5 money lessons for independent living

Jeanette Brox lost her parents when she was young, so by the time she was 17, the Toronto certified financial planner had already figured out how to manage money. The lessons she learned the hard way can help anyone who's moving away from home for the first time.

"At a young age I knew how to budget really well and learned how to save," Brox says. "Being on your own is a scary time but it's also an exciting time, and it's all manageable. People shouldn't feel overwhelmed. If you know what to expect it's not so frightening. When you can get into trouble is if you don't sit down and plan for this transition."

William Akoto, communications director of Money Mentors, an Alberta-based, not-for-profit credit counselling agency, agrees that it helps to abide by that old boy scouts slogan: Be prepared.

"The reality is that living on your own as a young person can be very expensive because you're paying for rent and at the same time buying all that stuff Mom and Dad used to buy for you," Akoto says. "We advise young people to start saving months and in some cases years ahead before they start thinking about moving away."

Keep in mind other money lessons for independent living:

Look at your fixed costs

Budgeting isn't exactly a sexy word, but financial experts can't emphasize enough the need to break down every last little item you'll need to cover: rent, food, utilities, transportation, and so on.

"For someone earning a salary for the first time, a figure like $40,000 may sound pretty great," Brox says. "But then there are taxes. You've got to look at hard numbers."

Consider unexpected costs

Where people can get into trouble is when things come up — which they always do — that didn't even enter their minds when they handed over their rent cheque.

"Commonly overlooked expenses are the surprise expenses," Akoto says. "These include car breakdowns, parking tickets, an increase in interest rates that can affect your credit card payments, inconsistent cell phone bills, and damage deposits."

Then there's the temptation to shop. "When you're doing a budget, think about expenditures like birthdays and Christmas," Brox says. "Christmas is a big one you need to plan for: don't go to the mall on weekends when everyone else is shopping or you're going to overspend."

Start building that emergency fund

You know, the one that contains three to six months of your monthly living expenses just in case the unthinkable happens.

"What if you lose your job or have an illness? Young people don't think about that kind of thing; they think it's never going to happen to them, that they'll never have a disability or have an accident," Brox notes.

If you have benefits through your employer, you need to be aware of exactly what coverage your plan provides. "Most people don't have any short-term disability coverage. Long-term coverage often kicks in after 120 days. If you get sick and are off work, how are things going to get paid for during that time? Parents are always willing to help and are constantly bailing their kids out. But your parents aren't going to be there forever," Brox says.

Look for money-saving opportunities everywhere you turn

"Don't pay for anything you can get for free," Akoto suggests. Armed with a bit of knowledge, and patience, the average shopper can wrack up some serious savings if they know where to look.

• Buy things on sale, including groceries

• Know the price of things so you don't get suckered into overpaying

• Use coupons

• Always ask for a youth or student discount

"Most importantly, live below your means and within your needs," Akoto says.

Pay your bills

"The worst thing you can do is avoid your debt, because that will affect your credit rating for years to come," says Brox, who also advises putting money into RRSPs early on and paying yourself 10 per cent of your salary every month. Burying your head in the sand will not make your debt go away and will likely only serve to increase the amount you owe.