Is Moving to a Cheaper City Better for Your Budget?

Having a set budget is always important, but sometimes your financial future depends on more than just scrimping. Nowadays, our household expenses can often exceed our earnings. If you live in one of the 17 Canadian cities that have seen rent prices increase by double digits in 2018, you have probably struggled in some way with affordability.

So what can you do? If your cost of living is proving too difficult for your budget, is moving to a cheaper city the answer?

Before you start packing your bags, remember that moving is not the right answer for everyone. It’s definitely one of the more extreme ways of dealing with a difficult financial situation. But for some people, exorbitant mortgage payments or rent prices may be depleting their finances, leaving them fewer funds for saving or paying down debts. If you can relate, you may want to ask yourself, “Should I move to a cheaper city?”

Comparing housing expenses in Canadian Cities

Let’s look at some numbers.

If you’re living in Toronto and earning an average income of $50,000 (about $38,869 net) and pay an average monthly rent for a one-bedroom of $2,260, you’re left with about $980 a month.

Now subtract for utilities ($120), internet ($60), phone ($80), public transportation ($200), and food ($425), you’re left with about $100 a month. Scary, right? It’s no wonder almost half of Canadian parents still help their kids financially into their 30s.

Have you ever thought of moving to a cheaper city as a cost-saving measure?

If you were living in Winnipeg with the same salary, paying the average monthly rent for a one-bedroom apartment ($970) and the same amount in monthly expenses, you’d be left with about $1,384. That’s a great deal more money to put towards savings, paying off your credit card debts and maybe even a holiday fund.

So what’s stopping us from leaving our most expensive cities?

Is the job market better in the most expensive cities?

We may think that employment opportunities are keeping us from leaving our most expensive cities. But there are inevitably some misconceptions about which cities have the most attractive labour markets. In BMO’s Labour Market Attractiveness Rankings, Toronto and Vancouver rank relatively low overall, because of their housing costs. The strength of their economies does little to compensate for the price of the average home. However, Hamilton and Guelph rank well because of their proximity to Toronto’s economy and the relative affordability of their housing markets.

Ottawa, Quebec City and Edmonton are ranked as having the most attractive job markets. The unemployment rates are low and rent is still reasonable. Buying a home in these cities is also a lot more feasible as the average price of a home in Ottawa is $432,829, while the average price of a home in Vancouver is $1.58 million.

Can telecommuting help you save money?

With the rise of telecommuting, you may be able to have your cake and eat it too. Moving to a more affordable city without having to find a new job is particularly enticing. It is one reason why a growing number of Canadians are leaving the hustle and bustle of city life and working from places that are more rural and less expensive.

When your job doesn’t require you to live within commuting distance, there are real savings to be made. Researchers at the Regional and Rural Broadband project say the average resident in southwestern Ontario will save $12,000 a year by telecommuting only three days per week.

Many studies even extol the benefits of telecommuting for businesses, increasing productivity and employee retention. If your job has the infrastructure for supporting remote work, there is no shortage of arguments to help your case.

Things to consider before moving

While changing cities can help you lighten your monthly expenses, moving is a big decision that shouldn’t be made impulsively. For the daydreamers out there, it’s fun to imagine buying that cheap old house in the middle of nowhere or to picture yourself abroad, in the city of your dreams. (Check out Teleport, an app that uses big data to determine where you should live according to a list of important criteria from geography to culture).

But for the realists, it helps to have a clear understanding of why you live where you do. Indeed, the grass is not necessarily always greener. Having a full appreciation of these factors will help you make a more informed decision. Here are some things to consider before moving:

  • Social networks and family connections. These are hard to quantify and sacrificing them can make a long-distance move very difficult. It’s important to consider the people and the relationships you leave behind before packing up your life. Maybe your friends and family connections are too important to justify a move.
  • Where you are in life. Moving to a new city for your future financial wellness is easier for some than it is for others. Young people may have fewer responsibilities that tie them down to an area than parents who have kids in school. Retirees, having already left the job market, also have an easier decision-making process.
  • Real estate investment. If you’re considering a move so that you can afford to buy real estate, remember that a house is an asset. It makes sense to buy a home in a desirable area that will appreciate. Do your research on all the external factors that could affect the property value. It may also be a good idea to rent in the area before making the decision to buy.
  • Lifestyle. For people who live in the city, culture and lifestyle shouldn’t be taken for granted. There are also certain benefits to city life that save you money. If you want to move somewhere cheaper and more remote, chances are you will need a vehicle to get around. This can easily cost $800 a month when factoring in car payments, insurance, gas, maintenance and repairs, registration, fees and taxes.

Moving to a cheaper city for financial wellness is a much more drastic lifestyle change than establishing a set budget and cutting out unnecessary expenses. (Try using this budget calculator). It should only be considered after you’ve mastered the science of budgeting and fully assessed your spending habits, like knowing the difference between wants vs. needs.

That said, people have moved to greener pastures since time immemorial. The irony is that our big Canadian cities, the ones that have attracted the most influx of people over the past century, have since become our most expensive cities, and are not necessarily the best places for saving money or for paying down debts. They might be holding you back.

Indeed, living in a less costly area is a great way to spend less and save more of your income for the future. Where you live has a big impact on your financial wellbeing.

Are you thinking about moving somewhere cheaper? Learn more about how to manage your budget and your debt by joining the conversation with us on Facebook or Twitter #LeaveDebtBehind