How much savings do you need to move out?​

What's it all about?

This article's designed to help you:

• Get your finances sorted before moving out.
• Understand the basics of saving and budgets.
• Avoid the pitfalls and hidden costs of moving home.

Getting a place of your own is a big step. Only about 37% of younger people aged 21-35 own the places they live in, with another 36% renting. 22% of people in that age bracket are currently living with family while they save up a deposit, while 16% have never managed to move out at all. A tricky part of the process is working out exactly what you’ll need to save up. If you can get your head around a few basic principles and strategies, you’ll be setting yourself up with the best possible start.

Budgeting for beginners

Let’s take the biggest step first. If you’re planning on moving out, getting control of your finances is Job One – and that means making a budget. Don’t worry; it’s a lot less scary than it sounds. You’re not going to need to become an expert accountant overnight. All you have to do is paint yourself the clearest, most complete picture you can of the cash you’ve got coming in and going out, then use that information to make a plan.

One of the best ways to do this is to draw up a “zero-based” budget (sometimes called “zero-sum” budgeting). All this really means is listing out every penny of your regular income, no matter where it comes from, and every penny going out, whether it’s spent, invested, saved or just given away. You can read more about zero-based budgets in our other guide, “4 Fixed Income Saving Strategies – Combine to Win!”

So, with your zero-based budget all mapped out, what can you do with the information? Well, for starters, it’ll make it a lot easier to get into some great saving habits. When you’re putting away your spare cash, little and often’s usually a lot better than dumping in larger amounts at random. With the information from your budget, you should be able to set yourself up a “50/30/20” system. Basically, each month, you set aside 50% of your income for essential expenses, 30% for fun stuff and 20% for savings. The trick to it, of course, is keeping the consistency up. Whatever you’re saving toward, though, building good habits from the outset can make a huge difference to your overall finances.

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Understand your goals

Okay, this one’s going to be a little harder to pin down. There really isn’t any exact figure you can set as a universal saving target for people looking to move out. A lot depends on where you’re going, for example. If you’re dead-set on finding a rental deal in London, you’re going to be coughing up a lot more in monthly payments than if you’re outright buying the same basic property in the Midlands.

Having said that, there are still some simple benchmarks you can set for your saving. A good rule of thumb to remember is to aim for about 3 months’ worth of your expected living costs stashed away. With that nice little cash cushion comfortably stuffed, you should be able to ride out any unexpected setbacks, like suddenly finding yourself out of a job and with bills to pay.

Know the costs

Obviously, there are more costs involved in moving out than just your new rent or mortgage payments. Before you fling yourself out into your new independent life, be sure to factor in the major monthly expenses you really can’t do without, like utility bills. Generally speaking, it’s a smart move to add about 30% on top of your basic rent just to cover those, but a lot depends on things like energy prices.

Extra costs that can trip people up:

• You'll need a deposit for the new place, which is refunable if you stick to the rules of your agreement
• Council tax read our guide, “Council Tax Debt Help: Where Do I Start” for tips on making sure you’re not being overcharged
• Service charges, if you’re buying a flat or studio apartment
• Weekly food and other shopping costs

Rent or buy?

Saving to rent and saving to buy are two very different goals, and need different approaches. If you’re renting, for instance, you’re probably going to have a slightly easier time with the set-up costs you’ll be facing. You’ll still need to front up a deposit, though – but at least it’ll probably be capped at a maximum of 5 weeks’ rent. You’ll also have fees to pay for letting agents and any reference checks you’ve had to go through.

If you’re buying your new home, you’re looking at a serious chunk of cash for your deposit – typically at least 5% of the asking price, and often as much as 20%. Depending on the property, your first home could easily cost you a deposit of anywhere from £5,000 to £40,000. Along with that, you’ll have to consider all the standard fees, from solicitor bills to Stamp Duty (we’ve got a guide about that, too. Check out “Property Tax and How to Budget For Stamp Duty”).

Either way, you’ll also have to add on the cost of actually moving your stuff to your new place. That alone can load hundreds of extra pounds onto your up-front expenses.

Pump up your credit - before you make your move!

We talk about this a lot, but it’s almost always better to pay down your debts before you stack up your savings. Most of the time, it’s simple maths. Your debts will almost always grow faster, leaving you worse off over time. When you’re looking to buy or rent a new home, though, it’s even more vital to lighten the load of the debts you’re carrying. Lenders and landlords alike will want to check out how you handle your finances before they decide whether or not you’re a good bet. Paying off credit card balances (straight away, if possible) can do a lot to prove you can be trusted with money. A bad credit rating will, at the very least, make the process of sealing your rental or mortgage deal slower and more difficult. Worse still, it can severely slim down the range of landlords who’ll rent to you.

What it all means:

• Zero-sum/zero-based budgeting: A way of tracking the money coming in and going out, whether you spend it, save it or give it away.
• The 50/30/20 rule: A simple way to divide up your money so you don’t lose control of it.
• Stamp Duty Land Tax (SDLT): A UK tax you pay when you buy most kinds of land and property.