Can a 26-year-old Toronto sous-chef making $40,000 rent alone?
Millennial Money is a weekly submission-based series that provides financial advice to millennials. Read the full series here.
At 26, Jocelyn has spent four years working her way up from dishwasher to sous-chef at a Toronto restaurant. Now, she earns around $40,000 a year, and has been living comfortably — going out for drinks and dinner — while not paying rent.
“I was chilling since I was living at home, saving money and just paying off student debt,” she said.
But now, she’s in for a big — and quite immediate — change.
“My parents have told me they plan on selling their home by the end of year, and I’ll have to find my own place,” Jocelyn said, adding that she’s been stressed about her situation.
Because she’s worked hard to make gains at the restaurant, she doesn’t want to leave — she’s comfortable after her many years of experience there.
As it’s located in downtown Toronto, however, she’ll likely have to find her own place, as her parents are considering moving north.
“I never really thought about my money like that. Now I have to consider places for rent that still get me downtown,” she said.
Because of all the expenses she’s saved on housing, and the easy access to transit she’s enjoyed to get her from her parents’ home to the downtown core for work, she admits she has a tendency to splurge.
“I work in a restaurant as a sous-chef, I am able to eat at work mostly. But also because I’m in this industry, I end up going out for drinks and food quite a bit with co-workers and friends when I have a day off,” Jocelyn said.
On the evenings that she chooses to stay out late, she’ll opt to Uber home, which costs a bit over $25 per trip.
“I almost never refuse a dinner or drinks engagement, and do go out after work as well,” she said. “I’ll have to change that when my parents want to sell our family house.”
So far, in a savings account, Jocelyn has $2,000 put away. She also doesn’t have any debt, but with the looming prospect of renting alone in the city, she wants some clarity.
“Do I live with a roommate? Where is it accessible?”
We asked Jocelyn to share a week of spending to get an idea of her finances.
The expert: Jason Heath, managing director at Objective Financial Partners Inc.
Jocelyn has been able to pay off her student loan by living at home with her parents, but that is about to change. They have given her notice that they plan to sell their house by the end of the year and she will have to move out.
She has managed to save $2,000, but will need a lot more to pay first and last month’s rent and have an emergency fund as well. She figures she may need to have a roommate. I think the best thing she can do is try to prepare a reasonable budget.
According to Statistics Canada’s last survey of household spending, the big three expenses for a household were shelter (29 per cent), transportation (19 per cent), and food (15 per cent). Jocelyn has no car and uses public transit, so her transportation costs are relatively low. Right now, she pays no rent, and her parents buy groceries. So, she can expect her monthly costs to increase substantially when she moves out.
Assuming she stays in North York, Rentals.ca reports the average rent for a one-bedroom apartment there as of May stands at $1,781 per month. For a two-bedroom, rent averaged $2,367. So, if she splits a two-bedroom with a roommate, she may be able to reduce her rent by about one-third, or nearly $600 per month. There are other fixed costs, like tenant insurance, internet and other miscellaneous expenses that may be less if shared.
It bears mentioning that Jocelyn’s $865 per month costs suggests she should be saving about $1,400 per month based on her after-tax income. Given she just finished paying off her debt, she may well have that much extra each month. But looking at one’s after-tax income and actual monthly savings (or lack thereof) could be the truest test of what you’re spending. People tend to drastically underestimate how much money they spend.
Even if Jocelyn has $1,400 extra each month now, she may be hard-pressed to pay for rent and food without some serious changes to her other expenses or to her income. She hopes to get a promotion and corresponding increase in income, but failing that, moving out is going to require a change in her money habits. The sooner she grows accustomed to those changes and reduces spending to boost her savings while she is still at home, the better prepared she will be to move out.
Results: She spent less. Spending in week 1: $419.50 Spending in week 2: $366.50
How she thinks she did: Reading all of this, Jocelyn said she’s feeling “nervous” as her parents continue to remind her about their plans.
“I realize that they think I had it too easy compared to my brother, and so I’ll be having to figure things out,” she said.
Take-aways: If there’s one major thing that stands out, it’s that she’ll have to drastically change her lifestyle.
“Working in the food industry, you constantly see people eating, drinking and enjoying food while we work at a fast pace in a hot kitchen,” Jocelyn said. “It’s why there are so many temptations to go for drinks or food, as we see it as a time to relax.”
To make the necessary changes, she’ll try her best to start buying groceries at her parents’ home while she’s still there to prep for breakfasts, as well as lunches and dinners when she’s not working.
“I want a better idea of how much all these additional things will cost. I realize it’s not just about rent, but so much more,” she added.
With Heath’s breakdown, Jocelyn is now considering finding a place with roommates.
“I don’t mind doing that if it means I can get to work at an efficient time,” she said, adding that if she can’t find anything close or walkable to work, she’ll consider moving further west or east, as long as she’s near a subway station.
In the meantime, she’ll continue working hard to get a promotion, while spending her days off looking for places to rent instead of going out for drinks.
“Learning to say no will be hard, but it’s necessary if I want to be independent.”
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