Sonia Grossi used to think $100,000 a year was a lot of money. Now that she has finally reached that level of income, it doesn’t feel like much.
She’s not struggling to get by. But getting by is all she’s doing.
“I’m not saving for an emergency fund right now. I’m not putting a lot into my RRSP,” Ms. Grossi said. She is 36 years old, and runs her own leadership coaching business in Toronto.
“I haven’t gone on vacation all year because I can’t.”
The one indulgence – if one can call it that – she allows herself is living alone in a one-bedroom apartment, rather than sharing a home with roommates. At $2,600 a month, her rent consumes just under half of her take-home pay, based on annual earnings that fluctuate between $90,000 and $100,000.
A $100,000 income has long loomed large in the collective imagination as code for having made it. YouTube, TikTok and countless blogs tout strategies, tricks and “underrated jobs” that will, supposedly, lead to the coveted six-figure milestone.
By many metrics, $100,000 a year is still a lot of money. It’s more than what roughly 90 per cent of Canadians declared as their annual incomes in 2020, according to the latest available data from Statistics Canada. But when today’s basic living costs are taken into account, there are many parts of the country where a low-six-figure salary no longer goes very far.
If Canada’s affordability crisis was an iceberg, $100,000 earners would be the tip of it. Their presence among the ranks of those feeling the financial squeeze is an indication of a much larger mass of Canadians with lower incomes, who are facing far more significant struggles.
In the run-up to Thanksgiving this year, for example, Toronto’s Daily Bread Food Bank said its member food banks had received more than 270,000 visits since August, a 51-per-cent increase compared with the same period last year.
For those with low-six-digit paycheques – particularly those without children – expensive groceries are merely a nuisance. The real issue is housing. Ask a $100,000 earner how they’re doing money-wise, and the answer hinges, first and foremost, on the cost of keeping a roof over their head.
With good financial discipline, $100,000 earners with contained shelter costs describe regular savings, annual vacations and impeccably paid-off credit card balances, even after more than two years of elevated inflation and a spike in interest rates. But for those who have to make oversized rent or mortgage payments, inflation is tightening already tight budgets. Getting by means fussing over the costs of things such as medicines for sick pets. And it means struggling to add to retirement nest eggs, or puzzling over the costs of having children.
In Vancouver, the average asking rent for a one-bedroom apartment reached $2,976 in September, according to the rental listing platform Rentals.ca. In Burnaby, B.C., it was $2,700. In Toronto it was $2,614, and in nearby Oakville $2,502. After heating and electricity bills, these prices would mean housing costs equivalent to more than 40 per cent of the net pay of a $100,000 earner. The Canada Mortgage and Housing Corporation, the country’s housing agency, recently described housing that consumes this much of an average household’s income as unaffordable.
The numbers look equally disheartening when it comes to homeownership. In markets such as Vancouver, Toronto and Mississauga, buying a typical house has long required a household income far above $100,000. But at current interest rates, an earner at that income level wouldn’t qualify for a mortgage even on an average-priced condo. And that’s assuming they had the financial wherewithal to save for a 20-per-cent down payment.
In Halifax, a low-six-figure earner might still get a mortgage to buy a flat. But real estate values have climbed so much that a buyer like that would likely need nearly a decade to save up a 20-per-cent down payment, assuming their income rose in lockstep with home prices. And that’s despite the fact that property values are currently down compared with their 2022 peaks.
It all comes down not just to where Canadians live, but also whether and when they were able to lock in their shelter costs.
In Edmonton, one of Canada’s most affordable larger cities, Liam Hudson has no trouble fitting all his expenses, aggressive savings and some travel into his household budget. The 32-year-old civil servant, who earns $106,000 a year, lives frugally. He drives a second-hand 2006 Buick Rendezvous. He tracks his spending meticulously. And he has made it a habit to put $250 every other week into his RRSP and another $100 into a tax-free savings account, even though he already has a generous government pension.
Mr. Hudson said he couldn’t remember the last time he had a carryover credit card balance. And yet he’s still able to afford annual vacations. He usually travels to Victoria to see a close friend once a year, and likes to break up winter doldrums with a trip to somewhere such as Los Angeles or Mexico.
It helps that Mr. Hudson is laying out just $698 every two weeks in mortgage payments and property tax for a spacious condo in a heritage building close to downtown. He bought the place in 2021, for $288,500. Even with some exceptionally high power bills last winter and summer, as Alberta struggled with a host of energy-related challenges, his housing costs remained around 30 per cent of his net income.
“I’m very, very lucky,” he said.
It’s a sentiment that Trent Chappus, a 26-year-old in Montreal, knows well. Mr. Chappus, a software developer whose income recently crossed the $100,000 line, was able to buy his first home – a condo of just under 600 square feet in the vibrant neighbourhood of Saint-Henri – without any help from family.
Mr. Chappus, who is originally from Chatham, Ont., said it’s a feat that has left many of his friends back home dumbfounded.
“They’re amazed that I’m buying a place,” he said. “My parents’ friends are amazed as well.”
What seems like a financial miracle to those watching Mr. Chappus from Southwestern Ontario has a lot to do with a track record of healthy earnings since soon after graduation. It also has to do with Montreal’s relatively low housing prices. But the city’s affordable rents also helped, Mr. Chappus said.
He lived in Montreal for more than three years in rental housing where his monthly payments ranged from less than $1,000 to $1,500, with utilities included. This allowed him to save between $1,000 and $1,500 a month. He has no plans to move back west any time soon, he said.
Still, even in pricier markets – such as Southern Ontario, B.C.’s Lower Mainland and the Halifax-Dartmouth area – there are $100,000 earners who are doing fine. Usually, it’s because they have been able to insulate themselves from soaring housing costs.
In Bowmanville, a town of 57,000 about a one-hour drive east of Toronto, Stacey Neilson said her income of just over $100,000 feels “pretty comfortable.”
The 44-year-old registered massage therapist, who also teaches at Centennial College, has no anxiety about paying her bills or saving for retirement and big-ticket expenses. She’s planning a trip to India and Nepal in December.
Ms. Neilson bought her one-bedroom condo in 2019 for $300,000, a price that was under asking. She also had the foresight to refinance her mortgage in 2020, after interest rates dropped during the pandemic. She secured a low 2.9-per-cent fixed rate that won’t expire until 2025.
While she expects her mortgage rate to rise considerably upon renewal, her relatively low housing costs have allowed her to direct spare financial firepower at her mortgage. She has switched her payments from monthly to every other week, which allows her to make the equivalent of 13 monthly payments every 12 months and shrink her debt faster. And she has been further reducing her balance with lump-sum payments.
One-bedroom units in her condo building are now selling for $500,000, even with mortgage rates in the 6-per-cent to 7-per-cent range. It’s a price tag she said she “definitely” couldn’t afford as a single earner.
“I don’t know how young people do it,” she said.
Even for people who rent their homes, housing market timing is a crucial financial variable. In Toronto and Vancouver, asking rents on available units were growing rapidly in 2019, as high housing prices forced growing numbers of would-be homebuyers to keep renting. That changed with the onset of the pandemic, when advertised rents in those two markets and other larger cities dropped. University and college students were going home to their parents, immigration had virtually frozen and many tenants were leaving downtown cores.
Then, as life went back to normal, rents shot up again, not just in Toronto and Vancouver, but also in smaller centres such as Victoria, Guelph, Ont., and Halifax. Today, this means the difference between a manageable rent and an impossibly high one is often a matter of whether the lease was signed during a rental-market low or a high.
In Vancouver, 38-year-old Matthew Poirier and his partner aren’t living large. For $2,000 a month, the couple shares a 500-square-foot one-bedroom apartment that also serves as an office for Mr. Poirier, whose job as a business analyst is fully remote.
Mr. Poirier earns $112,000 a year and his partner, who is pursuing a PhD in botany at the University of British Columbia, makes $28,000 a year as a teaching assistant – money she uses in part to cover tuition. The rent is low enough that there’s money left over to save up for a down payment, but only if the couple is extremely careful with the rest of their spending, Mr. Poirier said.
“If we just sort of automatically went through life, you know, ‘Oh, let’s go out to eat. Oh, I need a new sweater, let’s go buy a new sweater.’ There wouldn’t be any money left,” he said.
But Mr. Poirier is acutely aware that their rent is “a great deal” by Vancouver’s current standards. The couple signed their lease two years ago, when the city’s rental prices were briefly in decline. Today, the average rent for available one-bedroom apartments is nearly $1,000 more.
In Toronto, Shannon Lee Simmons, a financial planner and the founder of the New School of Finance, is well acquainted with such housing-related disparities among her clients.
“Six figures can still go pretty far if your housing is manageable,” she said, speaking of the situation in the Toronto area. “The people who are signing leases in the last five years, especially the last three, or people who have bought houses in the last three years – this is where I feel like the pinch on $100,000 is being felt.”
It’s easy to see where the squeeze comes from. The price of a typical home in Toronto shot up by nearly 60 per cent between March, 2020, and the same month in 2022. And while home prices have declined by nearly 15 per cent as of September of this year, higher mortgage costs have wiped out any affordability gains. One-bedroom rents, in the city, meanwhile, have increased by more than 30 per cent since September, 2020, according to Rentals.ca.
For those who didn’t manage to dodge those spikes in home prices and rents, life can be financially fragile when outsized housing expenses are coupled with widespread cost-of-living increases.
In Toronto, David Cameron, who is 52, is trying to rebuild his retirement savings. Until recently, he worked in marketing in the auto industry. The pandemic disruptions that upended that sector – including a precipitous drop in vehicle sales in 2020, and prolonged supply chain snarls in the following years – capsized his career, as well. Four spells of unemployment wiped out his cash savings and left just $5,500 in his RRSPs.
Today, Mr. Cameron has switched industries and is back in a steady job with a salary of just over $100,000 a year. He calls himself “fairly fortunate,” because he spends just under $2,300 a month to rent the spacious first floor of a house. But after he finishes paying for essentials there is not always enough left over for him to put money back into his retirement accounts, he said.
“It always seems that there’s something that comes up that is preventing me from putting more into savings, or more into investments,” he said.
Lately, that something has been medical costs for the older two of his three dogs. Before the pandemic, a walk-in vet exam was around $100, Mr. Cameron said. Today, he pays around $150. And the cost of pet drugs has increased as well. Recently, he paid almost $600 to cover a medical exam and three medications.
“I’ve had dogs my entire adult life. I’ve never put up the money for vets that I have since the pandemic,” he said.
For $100,000 earners with gargantuan shelter costs, it’s also getting trickier – and is sometimes now impossible – to manage another staple of a financially comfortable life: owning a car.
Lofty vehicle prices and high interest rates mean Canadians are now paying an average of $813 a month to finance a vehicle on a seven-year loan, the most popular auto loan term, according to data from J.D. Power & Associates, a data analytics and consumer intelligence firm. That’s up nearly $200 from the same period in 2019.
The average payment on a four-year lease, meanwhile, has increased by nearly $300 a month, from $604 to $903.
Add up rent, an auto loan payment and grocery costs for a $100,000 earner in Vancouver and a startling financial picture comes into focus. At current market rates, the average rent for a one-bedroom and the average auto-loan payment would come to around $3,790. Food costs are hovering between $310-$350 a month for a single woman or man between the ages of 31 and 50, according to estimates in the latest edition of Canada’s Food Price Report, an annual gauge of food price trends compiled by four Canadian universities.
The total is roughly $4,100 a month, or about 70 per cent of the take-home pay of someone making $100,000 a year in B.C.
Of course, most urbanites can easily do without a car. But for people who rely on cars to commute into city centres, the swelling costs of ownership are eating into the savings that normally come from living far away from a downtown core.
Even buying a used second-hand vehicle – which in the past has meant big savings compared with buying new – isn’t working so well these days. The average listing price of a used passenger vehicle in Canada is currently more than $38,000, a number buoyed by strong demand and low inventory, according to Canadian Black Book.
The challenges facing Canadians contemplating car purchases are similar to those facing many who are house-hunting right now, according to Ms. Simmons, the financial planner.
“I think often people who are in a lucky position with timing will confuse their success with savvy,” she said. “And it’s not. It was just luck. Just timing. Luck you got in before everything skyrocketed.”
The timing looks particularly awful for young Canadians who are trying to strike out on their own. But the issue goes well beyond the generational stereotypes, which usually pit younger people against more financially secure Boomers.
Owen Winkelmolen, the founder of financial planning firm PlanEasy.ca, in London, Ont., said sky-high rents are forcing some of his clients who earn around $100,000 and are nearing retirement to re-evaluate the sizes of the nest eggs they’ve been saving.
Lifelong renters who have been living in the same homes for two decades or more are wondering what would happen if they were forced to move and sign new leases at market rates, he said.
Similarly, unexpectedly high mortgage rates are forcing some older homeowners to reconsider their retirement plans.
Another common source of housing-related financial pain is a divorce or breakup, Ms. Simmons said.
She often sees couples, who together had no difficulty paying housing costs, break up and be thrust into the fray of the rental market, she said. Even if each partner earned $100,000, she said, basem*nt apartments could turn out to be all they can afford individually.
“They used to live aboveground and now can’t afford that,” she said.
If life transitions can expose Canadians to unmanageable housing costs, impossibly expensive shelter can also force them to delay some of those transitions.
Paniz Ghazanfari and her husband pay around $3,700 a month to cover the mortgage, property taxes and utilities for a condo in the Toronto district of East York, which the couple closed on a few weeks ago. It took more than two years of house-hunting, nine failed offers – Ms. Ghazanfari said she shed tears for each one – and financial help from both sets of parents for them to buy the one-bedroom condo, in a building that is still partly under construction.
The cost is manageable for them. Ms. Ghazanfari, who is 31 and the couple’s primary earner, currently makes a little more than $100,000 working as legal counsel for a non-profit. Her husband works at a startup. Both are likely to see their earnings grow. “I’m very privileged to be able to even say that,” Ms. Ghazanfari said.
And yet, she can’t fathom being able to buy a larger home anywhere close to Toronto.
“I have no idea how we can raise one or two kids in the future,” she said.
If they ever were to move away from the city it would be to the U.S. or somewhere in Europe, where they have close relatives who are comfortably raising families in big cities, she said.
Even at the top of the affordability iceberg, there is angst.
It was just this past December that Ms. Grossi, the leadership coach, moved out on her own. Living with her parents during her 20s and early 30s allowed her to leave a career in human resources she didn’t love and put a chunk of her savings toward building up her business.
By 2019, she had registered her business and was picking up corporate clients, but that momentum was interrupted by the pandemic. For six months, she had virtually no work. Over the next two years, she hustled tirelessly to bring her company back from the brink, and, by the end of 2022, she was able to sign a lease on her own home.
Her rent is just barely affordable. Still, she said, she remains confident that all her hard work will pay off, and that her income will grow enough that life will finally start to feel comfortable.
But buying a house is an idea she has shelved for good.
“The goal is so far away now that I don’t even want it any more,” she said.
