When Prince Harry and Meghan Markle announced plans to leave the UK and relinquish most of their royal duties, they also expressed a desire to have financial independence.
It’s unclear how living abroad would affect their royal paychecks, but the message is clear: Harry and Meghan want to do their own thing, and reducing their reliance on public money is a necessary step. After all, you can’t exactly ask for more freedom if you’re still getting an allowance from the taxpayers of England.
College students can learn from Harry and Meghan’s example, even if their circumstances are less glamorous. Whether you’re giving up a royal stipend or just paying for your own cell phone plan, becoming financially independent can be a surprisingly emotional experience. It can also be one of the best decisions you’ll ever make.
Why You Should Become Financially Independent
At first, I hated the idea of becoming financially independent. I was so used to having the essentials paid for, and I was intimidated by how much it cost to be an adult. I missed swiping my parent’s credit card every time I needed something.
But like Harry and Meghan, I quickly discovered the benefits of financial independence. All of a sudden, my parents had significantly less control over my life. They could make suggestions or insist I do something, but they couldn’t punish me for disregarding their advice. They couldn’t take anything away, because I was living on my own dime and paying my own bills.
Here’s a secret: once your parents don’t have a financial carrot to dangle over you, they’ll be more likely to respect you as an independent individual. When that happens, your relationship will start to fundamentally change for the better.
Make a List of What They Pay for
Being financially independent may sound empowering, but it’s often a huge shock to realize how much it costs to be an adult. When I got my first post-grad job, I almost couldn’t believe how much the real world actually costs to live in.
Here are some expenses your parents may be paying for:
- Health insurance and medical bills
- Car insurance and car repairs
- Cell phone
- Utilities including gas, water, and electric
- Clothes, shoes and accessories
- Amazon Prime, Netflix or other subscription services
If you can, contact your folks and ask how much they pay for all these expenses. If you’re like me, you’ll probably be surprised at how much car repairs or medical bills actually cost.
Seniors graduating soon should get a rundown of how much their lifestyle costs. This can help them create a preliminary budget to see how much they’ll need to live on.
Talk to Your Parents
Every parent has their own idea of what their child will do after college. Some expect their kids to move out and be fully independent, while others are happy to reopen the nest.
It may be scary, but talk to your parents about what they want after you graduate. It’s better to find out you won’t be welcome home months before you graduate than right before you leave campus.
Your parents can legally keep you on their health insurance plan until you turn 26, but they can also kick you off. This is another major question to ask.
Will you have coverage if your parents drop you from their plan? Discuss paying all or part of your share to stay on their policy.
Does your employer offer health insurance? This may be a less expensive option than buying your own policy.
If you want to stay at home while you job hunt, ask your parents what they expect as far as rent, chores and house rules. It might sound crazy to be charged rent in your childhood home, but again, you may be surprised. Many parents become accustomed to the solitude after their kids initially leave the roost.
Their terms may depend on whether you have a job, how much it pays and if you have student loans. My parents didn’t charge me rent while I was home and unemployed because they knew I could barely afford my student loan payments.
Create Your Own Independence Plan
One aspect of financial independence that many students forget about is their credit score and report. A good credit score is the key to becoming permanently financially independent.
A credit score is a composite figure that reflects how responsible you are as a borrower. You can check your credit score for free via the Mint app.
Landlords almost always run a credit check before approving a tenant, and if you don’t have a good credit score, you may be denied. This is often why young people have to ask their parents to co-sign a lease.
It can take as little as a few months to build a solid credit score, so it’s a good idea to start before college is over. That way, by the time graduation hits, you’ll have a solid credit score and won’t need your mom to co-sign on an apartment.
It’s also wise to check your credit report, which you can do at AnnualCreditReport.com. A credit report shows all current and past loans and lines of credit, including student loans, car loans and credit cards.
A credit report will also show any student loans you have. Staying abreast of your student loans is one of the most important things you can do to build and maintain good credit. If you miss a payment, your score will drop. This could make it harder to get that apartment or take out a loan for a car or house.
Save As Much and As Often As You Can
The final step to any financial independence plan is to save, save, save. Living on your own costs money, and you’ll need a decent reserve to land on your feet.
You’ll need to pay for moving expenses, including a security deposit and first month’s rent. In some cases, you’ll need to pay two month’s rent. It’s also a good idea to have a basic $1,000 emergency fund in case your car needs new tires or you have to visit urgent care.
This might sound like a lot – and it is – but you’ll have to do it all eventually. If you can take control of your financial life now, the transition from college to the real world won’t seem so scary.