a more flexible timeline, Merriman suggests looking into fixed-term deposit accounts with shorter maturity periods, such as six months, offering another way to grow your savings without exposing your money to high risk.
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