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8 steps to reaching financial independence

Living on your own creates a whole new level of responsibility. These tips can help you handle the job.

Read, 6 minutes

Moving out of your parents’ house is a good way to get a quick education in life. The challenges of getting your finances in order, paying off student loans and learning to budget—and doing it without help from your family—can be more than a little intimidating. So where do you start? By helping you establish some successes and building on them, this step-by-step approach can move you toward the ultimate goal of true financial independence.


  • Step 1: Get your own bank account

    When you move into a new place, rent and utilities are now your responsibility. The bills will be in your name and sent to your new address. That’s why you’ll need to have your own checking account.

    Having a personal checking account allows you to pay bills online or via paper checks. The account can also help you manage your spending. By setting up automatic payments for recurring bills and account alerts, you can help guard against overdrafts, unusual activity and fraud.

    Additionally, checking accounts often come with online banking and mobile banking apps that give you easy access to your accounts and help you perform everyday tasks, such as depositing checks or transferring funds. And digital tools can give you guidance on how to budget your money.

  • Step 2: Create your own budget

    First off, don’t think of a budget in a negative way. Look at it as a framework for how you spend, not a reminder of how much you can’t spend. Having one can be indispensable as you map out your short- and long-term needs and wants. And the better you get at creating a budget and sticking to it, the more confident you’ll start to feel about other financial decisions.

  • A good way to begin is to set some spending guidelines. One traditional method is the 50/30/20 rule for after-tax income. It breaks down like this:

    Close text version

    Needs 50%
    Minimum loan payments

    Wants 30%
    Dining out

    Savings or Debt 20%
    Emergency savings
    Additional debt payments

  • If you can keep to that formula, or even improve a little on the savings portion, it should be pretty easy for you to stay in solid financial shape. As you learn how to balance your priorities, you can take on more ambitious financial projects, such as creating an emergency fund or setting up a separate account toward buying your first home. Don’t get discouraged. You’ll probably make mistakes at the beginning, but the more you practice budgeting, the better you’ll get at it. Finally, remember that a budget is a living document that will evolve over time as you get a raise or a new job, get married, or go through any number of life changes.

  • Step 4: Begin building your credit

    A good credit score can help you with renting an apartment, landing a job, getting favorable loan rates and a lot more. Because a longer credit history generally works in your favor, it’s good to start building credit early. Ideally, you want to have your own card so that you can control purchases and payments.

    If you don’t have a credit card, consider applying for a secured card, which uses a security deposit as collateral. This can help you build credit. Sharing a card with your parents is another option. When you’re a joint cardholder, the card becomes part of your credit history. If you’re an authorized user, the card may or may not be reported on your history—it depends on the issuer. If your parents have good credit habits, this can help you qualify for your own card.

    Once you get a card, use it thoughtfully. Credit card debt can put the brakes on any financial momentum you might be gathering. Ideally, you should pay off the full amount each month. If you do carry a balance, pay as much above the minimum payment as possible. And make sure you pay on time—that’s the single most important factor in building a good credit score.

  • Step 5: Save up for rent

    If you’re not paying rent yet, a good way to prepare for that moment is to deposit into a savings account whatever amount you estimate you’ll pay each month. Not only can that savings go toward your security deposit, but removing the money from your checking account will help you get used to managing without it. If you’re paying rent to your parents, ask whether they’ll consider using that money to help you get on your feet, either by contributing to a savings fund or helping with student debt.

    Quick tip

    Remember to budget for all of the extra costs that come with renting, such as utilities, insurance and parking.

  • Step 6: Learn about health insurance options

    You have a few options for health care coverage when you’re starting out. If you’re under 26, you can stay on your parents’ plan, which gives you the chance to learn the ins and outs of health insurance without pressure to take immediate action. You may also be able to get health insurance through your employer (you’ll likely need to pay a share of the cost). Other options include coverage through a spouse or buying insurance through a government exchange—either your state’s or the federal government’s.

    Before you make a choice, make sure you understand what your monthly premium will be and what the plan covers, so that you can estimate additional costs.

  • Step 7: Figure out transportation

    Do you plan to live in your current location or move somewhere new? Either way, you’ll encounter transportation costs. To get an idea of what they might be, ask yourself:


    How close is my workplace to my new home?


    Is there public transportation nearby?


    Are there opportunities for carpooling?


    Will I need to purchase a car?

  • If you are currently borrowing your parents’ car, find out what they pay each month including gas and insurance—then consider contributing. This can help you start budgeting for transportation costs. If you need to begin the process of buying a car, you may be able to save money by buying used.

  • Step 8: Get your own phone and streaming plans

    A true mark of financial independence these days is having your own phone plan. Begin by taking a look at your parents’ most recent phone bill. That will give you an idea of what your share is. If you’re happy with your device and calling plan, you might be able to transfer your existing phone to a new plan with the same company. If not, you’ll need to figure out roughly how much you can afford for a new smartphone and calling plan, which are often bundled together. You’ll pay for the phone over a 24- to 48-month period, in many cases interest-free, as part of your wireless bill.

    If you’ve been piggybacking on your parents’ TV or music streaming services, now’s the time to stop. It’s an easy way to signal your financial independence—and your parents will be happy not to pay for channels they don’t use.

    Simply pick the streaming services you use most and establish your own account by going directly to the provider. Setting up automatic payment withdrawals from your bank account can ensure you always pay on time and there’s no interruption to your service.

The road to independence is filled with obstacles, to be sure. But by taking a common-sense approach and doing some advance planning, taking control of your finances can be easier than you think.

  1. U.S. News & World Report, September 2022
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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America Corporation and/or its affiliates assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management. ©2024 Bank of America Corporation.

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