Lifestyle | Can she earn less at 28?

Sarah* is 28, so she has her whole future ahead of her. A future that she already sees differently after four years on the job market.

Posted at 6:00 am

Marc Tison

Marc Tison
The press

The situation

“I don’t like my job and would like to know if I can reduce my salary,” says the young woman who works in information technology. “My dream is to work on an organic farm near where I live, like I did when I was a student,” she explains. That really turns me on. I want to know if I can quit my office job. »

She would be spoiled for choice: several of her friends own farms in the region where she lives. On the other hand, she would have less leeway with the salary, which she estimates should be around $15 an hour. She currently makes $46,000 a year.

Sarah and her partner Maxime bought a home in 2018, paying $200,000 and still debting a $130,000 mortgage on a $770 monthly payment.

Maxime’s situation, both in terms of income and debt, is almost identical to Sarah’s, “so all of our joint expenses are shared equally.”

As a freelancer, Maxime makes $45,000 a year. Each has about $6,500 in student debt and about $3,500 on their line of credit.


Sarah, 28 years old

Salary: $46,000
Student debt: about $6,500
Credit Line: $3600
TFSA: $3,000

Maxim, 39 years old

Independent Revenue: $45,000
Student debt: about $6,000
Credit Line: $2,000
Bought in 2018 for $200,000
Mortgage balance: $130,000
Monthly payment: $770
Market value: approx. $350,000

None have an RRSP.

“Breaking news, I’m eligible to contribute 2% of my salary and 2% of my employer to an RRSP starting with the next paycheck,” she told us via email after our interview.

She patiently raised $3,000 in a TFSA.

“Ever since I was little these were Christmas gifts I don’t want to touch to take a trip sometime, hopefully next year. »

She says she is willing to sacrifice some of her income to access “a slightly simpler way of life”. However, she acknowledges that working on a farm is very likely to be seasonal, likely accompanied by another winter job. Although “in an ideal world, I would have the winter to relax and take my vacation,” she recalls.

Things get complicated when she adds that she wants to “start a family soon.”

Shortly ? Maybe in six months to two years, she says. “In order to have a child, I think I have to have a job that I love. »

For Sarah, happiness is undeniably in the meadow. Hence his question: “Can I afford it?” »

The answer

Unfortunately, the size of Sarah’s projects runs counter to her income.

“Financial decisions have to be made,” says planner and tax expert Benoit Chaurette, consultant at the National Bank’s Private Wealth Management 1859 competence center.

“Assuming she works 40 hours a week all year round, her annual income would drop to $31,200,” he calculates.

This income could be even lower if the job is seasonal. Can Sarah forego gross income of around $15,000 a year?


Benoit Chaurette, Advisor to the Competence Center for Private Banks at the National Bank 1859

“She doesn’t save, so probably not, with the current lifestyle,” replies the planner.

The only way out: reduce expenses and change your lifestyle.

However, Sarah’s program is ambitious: winter break, travel, starting a family, renovation…

Our expert states that “the key to a successful career change lies in the development of a comprehensive budget”, based on which the couple can assess the feasibility of the future farm worker’s project.

Both can already improve the current situation.

Good news, the mortgage situation is excellent with a monthly payment of $770, he points out. With interest rates rising, Sarah should prioritize repaying her line of credit.

Maxime’s case is different. As a self-employed person, he was able to set the savings strategy in motion. It consists of counting your labor costs against a business line of credit to use the money thus freed up to repay your personal line of credit.

“Because the interest paid on a loan used in the course of business is tax-deductible, Maxime will be able to gradually convert a non-deductible liability into a tax-deductible liability. »

There is no rush to expedite student loan repayments, the interest on which is a tax credit.

On the other hand, Sarah should take the chance to contribute to her employer’s RRSP group, to which the latter contributes 2% of her salary – a “free” RRSP contribution, the scheduler argues.

Otherwise the path looks difficult. Benoit Chaurette estimates that Sarah is unable to complete her project at the moment. It’s just a deferral, though, and he outlines some budgetary milestones to get closer to the goal.

“If Sarah can’t save, it’s a sign that she needs all of her income to live well,” he notes. Sarah must first start cutting back on her spending to create surpluses that will allow her to pay back her margin and free up some savings. “She will thus be able to see what reduction in this income she can accept without affecting her rhythm of life. »

The couple should also build an emergency fund, ideally equal to three months’ income. Aside from the fact that these efforts are already demonstrating strict fiscal discipline, the fund will facilitate job transitions “by reducing financial burdens”.

In addition, Sarah and Maxime have to keep a detailed budget. In this way, they can see which expenses they could more easily reduce as part of a reduction in income.

But with reduced income, what place would be left for old-age provision?

The answer lies in demonstrating that the couple will be able to sustain a modest lifestyle.

“For a household with low living costs, a large part of the old-age provision can be covered by the statutory pension insurance. [PSV, SRG et RRQ], emphasizes Benoit Charette. This is even more true with recent improvements to QPP perks. »

Once the debt and mortgage loan are paid off, part of the budget surplus can be used for retirement.

“With a house paid off, government benefits and some savings, the couple could retire at 65 with confidence. Provided, of course, to maintain a simple way of life. »

In short, Sarah must first plow and sow to reap a career change.

* Although the case highlighted in this section is real, the first names used are fictitious.

Are you planning a project that requires a wise use of your money? Do you have financial problems?

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