Saving in an expensive city

The cost of living in many of Canada’s largest cities is going up – way, way up when it comes to real estate, especially in Toronto and Vancouver – while wages aren’t exactly keeping pace.

A 2015 study from the Canadian Payroll Association found that almost half of Canadians are living paycheque to paycheque. A lot of Canadians are having trouble making ends meet, and the news is full of permanently couch-surfing millennials and rising household debt.

For Madeleine Somerville, a 33-year-old freelance writer with a four-year-old daughter, getting by in pricey Calgary involves setting priorities, getting creative and not being hung up on keeping up with the neighbours. “When you're in a big city with many wealthy areas and wealthy people to compare yourself to, the temptation to ‘keep up’ financially can be huge,” says Somerville.

Somerville – who wrote a book on how to be both thrifty and environmentally conscious, All You Need Is Less: The Eco-friendly Guide to Guilt-Free Green Living and Stress-Free Simplicity – has developed a series of hacks to keep her expenses down. She keeps things minimal, prioritizing needs over wants, which also means she needs less living space; and she makes many of her home and beauty products, including shampoo, conditioner, toothpaste and cleaning supplies.

“Living within your means and being happy with what you have goes a long way towards creating financial freedom,” she says.

But living within one’s means isn’t as easy as it sounds. Rubina Ahmed-Haq, a personal finance expert in Toronto, says that there are two primary personal finance challenges in expensive cities: First, there are a lot of temptations, like restaurants with tasting menus and a full spectrum of appealing boutiques. And second, your money often doesn’t go as far as it does in smaller towns. “The biggest challenge is adjusting your lifestyle, especially somewhere like Toronto or Vancouver,” says Rubina.

While cutting out that daily latte habit isn’t quite going to cut it when it comes to saving up a down payment for a house, there are ways to scale back expenses to make your money go further. Here are five of Ahmed-Haq’s top tips for money management in the big city:

Stick with a housing budget

The general rule of thumb is to keep housing expenses below 40 percent of your after-tax income. Ahmed-Haq recommends calculating that specific figure and ignoring any listings that exceed that amount. “If you’re seeing stretch places, which are going to be nicer, you’re going to be tempted,” she says.

Use public transit

Big cities can be a nightmare for drivers – especially when it comes to finding a parking spot – but they offer great (and more affordable) opportunities to walk, bike and use public transit.

Take advantage of free events

Instead of spending money on a movie or pricey meal, go check out a municipal park, free concert or simply stroll around a lesser known neighbourhood.

Try targeted shopping

Shops and services in cities are often more proximate so try to shop for groceries as needed instead of coming home with a massive haul that might turn into food waste. And avoid aimless browsing at places where the temptation factor is high.

Take advantage of the secondhand market

Shop vintage and consignment stores, and scour Kijiji and other online marketplaces for whatever you need. “You can sometimes find things that are brand new,” says Ahmed-Haq.