How much did you think you’d make when you “grew up?”
When I was a little girl, in an effort to impress my father who works as a public health inspector, I promised him that I would one day earn a higher salary than he did. I never understood his amused expression as he stared down at this tiny person with a bowl cut who wanted to be a writer.
I do now since I have yet to keep that promise. But I’ve adjusted my expectations.
In fact, many of us might have to or have had to.
According to a recent BMO survey, university and college students expect to earn an annual salary of more than $50,000 on average when they start a job after graduation. But Statistics Canada reports that students with a bachelor’s degree earned $45,000.
That’s not too shabby considering that 74% of Canadians who filed a tax return in 2009 earned less than $50,000. The average after tax income for families in Canada in 2011 was $79,600, while unattached individuals made an average of $31,400.
“In my experience, people who are making less tend to be better at fiscal discipline than people who are making more,” says Bob Stammers, director of investor education at the CFA Institute.
“Everyone needs to learn to live within what they have now. You can’t look to the future and expect that things will be better just because you’re making more money.”
Here’s a snapshot of some young adults who are trying to live within their means, their various challenges and their attitudes about money.
Seanna Magee, 29, has a business degree from St. Francis Xavier University and works as a store manager at The Running Room in Toronto. She and her boyfriend have a baby due in March.
Annual income: $20,400 after tax
Monthly income: $1,700
Monthly expenses: $1,655
Monthly expenses: $274 on condo fees, $200 on utilities, $200 to savings, $300 for groceries, $120 on cable/phone, $100 on shopping, $300 on entertainment, $50 on charity, $50 for life insurance, $25 for critical illness insurance, $36 to pay back an investment loan.
What has shaped your ideas about money? I don’t see money as that important. Don’t get me wrong, it is necessary and I definitely would like to have more of it. But having various positions for very cool organizations and never making above $40,000 (usually actually about $30,000), I just see employers as cheap, somewhat exploitive and unwilling to invest to keep good employees.
Name a money challenge that you’re dealing with. I’m expecting a child in 2014 and I make $28,000 with no mat leave beyond employment insurance and my partner makes about $31,000. It will definitely be a challenge.
How much have you saved? I have about $40,000 in my RRSP, $18,000 in my TFSA, $2,000 in a more liquid savings non-reg account and I own a $250,000 property, mortgage free.
What do you splurge on? Daily spending, travel, dinners out, things that don’t seem like a lot but leave me broke before every payday.
What are your plans for the future? Be a mom. Take over my partner’s condo to joint-own. Sell my place. Find an employer that thinks they should pay me a decent wage in sales or financial literacy.
Share your best financial advice.
Credit cards are evil. Also, don’t be too proud to ask for help.
Jordann Brown, 23, and her husband moved from Halifax to Petitcodiac, NB, to be in a better position to tackle their debts. He operates his own landscaping business and she works in marketing for a small startup.
Combined annual income for Jordann and her husband: $34,976 after tax
Monthly income: $2,854
Monthly expenses: $2,854
$100 on rent, $250 on utilities, $160 to savings, $400 on groceries, $52 on Internet/cable/phone, $165 on shopping/personal spending, $190 on entertainment, $60 to pets, $280 on car insurance and gas, $60 on cellphones, $1,137 on debt repayment
What has shaped your ideas about money today? The biggest force that has shaped my ideas about money was literally an impact. In July 2011, I was in a car accident. I broke my wrist and wrote off my car. Being a recent university graduate, I had absolutely no savings to fall back on, and that was terrifying. Once that terrible situation was behind me, I vowed to never be caught unprepared again.
What’s a money challenge that you’ve run into? When my student loans were finally totaled, I was a little shocked. I owed $42,000 from my four-year commerce degree. When I started building a budget that included my monthly minimum payments on my student loans, my new car payment, and my expensive city apartment, the math just didn’t add up. There was no way to pay for it all on my entry-level salary, and eat too. To combat this, I moved to a smaller town with lower rent, and researched student loan forgiveness programs. I lowered my rent by offering to permanently house sit a relative’s 400 square-foot cottage, and reduced my overall student debt owing to $26,000, which lowered the corresponding minimum payments dramatically. This helped my budget balance, and I will be able to get my student loans paid off in 19 months, instead of the originally projected 10 years.
How much have you saved? I have an emergency fund of around $2,000 saved at the moment. I plan on saving three to six months of living expenses and putting around 15% of my net income away for retirement.
What do you splurge on? I splurged last year and adopted my dog Molly from the local SPCA. It wasn’t the most frugal decision; but I don’t regret adding her to my family for one second.
Share your best financial advice/What is your money secret. It’s entirely possible to be happy on a very limited budget. The things that you think are necessities probably aren’t. The sooner you get rid of them and start putting that money towards achieving your financial goals, the better.
Marc Rowley, 25, lives with a roommate while he attends Concordia University in Montreal. He’s studying Francophone literature and media resonance and works as a research assistant and web content developer at the university.
Annual income: $23,300 after tax (including a $4,000 student loan and a $2,500 scholarship)
Monthly income: $1,941
Monthly expenses: $1,931
$375 for rent, $208 for tuition ($2,500 annually), $83 for books ($1,000 annually), $25 for hydro, $160 for savings, $125 for miscellaneous, $300 for groceries, $35 for a flip-phone with no data, $60 for Internet, $100 for shopping, $400 a month on going to the bar twice a week, ordering food twice a week, movies, plays, concerts, $30 for grooming, $30 for charities.
How did you view money growing up? Frugality was very important at home. My parents share one car which they bought with cash, live in a relatively small house with a relatively small mortgage, don’t carry a credit card balance, eat most of their meals at home (and always take a lunch to work) and were very clear about what was a necessity and what was a luxury.
What are your plans for the future? I would like to stay in school to complete a Ph.D. I could see a career in academia in fields surrounding new media studies or in the private sector doing PR or communications work. It’s much more important to me to do a job I’m passionate about, for an organization I believe in, than it is to make lots of money.
What are you saving for? My savings are an emergency fund to cover rent and bills for three months in case of a change in my employment status.
What do you splurge on? Experiences! The money I have “extra” goes to memorable nights out with friends, shows and concerts, entrance to museums/gardens/festivals and delicious meals.
Share some money advice. You can’t take it with you.
Rebekah Brinks is a 32-year-old supply teacher, and her husband is a former youth pastor who is returning to college to become a hearing instruments specialist. They live in the Town of Simcoe, 10 minutes from Lake Erie.
Combined income for Rebekah and her husband: $34,200 after tax (including the Child Tax Credit and Universal Child Care Benefit)
Monthly income: $2,850
Monthly expenses: $2,754
$830 for Mortgage, $230 for gas, $228 for car and house insurance, $180 for utilities, $237 for childcare, $60 for RESPs, $400 for groceries, $138 for Internet and Netflix, $25 for shopping at the thrift store, $50 for entertainment, $20 for grooming, $250 for charity, $56 for vacations to Niagara Falls, Grand Bend, etc., $50 for gifts.
How did you view money growing up? I had a paper route when I was 10. I remember my parents sitting us down with jars and saying, “Hey you made $50 on your paper route so 10% goes to gifts, 10% goes to savings, 10% goes to charity and the rest goes to whatever you want. You have to work for what you want. We don’t spend money if we don’t have it.”
What kind of money challenges have you run into? With my first son, I had a maternity leave because I was working full-time; after he was born, I went back part-time so when I had my second son, I didn’t get a maternity leave. Both my husband and I really had to pare down our expenses. We kept all of our receipts for a month, looked at what we were spending and cut everything we could. I knew I had to work for five days [out of the month] to pay our bills. If we wanted something on top of that, we knew I’d have to work an extra two days. It made us prioritize.
What do you splurge on? Vacations. Two years ago, we went to the Dominican Republic. But we budget for it.
What has shaped your ideas about money today? Last year, I had ovarian cancer. I’m quite fortunate that the doctor caught it early. It really made me think that possessions aren’t important because I’m not taking them with me when I die.
Kevin MacLeod, a 27-year-old Cambridge, Ont., resident works as a financial services representative at a bank. He’s saving for a wedding.
Annual income: $23,108 (after tax)
Monthly income: $1,925
Monthly expenses: $1,925
$325 on rent, $102 on utilities, $150 to savings, $150 on groceries, $101 on Internet/cable/phone, $25 on shopping, $85 on entertainment, $4 to charity, $168 on car loan, $209 on car insurance, $220 on gas/oil/repairs, $386 on debt repayment.
What’s a money challenge that you’ve run into? The biggest money challenge I’ve run into is planning for a wedding while still trying to pay down debts. It seems that no matter how much I save, there seems to be another thing to plan.
How much money have you saved? With my employee ownership plan, my RRSP is currently worth $4,500. I can’t see the money coming from my account so I don’t miss it. My employer also matches contributions up to a certain portion which has also helped. The rest of my savings is currently going towards wedding-related expenses.
What do you splurge on? My biggest splurge has been restaurants. I hate doing dishes and love well-cooked meals; so when I was younger (and accumulating lots of debt), I visited a lot of restaurants and became accustomed to them. Now with a more stringent budget, I find that I still like having that once-in-a-while treat and try to make it count by combining it with special occasions.
What are your plans for the future? My plans are to get married in late March 2014, and to start building roots with my fiancée. That will largely mean getting our debts under control and then starting to look for a place to start a family.
Share some financial advice. Don’t be afraid to walk away to consider something, or talk your way into a better deal. I have found great success in negotiating with service providers whose aim is customer satisfaction. It can be daunting; but it’s helped everywhere from wedding vendors to cellphone providers.
Erica Martinello, a 29-year-old early childhood educator, purchased her first townhouse with her parents’ help in 2011.
Annual income: $34,000 (after tax)
Monthly income: $2,833
Monthly expenses: $2397.42
$976.42 on mortgage, $56 on condo fees, $35 on home insurance, $100 on utilities, $90 on cellphone, $60 on the Internet, $150 on groceries, $45 for the gym, $10 on clothing, $25 personal items, $200 on car insurance, $160 on gas, $100 for savings, $100 into an RRSP, $100 for debt repayment, $100 into an account, $10 as an allowance, $30 for certification fees, $50 for gifts.
What has shaped your ideas about money today? Reading a lot of blogs about money and personal finance has helped me be able to figure out that a budget is something good to have but it isn’t set in stone and that it’s always changing.
What kind of money challenges have you run into? I get laid off from my job for [July and August] so I collect employment insurance during that time. I have to start putting aside money in January to be able to have a cushion to make sure I have enough to cover my bills. This summer was particularly hard. My car broke down and my neighbours on both sides wanted to build a fence so my entire cushion of money was used up rather quickly.
How much have you saved? I have $500 saved in a savings account and I add to it whenever I have extra income, which isn’t often. I also have a pension with my job that is automatically taken off my pay. I also pay $100 into an RRSP every month, so I have about $1,000 in there by now.
What do you splurge on? I splurge on nail polish and a subscription to Cosmo magazine.
What are your plans for the future? My plans for the future are to be able to put at least $200 into savings and to increase my debt repayment.
Share your best financial advice. Pay yourself first.