By Christopher Haymon

Is there anything more exciting than moving out on your own? For the first time, you get to live the way you want to, not according to anyone else’s wishes. Unfortunately, some young adults get caught up in the excitement of independence and wind up in a financial bind. It’s easy to underestimate how much work goes into supporting yourself when you’re used to the safety net of Mom and Dad. If you’re not prepared for all the responsibilities of adulthood, you could miss something important and create financial problems.

These are some of the most common mistakes young adults make when striking out on their own, and how you can avoid them yourself.

Money Mistakes

Overspending on Housing

A good rule of thumb is to spend no more than 30 percent of your income on rent. This is tough to do when you’re working a low-paying job, but if you rent a place you can’t comfortably afford, you’ll regret it. With rent eating up all of your income, you’ll be eating Ramen and staying in instead of enjoying your young adulthood.

If one-bedroom apartments are out of your budget, look for roommates. It’s cheaper to split a larger place than it is to live on your own. Plus, you’ll have roommates to share the cost of utilities and internet.

On the other hand, if you’re looking at buying a house, not only will you need to determine how much house you can afford, you’ll need to think about how much you can afford to put on a down payment. If you put down 5 percent, for example, interest rates and monthly mortgage payments will be high. To avoid overspending and get better rates, try to put down a higher amount of money, and avoid paying for private mortgage insurance by borrowing 80 percent or less on your property’s value. If money is tight but your heart is set on buying a house, try to save as much as you can now or pull from your IRA or 401(k) to make a higher down payment and score better interest rates.

Paying Bills Late

Missing a bill is expensive. In addition to late fees, you could find yourself facing services fees for utilities that get turned off or an eviction notice for unpaid rent.

Unpaid bills hurt you in the long-term, too. Late payments lower your credit score, making it harder to rent in the future. If you have a history of evictions, it could be nearly impossible to find a place to live. Set calendar alerts or use auto-draft to avoid late payments (just make sure there’s enough money in your bank account!).

Not Buying Insurance

Health insurance, car insurance, renter’s insurance, life insurance — are these really necessary, or are insurance companies just out for your cash?

It’s tempting to skip insurance when you don’t see an immediate benefit. However, you’ll be glad you have insurance if you need it. Without insurance, getting in a car accident could cause you to lose your license, while going to the hospital is likely to end in a bankrupting bill. (You can stay on your parent’s health insurance until you’re 26, but after that, you’ll need to buy a policy of your own.)

Renter’s insurance is cheap enough that it’s worth having, even if you think you don’t have much to insure. Renter’s insurance covers your stuff if it’s damaged by fire, water, theft, or vandalism, and even protects you if someone gets injured in your home.

Spending Every Cent You Make

When you’re making real money for the first time, it’s easy to go overboard buying everything you’ve long wanted but could never afford. But if you’re spending money faster than you’re earning it, you won’t have any to spare if your car breaks down, you get sick, or you lose your job. Without cash to spend, you could end up taking on risky debt from high-interest credit cards or payday loans.

Make room in your budget for an emergency fund. When you’re young and single, your emergency fund doesn’t need to be huge; enough money to cover three months of expenses is plenty for most childless 20-somethings.

Making good financial choices is the best thing you can do to secure your independent future. As you prepare to move out on your own, create a budget and plan ahead for financial challenges. With smart decision making, you can launch your adulthood on solid financial footing.

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