When I started working after college, I was broke. When I found out I needed a root canal and a crown — to the tune of $3,000 — there was simply no way I could afford it. But the pain was unbearable, and my dentist warned me that the infection could spread.
I asked my parents for help — and they covered the cost. Although I felt three inches tall for asking for money, I’m certainly not the only person to be in that situation. In fact, a study by the University of Arizona found that 40% of college graduates five years out of school relied on their parents for financial assistance.
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Whether you depend on your parents for emergencies or for smaller expenses like a cell phone bill, you can break the cycle and become independent. If you hate the idea of relying on the bank of mom and dad, here is what you can do to become self-reliant.
1. Put your parents’ needs first
Relying on your parents is easy and convenient. However, depending on your parents has serious consequences. Taking care of you after college can be a significant strain on your parents’ finances. It may even cause them to have to delay retirement — or raid their retirement savings — to make ends meet themselves.
Shifting your perspective to think of their needs first can help you stay motivated to make lifestyle changes that improve your own financial well-being and help you become more independent.
2. Think twice before reaching for the phone
When something goes wrong, whether it’s the utility bill being past due or getting slapped with an expensive dental bill, your first instinct is likely to call your mom and dad. You might not intend to ask them for help, but when you call them in a panic, they’ll want to swoop in to make it right.
Think twice before picking up your phone to call your parents. Instead, think about how you can handle an emergency on your own. It might mean selling some stuff you have in your apartment or eating ramen for a while, but chances are you can manage it yourself.
3. Stop using your parents’ credit card
Your parents may have given you access to their credit cards to help you through emergencies, or even with routine expenses. The ease and convenience of a credit card can be addictive, but it’s important to have your own card, without your parents’ names attached to it.
Your credit score plays a major role in your life, and it’s based on the length of your own, independent credit history. If you only ever have your parents’ card, your credit history will be nonexistent, making it difficult to qualify for loans or even to get approved for an apartment.
Opening your own credit card after graduation will help you establish your own credit history and improve your credit score, as well as wean you off your parents’ bank account.
4. Don’t rely on your parents as an emergency fund
It’s easy to get used to your parents handling emergencies for you. But if you want to truly stand on your own two feet, you have to prepare for the unexpected and establish a savings account. If money is tight, here’s what you can do to start an emergency fund.
- Create a budget: Make a list of all of your expenses, then see what you can cut. Perhaps getting rid of cable or eliminating your Starbucks habit can help free up cash to save.
- Make lifestyle changes: If there’s not much you can cut from your budget, you might have to make more drastic lifestyle changes to get more cash flow. That might mean getting a roommate, moving to a smaller apartment, selling your car and relying on public transportation, or moving to a city with a lower cost of living.
- Launch a side hustle: Boost your income by picking up a side gig in your spare time. You can walk dogs, deliver groceries, or drive people around town for extra money.
5. Treat any assistance as a loan, not a gift
There will be times when you truly need financial help and wouldn’t be able to handle the emergency on your own. In some cases, reaching out to your parents might be the best option.
However, it’s important to shift how you treat any financial aid. Instead of treating it like a gift, treat it like a loan. Sit down with your parents and write down how much you need to borrow, how long you have to repay it, what you’ll pay them each month, and even pay them interest. It’ll still be cheaper than using a credit card or taking out a personal loan on your own, but your parents will get their money back.
Not relying on the safety net your parents provide can be difficult, but it is possible. By following these five steps, you can become financially independent and be prepared for any emergency that pops up.
Originally published August 14, 2018.