Is it financially beneficial to move to Canada on PR? Let's see..

I am very excited to write about my favourite subject after quite some time. The Canadian PR and challenges faced by new comers.

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DISCLAIMER (added as an edit): Some of us do have a habit of focusing on the challenges we face/ read. It is not bad to be aware of the challenges. Let's just not be biased by them. Since this article is focusing on the most difficult challenge around finances, doesn't mean we pick it up and call it as 'all is bad'. Don't be dissuaded. There are good things of course about moving to Canada and I have written all about it in my other articles as well. This article in only to help you prepare better for this big move.

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This article will benefit people who are confused about making the big move to Canada especially on the subject of evaluating the financial worth of this whole exercise.

Before the move, figuring out the why, who, when, where, what and how is all good. It happens over time with planning. Every candidate goes through a phase where their brains are on an overdrive trying to figure out the nuts and bolts of moving to a new country. I have written several articles on some of these aspects. You can find them on my LinkedIn profile. Additionally, while applying or even when you receive the PR approval, there will be one doubt in your head asking "Is it worth it?" or "I hope it is worth the while!"

To ease out this part of the question I will share some of the things I have learnt in the last ~three years that I have lived in this country. I will circle this article around thoughts like - Will I find a job which pays well? What is good enough to sustain? Will I be able to save enough? Will I be able to afford a car? Will I be able to buy a house? Was I better off in my home country?

Let's dig into it

1. Income Parity

To understand this I must introduce you to a term called PPP i.e. Purchasing Power Parity. Simply put, it means how two currencies compare to each other in terms of cost of living. This might get a tad bit complex. Dedicate some extra time to read it twice if you are reading it for the first time. So let me explain with an example:

Based on current Forex rates:

• 1 USD = approx. 1.35 CAD or 70 INR (Indian rupees)

However according to "PPP" (2018):

• 1 USD = approx. 1.24 CAD or 18.18 INR (Indian Rupees)

That means according to PPP = 1 CAD is approx. = 14.5 INR

I have taken INR as an example since I have a lot of connections on LinkedIn from India. (To find the PPP conversion for your currency click here: https://data.oecd.org/conversion/purchasing-power-parities-ppp.htm)

For people who are reading this for the first time, don't get confused. Let me explain further with an example.

Based on current Forex rates:

If I buy a packet of bread for 2 USD, it should cost me 2.7 CAD or 140 INR. 140 INR for bread seems off!

However when we take into account PPP:

The same packet of bread for 2 USD would cost me 2.5 CAD or ~ 40 INR (which seems approx. right).

Apply this to a majority of your purchases.

Now to simply explain, this difference exists because the cost of living in developed countries is higher. Products and services cost more in developed countries. So let's take this example further to salaries, expenses and savings:

If you were to make CAD 4500/5000 per month (avg. for a post graduate) it would be similar to making ~INR 65,000/75,000 a month in India.

So.....if you were to make and spend this money in your home country then your move may not make much sense financially. That is in case you are netting more than ~70,000 INR a month. Additionally, increments and bonuses in your home country could be envious. You may just be able to save sufficient while living a similar lifestyle.

Was this dissuading? Don't withdraw your application just yet and let me finish.

If you are planning on moving back to your home country, planning on making an investment in your home country or need to send money for family maintenance, then of course you will be converting the money at the Forex rate and not PPP. Which now makes absolute financial sense. So setting your priorities is critical, before moving to a new country.

2. Taxes. Oh Canada!

I am sure you've already heard about free education and free healthcare in Canada. Isn't "free" lucrative enough? Well, everything comes at a cost (cliché). And that cost is called Taxes. Taxes in Canada are pretty high. Averages around 30-35% and can get as high as 45% for certain income brackets. And do not forget HST that is applied on almost everything you buy. That is paid from your savings. So overall, taxes eat away almost half of your personal income.

3. Cost of living

By living a modest lifestyle during your initial years, you'll be looking at expenses in the range of CAD 2500-3500 a month.

Now this is assuming that you get a rented apartment/ condo and a car to commute. There is an affordable housing crisis right now in Toronto and surrounding areas (collectively called GTA). 1 or 2 bedroom condos/ apartments are ranging anywhere between CAD 1500-2500 per month. This is insane. (I am not even looking at downtown Toronto).

Next stop, car: a hatchback/sedan will put you back by you approx. 250-400/month. As a new license holder don't be surprised if you need to shell out CAD 250 or even CAD 500 a month for insurance in GTA. And parking in the range of CAD 75-100 a month. And Gas of course. So a car could gobble up ~ CAD 1000 a month.

Hmmm.

Thinking of not buying a car then? Well, public transit can be exhausting and expensive as well. Depending on where you live.

And no one survives without eating. Add approx. CAD 200-250 per month for a single person to your expenses (depends on your eating habits).

Considering lower side of things, so far you are down by CAD 2500 to the least. So if you are single and net 5,000 a month, you'll save 2000-2500 a month. If you save more, it's party time.

You could make it better, by sharing their apartment/condo with a roommate. And people who are married can add a whole salary to their family savings.

So now, let's see what happens if you are single and want to buy a property..

4. Property Market:

If you are thinking long run, then you may be considering buying a property of your own. Buying a property in a market like Vancouver, Ottawa, Montreal or Toronto is getting out of reach for common people. I said common people. For those making tons of money, put your swords down please. To be able to buy a property you need to save at least 5% of the property value and to avail the maximum benefits while not buying 100% in cash, you need to save 20%. A condo averages around 400,000 CAD and a semi-detached house averages CAD 750,000/800,000 in GTA. That means you need to save something in the range of 60,000 to 175,000 if you want to go 10-20% down payment.

So if you are saving CAD 2000-2500 a month, you'll need more or less 4-5 years to be able to save only for a down payment+lawyer fees+property tax+the list goes on. And all while living a modest lifestyle. So 4-5 years of hustle is not too bad to be a home owner. You find that worth it or not is what you need to evaluate. My advice is - just be sure to not be House Poor. (You have a house. Sure! But don't have money to live a life or for emergencies).

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So all in all, evaluate considering the PPP concept along with your financial goals, motive of moving to Canada, and your long term life goal. I hope this will help you a tiny bit in your decision making process.

Let's not discount the good things that this country will bring in your life. Free education for kids, free medical facilities (I won't deny that this comes with some challenges), good overall infrastructure, clean environment, work-life balance to mention to the least. There definitely are good things that come along with moving to Canada and I have written all about them in my several other articles.

This article is not to critique the Canadian way of personal finances or the Canadian financial system. I am simply pointing out the stark differences that you'll experience when you move to Canada. And what I mention here are my personal experiences. Nothing set in stone.

It is better to be cognizant of what you are getting into on the financial front.

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Here are the links to my earlier articles:

• What I learned about finding a job as a Newcomer to Canada
• Research the job market before coming to Canada on PR
• Build an amazing LinkedIn profile and Beyond
• What I learned about Coffee Interviews as a Newcomer to Canada
• A newcomer's experience of transitioning into the Canadian work culture !