{"id":26796,"date":"2022-06-08T16:15:42","date_gmt":"2022-06-08T20:15:42","guid":{"rendered":"https:\/\/www.moneysense.ca\/?p=264644"},"modified":"2022-06-08T16:15:42","modified_gmt":"2022-06-08T20:15:42","slug":"can-young-people-afford-to-live-in-the-city-anymore","status":"publish","type":"post","link":"https:\/\/www.moneysense.ca\/spend\/real-estate\/renting\/can-young-people-afford-to-live-in-the-city\/","title":{"rendered":"Can young people afford to live in the city anymore?"},"content":{"rendered":"
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High rent is a major contributing factor to the lack of affordability: Rent growth has exceeded wage growth in major Canadian cities, according to a February 2022 report<\/a> from the Canada Mortgage and Housing Corporation (CMHC). This has been a long-brewing issue: CBC\u2019s The Fifth Estate<\/em> found that between 2014 and 2019, rents across Canada<\/a> increased almost 20% while incomes remained relatively stagnant.<\/p>\n

Adding to the pressure is the rising cost of basic necessities. Inflation<\/a>\u2014which affects the prices of everything from food and gas to shelter and your morning latte\u2014is currently at a 31-year high of 6.8%. This number directly impacts your budget. Consider grocery prices: In April 2022, prices were 9.7% higher on a year-over-year basis\u2014the largest yearly increase since March 2009, according to Stats Canada<\/a>.<\/p>\n

The bottom line: Today\u2019s young renters have to account for the rising costs of both rent and<\/em> everyday living expenses, which can be a challenge on a student budget, minimum wage or an entry-level salary. While there\u2019s little you can do to change the going rate for an apartment in your city of choice, there are strategies to lighten the financial burden of a high cost of living. Let\u2019s take a look at some pointers for young professionals and recent graduates who want to make the leap to independent living.<\/p>\n

Calculate what you can afford<\/h2>\n

Everyone has a different definition of what it means to live \u201caffordably,\u201d depending on their lifestyle, but there are some general guidelines. According to CMHC, affordable rent (including utilities) should be no more than 30% of a household\u2019s annual income. So, if your monthly income is $3,000, you should aim to pay no more than $900 in rent per month. In many cities, that will mean living with a roommate to keep rent affordable. For example, in Toronto, the average price<\/a> of a bachelor apartment is $1,225, a one bedroom apartment is $1,446 and a two bedroom is $1,703 (plus utilities for each unit type). You can use a rent affordability calculator<\/a> to determine the range that is realistic for you. <\/p>\n

Start saving well before your move<\/h2>\n

If you\u2019ve just entered the workforce, you shouldn\u2019t be ashamed to live at home or with family while you save up money, says Greg Tomkins, chartered financial analyst and financial advisor at Tomkins Financial<\/a> in Nanaimo, B.C. <\/p>\n

If living with family is an option, you can build up your savings account before rent, utilities and grocery costs start to eat away at your paycheque. You\u2019ll need a stash of cash for first and last months\u2019 rent, moving costs and, in some cases, a damage deposit. (Tenant insurance<\/a> is also a good idea, to protect your belongings.) <\/p>\n

That\u2019s what Leila Kalwar*, a 24-year-old business development representative from Mississauga, Ont., did. She saved for eight months while living with her family and working remotely, prior to moving into her downtown Toronto rental unit last spring. <\/p>\n

Once you\u2019ve moved, you can put any leftover savings into an emergency fund or begin investing for the future. <\/p>\n

Maintain an emergency fund<\/h2>\n

Nicholas Hui, an advice-only financial planner at VAVE Financial Planning<\/a> in Markham, Ont., suggests that young people have an emergency savings fund<\/a> before moving into rental accommodations.<\/p>\n

The fund should cover at least three-to-six months of living expenses, including rent. So, if your rent is $1,000 and you expect to spend $600 on utilities, groceries and transportation, you would want to have at least $4,800 as backup in case of an unexpected event like losing your job or fixing your car. Your savings will protect you from having to take on debt to cover expenses. <\/p>\n

Create a monthly budget <\/h2>\n

Between online shopping, hitting the local pub and ordering food delivery, it\u2019s incredibly easy to lose track of where your money is going. That\u2019s where a budget comes in. Hui recommends mapping out your monthly income and expenses (including rent) in a spreadsheet to determine how much you\u2019ll have left over at the end of each month. \u201cThat\u2019s going to help you understand how much you\u2019re able to save,\u201d he says.<\/p>\n

For instance, if you add up your rent, groceries, transportation, gym membership, subscriptions and miscellaneous expenses like takeout food and you have $200 left over, aim to save $100 of it. Hui suggests setting up automatic transfers from your bank account to a high-interest savings account<\/a> (HISA) each month. <\/p>\n

Tomkins says that if you can draw from your HISA rather than frequently using your credit card, you can avoid accumulating credit card debt<\/a> and paying interest on it (usually around 20%, plus the cost of compound interest if you carry a balance). If you do use your credit card, make a point of paying it off in full and on time each month. <\/p>\n

If a spreadsheet sounds tedious, try one of the many free financial apps<\/a> that calculate and categorize your spending for you. Mint<\/a>, for instance, tracks your finances all in one place, across all of your accounts\u2014from chequing, savings and credit cards to registered accounts like a TFSA, lines of credit and car loans.<\/p>\n

Think outside the box<\/h2>\n

When it comes to your living arrangements, you might need to compromise to stay on track financially. <\/p>\n

A study by insurance company Square One<\/a> found that in 2019, 33% of renters in Toronto had a roommate, as did 32% in Ottawa, 28% in Vancouver and 23% in Edmonton. In Ontario, B.C., Alberta, the number of renters with roommates increased between 5% and 10% from 2018 to 2019 alone. <\/p>\n

Source<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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