The latest Canadian census showed that a growing portion of Canadians are preferring to live single rather than being married or living with a significant other. This probably explains the lack of condo options in popular cities like Toronto and Vancouver where one bedroom condos dominate the city skylines, yet availability remains extremely low.
I compare this to the same phenomenon where there are plenty of cars on the road, but the majority of them contain just a single person. OK, I get it. We all want to be independent. We each have our own personalities and we want to do our own thing. It sounds selfish, but we’re not going to openly admit it.
With the freedom of living alone comes the drawback of having to shoulder a larger financial cost. With no one to share the living costs, the burden of all the expenses comes down to the single individual. It’s no wonder that so many young individuals are complaining that everything is expensive.
Divide and Conquer
One of the many benefits of living with a partner is the ability to split costs. This can have a huge impact on monthly financial budgets. Just imagine how much more one could do with an extra $800 in the pocket by splitting the $1600 monthly rent with another person.
It’s not only the monthly rent or mortgage that can be split, but the other household costs can be as well. How many times does a single person buy food in bulk just to throw it out because she can’t finish it? And how about all those deals you can get on food that are ignored because the portions are too big for one, but perfect for two?
Our society and the marketplace provides more advantages to families by offering them discounts on bulk purchases. More often than not, the more you buy, the greater the savings. Think Costco. Being solo means the average cost for meals is generally higher because buying small portions incurs a penalty. It’s almost discouraged by our free market. Ever notice the price of 3 bags of milk is cheaper in volume than the 1L carton? Yeah, living on your own sucks doesn’t it?
Utilities and other costs can also be saved when living with another individual. Since living space is shared, some of those costs can be shared as well. When you turn on the lights in the living room and kitchen it benefits both people now, not just one! Not only are we saving money, but we’re saving the environment too. David Suzuki would be proud of you. Ditto for heating and cooling bills.
You Make More Than A Single Person
What I hear a lot from people is that they don’t make enough money for what they do. I try not to hold in my laughter because these are professionals making decent money and well above the average norm. But why do these people feel so stressed? The bills of course. It hurts even more when you’re living alone in a condo with a big fat mortgage.
As an individual that might be grossing $70,000 a year, the take home pay after taxes is $55,579 in Ontario. That isn’t bad at all, but what happens when you you put two people together with much lower incomes in the same household? Well two people making $35,000 a year, that equates to the same gross amount as the individual, with taxes deducted would take home $60,484 a year. That’s nearly $5,000 more annually than the single income individual or $400 more per month. See how much happier a dual income family can be? The couple can afford the same condo, but also have more money to spend than the individual.
This happens because those with higher incomes are taxed at a higher marginal tax rate. In order to achieve the same cash flow as a couple earning the same total gross amount, a single person would have to earn more. In this case almost 10% more or $77,000.
It’s not only income tax where couples gain an advantage, but there are many tax breaks that couples enjoy over single individuals. Legally joined couples have it great because of the ability to use spousal RRSPs. In this way, the person with the higher income is able to make contributions for the other person, but the amount must be claimed against their own RRSP limit. The lower income person can then withdraw the money 3 years later at a lower tax bracket. This type of savings can only be accomplished with two people.
I’ve already written about the benefits of tax planning ahead of time when thinking about taking maternity leave or having one person taking leave for education. The above example is almost similar to that technique.
On top of the pseudo income sharing using RRSPs, there are various tax credits that can be shared like education. If your significant other goes back to school, the person that is working can claim the tuition tax credits to reduce her tax bill. Transit expenses can also be combined and passed to the higher earning person to deduct against her taxes.
Better Standard of Living
There’s no doubt that pooling resources makes life easier to manage. Especially in expensive cities like San Francisco, Toronto, Vancouver or London. The ability to share space with one dwelling reduces overhead cost greatly. Having another person shoulder a bit of the financial load also makes life a little less stressful. This all leads to a bit better standard of living overall when having someone live with you. Yet the trend is heading in the other direction.
It seems we value our own independence more than sharing our lives with someone else, but make no mistake joining forces can be a powerful way to achieving financial independence much faster. Just look at the folks over at Millennial Revolution, I’m sure their goal of one million dollars would have been much harder had it been one person doing all the saving.
It’s not to say that you should go out and try to hook up with the next person that you see, but certainly the financial benefits of having a second income in the household cannot be discounted.