Clark Howard

I Have $78,000 in Debt and Make $59,000 a Year. Should I Move in With My Parents To Save?

Making good decisions with money when you’re young is much higher stakes than it may seem.

Consider compound interest, how important it is to set good lifetime financial habits, and to get yourself in a good position early so that you have flexibility later.

However, when you’re just starting your career, you’re more likely to have student loan debt and a lower salary than you’ll have later in life.

Some adults find it necessary, or at least helpful, to live with their parents in their childhood homes for a period. Especially if it allows them to save big money and set themselves up for a better financial future.

But is it a good idea financially to live with your parents? And what’s the key to making it work?

Should I Live With My Parents as an Adult To Save Money?

I have $78,000 in debt and I have a chance to save big money every month by living with my parents. Should I do it?

That’s what a Clark Howard podcast listener recently asked.

Asked Elijah in Texas: "I have $60,000 in student loans and $18,000 in a car. I am currently paying $1,300 in rent and utilities but my parents have offered for me to move into their place for a nominal rent.

"I make around $58,800 a year. I can afford everything as is but moving back would allow me to save up faster. Should I continue to live on my own or should I take the opportunity to save up money faster?"

We don’t know what nominal rent is in this case. It could be $50 or it could be $500. But let’s just say for illustration purposes that his rent and utilities fall from $1,300 a month to $1,000 a month.

Living with his parents for a year could represent an additional $12,000 toward paying off debt, building an emergency fund or both. Of course, it could be even more than that.

However, that depends on Elijah’s ability to be disciplined financially.

“That all depends on you,” Clark says. “If you were to use that $1,300 every month that you move back home with your parents specifically toward paying down the student loan debt or building up savings or some combination of it — if the $1,300 every single month was going into those purposes and not being siphoned off into other things — there’d be an enormous benefit to you.

“You’ve just gotta know your own personality, Elijah. Would you truly do that with the $1,300? Or would it kind of go into the ether? If the answer is you would truly use that money month after month to wipe out debt and build up reserve, then go for it.”

Living With Your Parents: Non-Financial Factors To Consider

In this exercise, we’re isolating Elijah’s financial circumstances. In the real world, that’s hardly the lone consideration.

Every family is different. Some parents are happy to have their adult children under their roof as much as possible. And some children are glad to be around their parents all the time. In other families, that can be stressful, unwanted or at least have some sort of expiration date.

Moving costs time and money as well. The same goes for finding a new place to live.

It’s important to communicate and set expectations with all parties before making this choice.

For example, if Elijah’s parents are happy to accommodate him but only for a maximum of six months, he’ll need to account for the additional costs of moving twice and potentially of having to pay a deposit on a new place when he moves out.

Or perhaps Elijah knows it sounds good in theory but that there’s some type of shelf life to how long the arrangement will last. Or maybe he has a serious girlfriend and knows he’s getting engaged soon, and that his girlfriend will want the two of them to get a place together soon. Perhaps he’s hoping to pay off 50% of his $78,000 debt before moving out and he knows it will take close to three years.

In any event, it’s important to be honest with yourself and with all the family members involved about the length you’d be staying, what you’d be paying in rent, what you may or may not contribute to the house as a whole and all the other possible important points.

Final Thoughts

Back to isolating the financial component. If you’ve got a chance to put an additional four figures of income toward paying off debt and saving for your future, and you’re OK with living with your parents for a period, do it.

You have to be committed not to taking your extra cash flow and spending it on frivolous things. But if you’re disciplined, it can be a tremendous boost to your financial life in a relatively short period.

The post I Have $78,000 in Debt and Make $59,000 a Year. Should I Move in With My Parents To Save? appeared first on Clark Howard.