Move Home or Move On

Ed note: Moving back home may come with emotional baggage. But when it comes to making a decision about your finances, you have to think rationally. Put aside your feelings and use this impartial calculation to help determine whether it’s best to move back into your parents’ house or strike out on your own.

If you’re one of the nearly 2 million undergraduates heading into the workforce this spring, you’re about to make one of the most critical financial decisions of your life: Do you move back home or move into your own place?

It may seem like a no-brainer. You look at your starting salary – the average starting salary for a college grad was $45,473 in 2014 – see what it costs to get an apartment with a friend (or three), and decide if you can afford your own place.

Alas, finances are never that simple. You have to budget for taxes, student loan repayment, food, transportation, fun and saving for emergencies and retirement.

Your brain deserves a rest after four years (or more) of intense academic strain. So use this six-step cheat sheet to figure out whether it’s smart to move back in with the ‘rents or get your own place.

1. What’s your take home pay? Calculate how much you’ll net from each paycheck after federal and state taxes, Social Security withholding, health insurance and anything else that gets deducted from your pay. If you’re paid bi-monthly, double your net paycheck to get your monthly take-home pay, then subtract your expenses from your take-home pay and see what is left for affordable rent.

Speaking of deductions, always sign up for the full match amount on your 401(k) if your company offers it. The retirement match is free money and you’re crazy not to take free money.

2. Got federal student loans to repay? The Department of Education’s Student Loan Repayment Estimator tells you how much you’ll spend on loan payments each month. If you’re making a low salary, explore income-based repayment; and if you’re in a public service job, look at loan forgiveness.

When you have a large debt to repay, moving back home and devoting your paycheck to loan repayment can free you from years of monthly payments that could prevent you from buying a home or saving enough to fund your retirement.

3. How are you getting to work? Car ownership costs, on average, $5,366 a year, or about $450 a month (more if it’s that nice car you’ve wanted since your 16^th birthday). Subtract your car payment, too, if you have one.

Using public transportation (ask your new employer about transit subsidies) and car sharing might make the difference between moving in or out of your parents’ place.

4. Do you have credit card or personal loan debt? See what it would cost you to pay it off in 12 months. If you plan on paying the minimum on your credit card bill, you may still be paying off your account when your kids graduate from college.

If you can’t pay off your credit card and personal debt within a year, move home to cut your expenses and dig your way out of debt.

5. What else do you spend money on? Use a budget planner to add up everything else you consume. Your cell phone, Netflix account, gym membership, pet food, vacations and anything else you buy to entertain yourself.

Give yourself $300 a month for groceries; double that if you eat out twice a week.

6. Are you saving? Hopefully, you still have some money left at this point. You’ll need it because life is unpredictable. Your top financial priority must be creating an emergency savings fund that will keep you from having to move back home if you lose your new job.

If you have $3,000 a month in expenses, you need an $18,000 cushion. To get that, you have to put away $485 a month for three years.

Or you could move back home, put away most of your paycheck, and give yourself the gift of financial breathing room much more quickly.

7. Can you still afford to move out? Whatever is now left over is what you have to spend on rent and utilities. Check the numbers against the projections for a rental and decide whether it works to move out.

No doubt, you may feel social pressure to move out. Maybe your parents are controlling, or worse, they always cook meatloaf and make you drive your kid brother to soccer practice.

These are not unreasonable fears. But chances are you’ll know others in the same predicament —30% of millennials live with a parent.

Or, you can do what years of on-campus living have trained you to do: Split your two-bedroom apartment with three other people, bartend on the weekends, eat dinner at home as often as possible and supplement with ramen noodles.