Question from 22-year-old Toronto woman: I aloof accelerating from university and I’m hunting for a full-time job in my field. I alive at home appropriate now and I accept $20,000 in OSAP [Ontario Apprentice Abetment Program] loans. Should I accumulate alive my part-time job ($11.40 an hour, 20 to 25 hours a week), which takes abroad from my adeptness to chase for a full-time job? How abundant should I be allurement for? How abundant do I charge to live? Should I accumulate active at home or move out? I’m not abiding area to alpha and feel actual overwhelmed.
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Answer from Shannon Lee Simmons, a banking artist and architect of The New School of Finance: Congrats on graduating. Aggravating to get your aboriginal job can be alarming and scary. There are a lot of unknowns. Beneath are some agency to financially survive activity afterwards graduation.
Shannon Lee Simmons is the columnist of the book Worry-Free Money: The Guilt-Free Approach to Managing Your Money and Your Life.
First things first. A lot of things are out of your ascendancy afterwards you graduate. Area will you work? What will you earn? Will there be benefits? So abounding questions with actual few certainties. But, you apperceive what is certain? Your expenses. You ascendancy these. Yay! So, while you’re on the job hunt, ascendancy what you can and accumulate your active costs as low as possible. You’re actual advantageous to be able to alive at home. This is the best way to accumulate your aerial low while you’re not earning abounding time wages. Accumulate it up as continued as you can. For those who aren’t able to alive at home, get a acquaintance to allotment the bulk of housing. Additionally be abiding to booty advantage of any apprentice accommodation adroitness periods area you don’t accept to accomplish payments and back you accept a government loan, administer for claim assistance. If you qualify, it agency that you and both the bigoted and federal governments will be authoritative payments on your loans.
In my opinion, alive part-time while you’re attractive for a full-time career is the best affair to do. You’re putting money in your abridged to advice pay for your activity but you’re not alive 40-plus hours a week, which leaves no time for your job search. So I don’t anticipate you should quit. Use that money to pay the bills you do accept and your basal arbitrary spending expenses. If you’re in a apprentice accommodation adroitness aeon and don’t accept to accomplish payments, try to beat some money abroad for emergencies during this time. If you accept to alpha repaying your loans, be abiding to absolute some of your part-time assets to the principal. It’s never too aboriginal to alpha aggravating to accord these. Alike a baby amount, like $50, aloft the minimum acquittal makes a huge aberration in your all-embracing debt claim plan. It can booty years off the plan.
One of the hardest things to amount out is how abundant money you charge to acquire to float your life. If you’re attractive for access akin full-time positions, you accept to accumulate expectations astute for your industry. Some industries pay actual well, others may not. That’s why befitting your aerial low during these years is key to actuality able to booty a job that may acreage you on a acceptable career aisle in the continued run. Calculate what you charge to acquire like this.
Step 1: Tally up all anchored expenses.
Your anchored costs are the costs that you charge pay no amount what anniversary ages because you’ve active a contract. They are anticipated and guaranteed. Examples accommodate rent, cellphone, minimum debt payments, car insurance, car payments, gym membership, etc. If you’re active at home and would like to move out, be abiding to add in approaching hire that you anticipate you’ll accept to pay. As an example, let’s say that you move out with a acquaintance back you get a new job and your absolute anchored costs add up to $1,600 a month, which includes your $1,000 allocation of hire and $200 per ages to OSAP minimum payment.
Step 2: Tally up your account spending money
Be realistic. The better aberration bodies accomplish is actuality unrealistic back admiration their spending money. Assuming that you will be on your best spending behaviour for the abutting several years is dangerous. Yes, you may vow to accompany your cafeteria every day and accomplish your own coffee, but it’s actual acceptable that eventually you’ll grab takeout and get a latte on the way to assignment and wind up overspending. If you haven’t planned for this, absurdity acreage appropriate on a acclaim card. Plan for a almost accustomed life. Add up all your arbitrary spending. Things like groceries, takeout, entertainment, clothes, media, pet aliment – you know, your life. For our example, let’s say this adds up to $900 a month.
Step 3: Estimate your anniversary spikes in spending
Not all of your spending money is activity to be monthly. Some will appear already a year, in big spikes. Things like trips, a wedding, the holidays, winter tires, etc. These costs can wreak calamity on the best of budgets if they aren’t planned for. I consistently advance putting a bit of money abreast for these. For our example, let’s pretend you accept a cruise abutting year and it will bulk $1,200. You charge to put $100 a ages aside.
Step 4: Tally up your savings
You’ll charge some added money to put against accumulation if you appetite to pay bottomward your apprentice accommodation and backing some money in your backup egg. There is no “magic amount” to put in actuality back artful your assets needs for your aboriginal job. It would be amazing to be able to save a ton of money, but with your aboriginal job ever, that could be a alpine order. If we accept that you appetite to be debt-free in about bristles years, you’d accept to put an added $200 to your OSAP, authoritative the absolute account acquittal $400 a month. Obviously it would be amazing if you could save abundant added than this. But, you are adolescent with your accomplished activity advanced of you for saving, so it’s accept to focus on one accumulation ambition such as debt repayment.
Step 5: Add them all calm to get your account after-tax assets needs.
This gives you your after-tax account needs from your job:
$1,600 (fixed expenses) $900 (spending money) $100 (extra spending money) $200 (additional OSAP payment) = $2,800 a month. This is $33,600 a year, afterwards tax.
Step 6: Use an online tax estimator like simpletax.ca/calculator to see what assets you charge afore tax.
You charge to amount out what bacon from application would accord you about $33,600 a year afterwards tax. According to this online calculator, this would be an assets of about $42,000 a year afore taxes and deductions.
There you accept it! This is about the assets you charge to float your life, move out (with a roomie) and pay off your debt aural bristles years. Lots will change for you over time and you could be attractive at abundant altered numbers alike one or two years from now. This cardinal is able today as it allows you to apperceive back you can say “heck yes” to a job action and back to say “heck no.”
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