I've always wanted to be independent from my parents ever since high school. I admit I got a late start, but I'm slowly transitioning from college to an apartment where I take care of myself. It can be scary though — what does "utilities" even entail — especially for someone like me who needs to plan everything out with numerous lists and endless research.
The pregame plan
Before you start, you should probably get some things in line so they don't come back to bite you in the butt later. Set aside some days to browse flea markets, garage sales or apps that sell cheap appliances, starting furniture and maybe even kitchen supplies. I scoured bins of unwanted objects my fellow students didn't want after the year ended — aim for the rich international students. I scored a microwave, a mini fridge, full length mirrors and some other useful stuff.
If you're still being taken care of by your parents, see if they'll keep you on their cell phone plan and health insurance if it's too much for you to take on for now. I know my parents wanted me to stay on because they got a discount for a family plan. When you're finally ready, you can take care of these things for yourself.
Set your budget
Always make a budget with the amount you are getting paid at the moment or an estimate that resides on the lower side. It's so easy to overestimate and get ahead of yourself which will leave you out to dry later. Calculate what you'll make per week, per month and per year so you can make long and short term budgets.
Rent and utilities
This is the most important aspect of your budget and something you should always set first. Between my boyfriend and I, we could afford to pay rent up to $2,000 a month in NYC but settled for an $1,800 apartment. Try to find a roommate — or a couple — if you can as paying rent by yourself can be bothersome. Also rent will of course be cheaper if you choose to live elsewhere.
Utilities include electric, gas, water, Internet and whatever else you need to make your apartment run. Some apartments have rent that cover the utilities so make sure you check up on that. I would set aside about $200 or more for these utilities but if you are moving into a house or a bigger home, it will go up.
Since I live in the city, we basically get around by subway and Uber. It'd be super impractical to have a car since we'd have to pay for parking and gas. However, if you do decide to purchase a car or keep one you already have, set aside a budget for that. Be sure to include gas, car insurance, parking fees and maintenance.
However, if you take public transportation, consider an unlimited pass. An unlimited monthly Metrocard costs about $121 plus extra money for lazy Uber's will be about $150 per month. Decide how you should get around based on your surroundings.
Groceries, Toiletries and Miscellaneous
Since my boyfriend and I eat a ton — we're both super athletic — our grocery bill will stack up. We set the grocery budget to about $500 per month but a money-conscious normal-eating person could totally get by at around $300. Note that eating out is NOT included in this budget.
Toiletries range anywhere from tampons to toothpaste. Set aside $100 or so to get your monthly needs. Miscellaneous items include entertainment, play, date nights, Grubhub or anything else you might want to indulge yourself in. We set aside another $100 for this as we don't really have any room for fluff.
You should have two categories of savings — emergencies and long term. Emergencies can be anything from car crashes to rodent drop-in's. Long term is for money that you're saving towards a long term goal or expense. If you're slowly building up to an apartment to a house or starting early on your 401K, this fund covers that.
My boyfriend and I usually use the rest of the money from what we made that month towards the savings which adds up to about $600. If you think what you're saving isn't enough, redo your budget with cheaper amenities or skim from another category — looking at you, "miscellaneous."
I understand that my boyfriend and I have very well-off jobs for young adults literally just coming out of their teens so our budget might be bigger than most. Feel free to adjust this budget however you would like, but be sure to include all the elements. If you aren't quite ready to move out yet, that's fine too! This guide will still be here for you in a few years.
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When you take out a loan for a car, charge something to your credit card, or get a personal line of credit, there is going to be an interest rate that applies to your loan.
A lot of different factors go into what you will be charged, including your own personal credit score. But even those with flawless credit still see a minimum charge that they can't get around. That all goes back to the Federal Funds Rate.
One thing consumers rarely realize is that all of our banks are lending money to each other every night. Banks are legally required to maintain a certain percentage of their deposits in non-interest-bearing accounts at the Federal Reserve to ensure they have enough money to cover any withdrawals that may unexpectedly come up. However, deposits can fluctuate and it's very common for some banks to exceed the requirement on certain days while some fall short. In cases like this, banks actually lend each other money to ensure they meet the minimum balance. It's a bit hard to imagine these multibillion-dollar financial institutions needing to borrow money to tide them over for a bit, but it happens every single night at the Federal Reserve. It's also a nice deal for those with balances above the reserve balance requirement to earn a bit of money with cash that would normally just be sitting there.
The Federal Reserve
The exact interest rate the banks will charge each other is a matter of negotiation between them, but the Federal Open Market Committee (FOMC) (the arm of the Federal Reserve that sets monetary policy) meets eight times a year to set a target rate. They evaluate a multitude of economic indicators including unemployment, inflation, and consumer confidence to decide the best rate to keep the country in business. The weighted average of all interest rates across these interbank loans is the effective federal funds rate.
This rate has a huge impact on the economy overall as well as your personal finances. The federal funds rate is essentially the cheapest money available to a bank and that feeds into all of the other loans they make. Banks will add a slight upcharge to the rate set by the Fed to determine what is the lowest interest that they will announce for their most creditworthy customers, also known as the prime rate. If you have a variable interest rate loan (very common with credit cards and some student loans), it's likely that the interest rate you pay is a set percentage on top of that prime rate that your lender is paying. That's why in times of low interest rates (it was set at 0% during the Great Recession), a lot of borrowers should go for fixed interest rate loans that won't increase. However, if the federal funds rate was relatively high (it went up to 20% in the early 1980's), a variable interest rate loan may be a better decision as you would be charged less interest should the rate drop without the need to refinance.
The federal funds rate also has a major impact on your investment portfolio. The stock market reacts very strongly to any changes in interest rates from the Federal Reserve, as a lower rate makes it cheaper for companies to borrow and reinvest while a higher rate may restrict capital and slow short-term growth. If you have a significant portion of your investments in equities, a small change in the federal funds rate can have a large impact on your net worth.
Whether you're leaving a job involuntarily, departing for something new, or just want to prepare for the unknown, it is smart to understand all your options regarding your 401k.
Frugal gifting often gets a bad reputation. However, this shopping method does not make you cheap — it makes you practical. Frugal gifts often avoid waste and overspending and can be just as meaningful (if not more so) as any other present.
With the National Retail Federation predicting each consumer this holiday season to spend upwards of $1,000 on holiday gifts amidst an economic recession —this year might be the perfect time to reconsider your spending budget. We've formulated the ultimate list of frugal gift-giving ideas to get you started.