It’s boomerang season. After four years of living away from their parents, millions of new college graduates are on the cusp of returning back home to the spot where they were launched.
Some knew this was the plan all along. Others just discovered it or will soon realize their near-term futures include sleeping under that Harry Potter poster they thought they’d left behind.
Living at home with your parents post-graduation isn’t a new concept. There’s absolutely nothing wrong with moving back in with the people who raised you until you could “get on your feet.” But if you’re going to tap this luxury, you should structure your stay around a series of hard and fast rules.
Right off the bat you may see the problem. If you are on the verge of finishing four (or more) years of living without rules, being saddled with restrictions isn’t exactly appealing.
What’s even stranger is that you may need to be the one who lays down the rules, not your parents. Sure, they may have rules of their own, but the ones you set for yourself are meant to relaunch you from your childhood bedroom successfully – and permanently. No more boomeranging back to the place that still contains your Pokémon cards.
Let’s start with the first rule.
Set a move-out date
Have you ever been to a wedding where the happy couple greets a receiving line full of guests? There’s always the one who becomes a roadblock. He or she talks to the couple for 15 minutes, while everyone else just stands there in disbelief. Of course, there are no rules outlawing this practice, but the open-ended nature of the conversation can easily be abused.
To avoid becoming your own roadblock, set a limit on how long you’re going to linger with your parents. You must stay long enough to create stability, but not so long that you’ll become dependent on their generosity. The primary factors determining the length of your stay include how much student loan debt you have, whether you have a job and how much savings you’ve built up.
A six-month stay is a good goal. If you start measuring the passing of time in years, you’ve likely stayed too long and it will be harder to leave. There’s definitely a sweet spot.
Pay off debt
The second rule is applicable to graduates dealing with student loan debt. Begin paying back your loans immediately. Not only will you prevent the deferred interest from capitalizing into the loan, but you will immediately make room in your budget for a line item that will be there for years.
After your grace period ends (six months), the interest you’ve owed on the money you’ve already borrowed becomes part of the loan principal. In other words, your balance goes up. You can prevent that from happening by aggressively paying off your interest balance prior to the end of the grace period. Ignoring this rule will end up costing you thousands of dollars.
Make extra payments
Rule number three is a derivative of rule number two and makes rule number one possible. Make an additional payment on your student loans or a deposit into your savings account on a monthly basis equal to the total cost of living on your own, in the area in which you intend to live.
For example, if the going rate for rent in your area is $750 and the utilities and other expenses which support that home are an additional $160, then your goal is to either pay down an additional $910 of debt each month (on top of your standard loan repayment amount), or deposit an additional $910 into your savings account. You are essentially creating a budget for living on your own, and better yet, proving you can make the budget work. If you don’t do this, you will never be able to fly the coop.
A nightmare scenario is possible, and likely if you don’t follow rule number three. If the goal is independence, you have to force the issue. Otherwise, the money you will eventually need to have readily available for life on your own will be consumed with discretionary expenditures. Habits will be formed. Bad habits.
One last rule. Don’t ease into this. The safety net of your parents can very easily turn into self-imposed shackles if you don’t have a viable strategy to be gone and stay gone.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.