Many parents want their adult kids to move out, but aren’t quite sure when the time is right. Some choose to allow their children to remain at home while they complete their college education or begin their careers. While this can certainly let their kids get a solid financial footing under them, figuring out precisely when they should move out isn’t always easy.
Even if you are open to providing some level of monetary support to your kids, that doesn’t mean they need to stay in your home indefinitely. If you are trying to decide if it is financially time for your adult children to move out. Here are some tips for assessing their financial situation.
Determine Their Average Monthly Income
The first step in establishing whether your child is financially stable enough to move out involves calculating their average monthly income. For kids that receive a salary on a regular schedule, this is fairly easy. Simply total up the pre-tax amount they will receive on their paycheck. Then calculate the amount over a period of a year and divide it by 12.
If your kid works in an hourly position, you will need to look more closely at their actual pay stubs. This is particularly important if their hours fluctuate. You can calculate their current pay average, based on the number of paychecks they have received. Then use that to extrapolate their monthly income. However, if their income varies depending on seasonal factors. For example, extended retail hours during the winter holidays, it is wise to assume that their usual monthly income will be lower than they received during that period.
Estimate Affordable Housing Costs
Typical advice states that a person shouldn’t spend any more than 25 to 28 percent of their pre-tax income on rent. You can use this figure to help estimate what your child can reasonably afford. Use the monthly pay estimate as a baseline. Then determine what 25 percent of that amount would be.
Now, rent alone doesn’t encompass all of a person’s housing costs. Utilities, renter’s insurance, and extras like internet and reserved parking (if there is an additional charge) should be included in the total. Ideally, after adding everything to the affordable rent estimate, the full amount should not exceed 33 to 35 percent of their pre-tax income. If the total falls above that amount, then it’s best to scale back the estimate of what they can truly afford. This is ensure rent comes in at below 35 percent.
Review Debts and Fixed Expenses
Once you have a housing estimate, you need to review any fixed expenses your child will need to handle. This includes medical insurance (if not managed through a payroll deduction), student loans, car insurance, credit cards, auto loans, wireless plans. Also include any other monthly obligation your child must handle.
Total up the cost of their debts and fixed expenses, as well as the housing estimates, and deduct that amount from their take-home pay (the amount that ends up as cash in a bank account). Now you have an estimate of what remains for savings, living expenses (like food and gas for their car), and discretionary spending.
Deciding Whether It’s Financially Time for Your Adult Kids to Move Out
Once you have the estimates listed above, you and your child can reasonably assess whether they are financially ready to move out or what circumstances need to occur to make it possible (such as living with a roommate instead of alone as a means of saving on rent).
Ultimately, there is no magic number that shows it is definitely time for them to move out. Just assess their circumstances based on the calculations and see if it seems as though they can be reasonably comfortable when living on their current income.
Have you decided it’s time for your adult kids to move out? Share your story with us below.
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