Should You Move Back Home?

(Benefits of Boomeranging)

The so-called Boomerang Generation includes people from all walks of life who decide to move back home with their parents as adults. Especially with rising student loans and increased housing costs, many people are choosing to live at home for a few years after college in order to save on living expenses and aggressively pay off debt.

PAYING OFF STUDENT LOANS

Student loans are considered “good debt” because they help you earn a degree that leads to a higher-paying job. This works in theory, but college costs have been rising in recent years, even as most starting salaries have stayed pretty low. Unless you’re going into a profession that you know pays a very high starting salary right out of the gate, you should assume that you’ll be earning at the lowest end of the range.

Much of your income at the beginning of your career could go to debt payments — the longer it takes you to pay those loans off, the more they will cost you in interest and lost income that could have been used to grow your wealth. It takes planning, but it is possible to pay off enormous debts in relatively short time frames once you get serious about it.

Moving home can give you an added boost if it saves living expenses, but you have to commit to using any money you save to pay down student loans and credit cards, not to spend on something else.

MOVING HOME TO BUY A HOME

If you have $100,000 in student loans, that’s practically a mortgage — No wonder fewer Millennials are buying homes and getting married in their 20s.

If you dream of getting an actual mortgage any time soon, you might move back home with your parents to focus on saving up for a down payment.

Investing in a home is another good type of debt because instead of your money going to rent, you’ll be building equity in an asset (your home) that will theoretically continue to increase in value as you pay off the mortgage. If boomeranging back home to Mom and Dad helps get you into a home of your own sooner, then it’s worth the discomfort and potential embarrassment. Especially when you’re having a housewarming party in your new home while your other friends are still renting and drowning in debt.

AGREE ON TERMS

Living at home only works if it saves you money and/or supports you to reach your future goals. If moving home with your parents is a burden or obstacle to your forward motion, then you should reassess what you are gaining and what you are potentially giving up. A lot depends on your relationship with your parents and other family members as well as what they expect from you. Keep focused — if your ambition is to move out on your own successfully, then how is living at home getting you closer to that goal?

You might even write up a contract or discuss your goals and timeline with your parents. Let them by your accountability buddies. While you’re still under their roof, use their knowledge, experience and resources to learn about any financial concepts you don’t quite understand, such as insurance, retirement planning and taxes.

PLAN YOUR EXIT STRATEGY

Before you even move back in with your parents, it helps to have a plan for how you hope to move out. Calculate how much you can save by living at home, and then put as much of those savings as possible toward two primary goals: paying down debt and building up wealth.

Create an estimated budget for how much you’ll need to live on your own, including all the bills that you’ll be responsible for paying in the future. The closer you get to moving out, the closer you should be to living within that budget. If you’re not earning enough income to cover your expenses while you’re living at home, how will you pay those bills once you’re on your own? Use the opportunity of moving home to take on increasing financial responsibility while still benefitting from your parents’ help.

As always, we’ve got your back. — The On Your Own Team End of article insignia

 

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