Financial independence is one of the most liberating parts of adulthood; but leaving the nest too soon may lead to poor financial decisions, such as taking on debt to maintain a lifestyle. You should think long and hard about whether or not you have the financial maturity and stability to handle living on your own.

To help you make sound decisions and learn about financial independence, experienced money manager and author Steven Smith, CEO of Finicity and creator of the Mvelopes online budgeting service, will break down the important questions you need to ask yourself before leaving the nest.

Do I Have Enough Saved Up to Cover a Worst-Case Scenario?

Steven Smith: Do a little pre-planning. Think about your personal worse case financial scenario — whether it’s losing your current job, being forced to cut your hours, or needing to urgently purchase a plane ticket across the country to visit a parent.

Be sure to have enough “backup” money in your savings account to cover that emergency. Knowing your personal worst-case financial situation and thinking ahead about how you will react can ultimately save a headache or even financial debt down the road.

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Do I Even Know How Much This Will Cost?

Steven Smith: Do your homework before deciding to leave the nest. Consider using a budgeting tool to track what you are spending now so you’ll know how much money you have to spend on rent, food, and utilities once you move out.

Don’t forget to ask around, as well. Your parents and others in your life should answer cost questions honestly, so you can grasp what it takes to live on your own.

Am I Ready to Discipline My Habits and Myself?

Steven Smith: Put together a simple budget; there are great free online apps, such as Mvelopes, to make this process easy and fun. Mobile friendly apps with frequent reminders and warnings will you stay on top of every penny spent or over-spent!

Having a written plan is just the beginning. In order for the plan to work you need to measure the plan against the real results. Check your online budget every day in order to make sure that the budget categories and funds available in your bank account are aligned.

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Can I Say “NO” to My Wants?

Steven Smith: According to Stanford University research, those who practice delayed gratification have a much greater chance of succeeding in life. You can acquire that habit by instituting a 30-day waiting rule on purchases. Any new item will go on a 30-day waiting list.

This will help you develop patience, give you the time to ask “Do I really need it?” and give you room to compare prices and look for bargains or sales. You’ll also have to say “no” once in a while, especially when the purchase does not fit your budget.

How Can I Start Establishing My Credit History?

Steven Smith: Consumer credit scores will become very important to you very soon, so learn about credit scores and what can help you establish or destroy your credit. Depending on how responsible and teachable you are, you may consider asking your parents to add you as a user on one of their credit cards to help you develop a habit of responsible use of credit.

You can also go to one of the three major credit bureau’s web sites (Trans Union, Equifax or Experian) to find out what type of activities are helping or hurting your score. Being responsible with student loans, car loans, as well as paying all of your bills (cell phone, apartment, utilities, etc.), will help you establish a positive credit history.



Image: Kate Hiscock