Living in a big city can be an exciting time in your life, especially if you are a recent university graduate ready to start a new career. While major cities offer a lot of fun, food, culture and entertainment, they also present financial temptations that you need to be mindful of. It is 100% possible to experience the best that a city like Toronto, New York or San Francisco has to offer while still saving money. All it takes is a few smart decisions and realizing that there will be some minor sacrifices along the way. Today we learn how to save money living in a big city.
How to save money living in a big city tips
Tip #1 – Get a Roommate
This is especially true for recent graduates who are living on an entry-level salary. You likely lived with roommates while at college/university, so aim to keep that that going for the first few years of your career.
Rent for the average 1-bedroom apartment in Toronto is $1,777 per month. The average 2-bedroom apartment is $2,219, which means that you could split that with a friend for $1,110 each. The difference between having a roommate or living alone works out to over $8,000 per year! This is enough money to maximize your TFSA for the year and still have money left over. Now that is a great way on how to save money living in a big city!
Try to live the first few years of your career with a roommate and invest the money you save. Doing this early in your career will lead to wealth down the road because your savings have so much time to grow. There’s a reason Einstein called compound interest the “8th wonder of the world.”
Tip #2 – Be Smart about Transportation
Owning a car is expensive no matter where you live. Owning a car in a major city can cost a small fortune. The Canadian Automobile Association has a calculator that shows you exactly how much it costs to own a car when factoring in all expenses. Try out that calculator and you’ll see that it’s almost impossible to own a car for less than $10,000 per year. In a big city you will likely be paying $150+ each month for parking on top of everything else.
The smarter approach is to rely on a combination of public transit, cycling and either UberX or a carsharing service like Zipcar.
Public transit – It’s important to note that not all major cities have good public transit systems. However, if you are living in one that does it is worth taking advantage of. A monthly pass in Toronto costs $146.25 which is less than you would have to pay for a monthly parking pass anywhere in the city.
Cycling – There are so many health and environmental benefits of cycling that it is impossible to list them all. In a big city, cycling can be the fastest mode of transit, it builds exercise into your daily routine and it is free.
UberX and carsharing – for those times when you absolutely need a car, it is far more cost effective to rent for a short period than own a car outright.
Tip #3 – Take Advantage of Free Things To Do
Big cities have a lot of expensive entertainment options like professional sports games, 5-star restaurants and fancy nightclubs. What is often overlooked is that they have just as many top-tier entertainment options that are completely free. Museums and art galleries are free to visit in most of the world’s largest cities.
Every major city will have blogs that point out everything you can do for free just like this one for Toronto. Research those blogs and use them for an affordable night on the town.
Tip #4 – Avoid lifestyle inflation
Lifestyle inflation is when your spending increases as your income increases. Lifestyle inflation starts slow, but once it happens it is difficult to reverse. For example, going to a fancy restaurant might have once been a rare treat. Then as you start making more money you start to go every week, then multiple times per week, until it eventually seems like a normal behaviour.
Here are a few recommendations to avoid falling victim to lifestyle inflation:
Invest your raises – when you make more money, use those funds for investment and try to keep living off of your old salary. Set up a pre-authorized investment to immediately divert your new earnings to an investment account.
Don’t change shopping habits – If you are used to shopping at a discount grocery store like No Frills, don’t start shopping at Loblaws once you get a raise. This will lead to lifestyle inflation that is hard to reverse and a more expensive grocery budget. You can also try $5 dinners.
How to save money living in a big city – 3 day action plan
What can you do today to start
Pick one of the savings tips, wow now that’s an easy first day task!
What can you do tomorrow to continue
Take the first step, no literally take the first step towards work in the morning (if you work within walking distance) or better yet take your first step and hop on a train, bus or bike!
Post an ad in your apartment or condo so other inhabitants can see you are looking for a roommate; you might just find they are willing to share the cost or knows someone who is! And because you are reaching out to people that live in the same place as you, they are well aware of the type of lifestyle and mannerisms of the space!
What can you do the next day to continue
Buy a bus or train pass! If you still have a vehicle that’s alright, you are saving on gas and on your fourth day you can post an ad to sell your car.
How to save money living in a big city – what about us small town folk
If you live in a small town the same strategies apply! Especially bunking up with a roommate, as the old saying goes, two can live cheaper than one. Public transportation may be difficult to use, as it may be non-existent, however cycling or owning a used car are viable options. Explore the local area and make your own fun things to do for entertainment, you never know what you will find in a small town! As it is already cheaper to live and if you have plans on moving to a big city, use the small town living lifestyle to save up so you can be financially comfortable when you move!