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Question: Paul in San Antonio is 22 years old and debt-free. He lives with his dad in an apartment and helps with rent and groceries. He's making $30,000 a year, and half of his paycheck will go toward a car. He's moving out in July and would like to have some money saved for rent as well. What steps should he take from this point forward to be prepared?
Answer: At $30,000 a year and no debt and no car payment between now and the time you move out because you paid cash for an inexpensive car, you should be able to make it just fine. You're just going to have to plan. The way you do that is on paper, on purpose before the month begins. We write down at the top of the paper what your take-home pay is. You already know that. Then you give every one of those dollars an assignment down the page until it equals zero. Every dollar has a name. Income minus outgo equals exactly zero on paper, on purpose, before the month begins. That's called a budget. You do a new one every month before the month begins. Every dollar has an assignment down to zero is called a zero-based budget. When you do that, you're going to see where your money's going, and then you've got to stick to that plan. That becomes your out-of-bounds marker.
When you move into an apartment, you're going to have electricity, so when you're looking at the apartment, you need to ask them what the utility bills run. You need to start trying to estimate what you're going to spend on food. It sounds like your dad's doing a really good job of helping to coach you up to where you're able to fly out of the nest and not crash. I love it. I think he's being very wise, and it sounds like you're being very wise. I'm proud of both of you.
You've kind of got to plan it out on paper how we're going to make this work. You need to change your W-4 since you got a tax refund. We need to go to payroll and change your take-home by $50. You want to bring home $50 more so you don't get a tax refund.
We're dealing with $1,700, so you can't be looking at an apartment that's $1,000 a month. You've got to start shopping for apartments or places to live. A really good way to do that is a roommate arrangement, honestly. An efficiency apartment is another way to do it. Something like I was just talking about a minute ago was a garage apartment type thing. If you can find those kinds of things, those are awesome—in the rich end of town where you've got a real good neighborhood and a real sweet little lady and you mow her grass or something and get almost no rent.
If you get a two-bedroom and split it, it's going to be cheaper than you paying a whole one-bedroom. But you've got to screen your roommate very carefully so you don't get some deadbeat in there who doesn't pay the bill and starts doing a bunch of stuff in the apartment that causes the apartment to get raided by the SWAT team and all that kind of stuff. You don't need that junk. You've got to be very wise on your screening on that.
You've got to just say, "All right, I've got $1,700 to work with. It's going to cost me $X in food. It's going to cost me $Y in rent. It's going to cost me $Z in utilities. My car gasoline is going to be $A. My car insurance is going to be $B." You start to lay out your written budget.