Graduating to real life: What it costs to be a grownup

Congratulations—you’ve graduated! Completing your postsecondary education is a huge step forward, and something that both you and your family should be very proud of. You’ve landed your first “adult” job and are now ready to embark on a whole new challenge: adulthood.

Adulthood marks the start of real independence. And even with a supportive family at your back, that can be daunting. After graduation it can seem like everything is being thrown at you at once. Where do I live? Do I need a car? What’s a typical budget for groceries? How do I learn how to cook!!??

Welcome to adulting

A lot of those life challenges are overcome simply through trial and error, but others demand planning and forethought. That’s especially the case with personal finances. After all, you can afford to burn your first mac ‘n cheese before getting the hang of it—but you don’t want to burn yourself financially starting out.

The foundation of personal finance is budgeting. For some, that’s often intuitive, but those just starting out should consider writing out a formal budget. The infographic below shows you how much a typical new graduate in Toronto can expect to spend in a year, and as you can see, the expenses add up quickly. Of course, Toronto is a very expensive city, and these figures are just averages—so your experience, wherever you live, may be very different. But as you can see, adulthood ain’t cheap.

Cost of Independence

Living la vida local

We all know that costs vary by location—but by how much? A quick way to compare living expenses by city is to look at rent, because that’s the single biggest item in your budget (by far). Just look at what it takes to lay down your head to rest in a one-bedroom in Toronto compared to other cities—three times as much as in Windsor!

Cost of Housing

Get creative when getting around

One of the most flexible items in a budget is transportation. The figure of $254 used above is based on a monthly transit pass combined with one ride-share every week. But you can change your costs by opting for a car, bike, ridesharing or just plain old walking. Remember as well that your transportation mix can affect other parts of your budget: hopping on a bike, for example, can let you ditch your transit pass and even your gym membership—all while boosting your own health and that of the planet.

Cost of Transportation

Car costs add up

For a lot of people, a car is the ultimate symbol of independence. But that independence comes at a price. Before you rush into getting your first set of wheels, take a look at what you’re getting into financially.*

Cost of Car Ownership

*Costs vary considerably, according to where you live and what you drive. This example uses a 3-year-old used model of a popular small car in Ontario.

Puttin’ on the Ritz (crackers)

Living well isn’t easy when you’re starting out. The average annual starting salary for someone with a college diploma is around $45,000, while a bachelor’s degree bumps that up to about $54,000. With a master’s degree you can typically net around $61,000. Knock off a big chunk for taxes and deductions, and you can see that the typical first job won’t even cover the annual expenses in Toronto noted above ($42,084 annually).

Then there’s your student loan: an average of $26,819 for recent Canadian grads. It will take five years to pay that off at $544/month—but if you can’t afford that level of repayment then you’re looking at a longer period to get debt-free.

Being in the black is the new black…

While budgeting is key to managing your money, it’s important not to overlook another pillar of your finances: building up a credit history. A good credit history is vital to your financial future, because banks and other financial institutions use it to decide whether or not to lend you money. You may not be thinking about borrowing now, but when the time comes in the future to do things like take out a mortgage on your first home, you’ll need a sold credit history before you can do so.

One of the best ways to build up your credit history is to obtain a credit card—or, if you already have one, to use it wisely. Buy only things that you really need, stay within your budget and, above all, pay off all or most of your balance every month: banks like to see black ink—not red—on your personal balance sheet!

Home Trust offers a perfect credit card1 if you’re starting out and want to build that history. It’s the Preferred Visa Card from Home Trust, and it offers great features designed to appeal to young people on a budget. To begin with, it doesn’t charge an annual fee. (That’s a neat little saving right there.) On top of that, it offers you 1% Cash Back on all your regular purchases—another way to save a little bit every time you shop. And finally, it has lots of other features that can add up to more savings over the years. By combining a sound budget with a credit card used responsibly, you’ll be laying the foundation for solid personal finances as you embark on the biggest new chapter in your adult life.

 

1On approved credit.

 

Sources:

https://bikesharetoronto.com/how-it-works/
https://dailyhive.com/toronto/average-cost-rent-canada-january-2019
https://www.canadianbusiness.com/lists-and-rankings/best-jobs/now-even-a-bachelors-degree-isnt-enough-for-some-entry-level-jobs/
https://www.lowestrates.ca/blog/finance/how-much-it-costs-live-young-person-toronto-2019
https://www.ratehub.ca/blog/what-is-the-total-cost-of-owning-a-car/
https://www.vice.com/en_ca/article/z499n4/how-much-it-really-costs-for-young-people-to-have-a-fun-life-in-toronto

 

We welcome your thoughts on this blog feature. Please email your comments to Blog@hometrust.ca

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