6 ways to save money with a roommate

6 ways to save money with a roommate

6 ways to save money with a roommate

Housing is one of life’s largest expenses. Mortgage payments or rent takes a heavy toll and requires a lot of your hard earned money. We may find ourselves in a home that is beyond our current needs however we do not want to downsize in anticipation of needing the space in the future. To save money in the meanwhile finding a roommate is an excellent idea! Here are 6 ways to save money with a roommate:

  1. Saving on rent

A two bedroom apartment is a great dwelling to split the rent cost in two! You occupy one room while your roommate occupies the other. Rent is shared (perhaps 50/50 or 60/40, depending on the size of each room) between the two of you.

  1. Saving on your mortgage

Just bought a house and have a few rooms available? Find a roommate or two and charge them rent! The rent you earn will decrease your net cash outflow.

  1. Saving on your mortgage 2.0

In larger and more expensive real-estate markets such as Toronto and Vancouver, many people cannot qualify to purchase a home because of how high the housing prices are. It is becoming more common for people to buy houses together, two incomes combined yield more purchasing power and qualifies the people to purchase these homes. The dual incomes also work together to make the mortgage payments affordable.

  1. Buy in bulk

Now there are two mouths to feed and now is a great time to make bulk purchases! Buying in bulk can save you money and the food won’t go bad because there are you and your roommate chowing down. Bulk Barn and Costco are two great places to buy your favourite foods and household items in bulk!

  1. Carpooling

Going somewhere? Your roommate and yourself may be heading to the same place (i.e. school, work) or at least the same area (i.e. entertainment district, business district). Take turns driving to and from these places to balance out the savings on gas.

  1. Things you never thought of

There are a number of other things to split on including: furnishing common spaces (best to have a written agreement on who gets what when you go your separate ways), sharing an unlimited metro pass when the other person is out of the city, borrowing clothes is another possibility for one off occasions (ladies: this saves you from buying a dress, men: it saves you from buying a sports’ jacket).

How to save money living in a big city

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

HOW TO SAVE MONEY LIVING IN A BIG CITY

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!