A traveller looking to pay down some debt
In our Smart Money series, #MillennialMoney, we ask people living in the Greater Toronto Area to record every penny they spend in a typical week. Then, using tips from a financial adviser, we challenge them to cut their spending the following week so they can save more money. Will they fail or succeed?
Elena has been out of work for months. After being laid off due to the COVID-19 pandemic, she’s been surviving off $2,000 monthly from the Canada Emergency Response Benefit, but it hasn’t kept her from indulging.
In the first week of the Millennial Money exercise, this 28year-old part-time server had already spent more than $700 of her benefit money. This includes high-ticket items like a Botox appointment and purchases at the Ontario Cannabis Store.
“I know I’m terrible with money, but the mental-health stresses from the pandemic really push me to buying things as it is a coping mechanism,” she said. With nothing to do day to day, she also needs to fill up her time, which includes an occasional patio dinner as Toronto is in Stage 2 of reopening.
Living with two other roommates in a basement apartment near Kensington Market, she pays $677 in rent. But even with her relatively low housing costs, she still has $16,000 in debt accumulated through travel and other impromptu buys. One of her goals is to pay off the debt.
One thing Elena wanted to point out? Unlike other millennials profiled in this Star series, she doesn’t aspire to hold down a career or buy a home — at least anytime soon. “I save my money so I can travel and see the world.”
Outside of the pandemic, she’d work the late shift four nights a week, which starts after 5 p.m. and goes until 3 a.m. “Thankfully, (my meals) are free when I’m at work,” she said. On nonwork days, she usually buys food through Uber Eats.
As for saving goals, other than paying off her credit-card debt, she wants to save another $20,000 for travelling for half a year.
We asked Elena to share her daily expenses to get a better idea of her spending habits.
The expert: Jason Heath, managing director at Objective Financial Partners Inc., on Elena’s impulsive spending:
> Elena is embracing the anti-FIRE movement. Financial independence and early retirement are not on her priority list. She figures the world might end earlier than expected and wants to live for today so she can be happy.
> Conventional financial advice focuses a lot on saving and can be highly critical of those who do not. There needs to be a balance. Even more importantly, financial decisions are personal and people can do what they want with their money. So
I’m not going to tell Elena she’s wrong with her money choices. I am, however, going to raise some concerns.
> Elena is receiving the CERB right now, but that program is scheduled to end by Oct. 3. The maximum benefit is only 24 weeks though, so many early CERB recipients could see their coverage exhausted by September. I’m optimistic for workers like Elena who are working in the restaurant industry, but I think she needs to plan for the chance that her income may not be as high in the coming year as it has been given the ongoing risks of COVID-19.
> Elena’s rent is pretty modest at $677 per month, so if she has accumulated debt with such a modest housing cost, and she is hoping to spend more money on travel, that limits her future housing prospects.
> She mentions a goal to save up $20,000 to travel once she can work again. I think travel is a better indulgence than material goods. But with $16,000 of credit card debt, I would definitely be aiming to get that paid down and build up an emergency fund.
> I think Elena’s passion for living in the moment is great, but if she forgoes the future for too long, it can be tough to play catch up later.
How she thinks she did: “Unfortunately, I don’t think I did much better this week, as most of my money that’s wasted is spent on transportation or food,” Elena said. One thing she’s proud of? Taking the TTC more, though she misplaced her wallet and was unable to pay every single fare.
Also, because she didn’t have her wallet, she had to order more food on Uber Eats or other delivery services as she used her phone to get food.
Finally, she said she tried to follow Heath’s advice on not buying gifts while unemployed but, because of a past commitment, had to pay a couple hundred in that area.
Thankfully, because of the pandemic, she’s saving on going out. “I’ve spent up to $200 on a full night out with friends easily, so I’m glad COVID-19 at least prevents that while I am unemployed.”
Take-aways: “A takeaway from this is that I’m definitely not wise with my money,” Elena said. While reading the advice, she definitely felt that she needed to re-evaluate her life, but during this dark time it’s been hard.
“I learned I never say no to instant gratifications, but without them I’d probably have depression during these times, so it’s a give and take for now to keep my sanity,” she said. Are you a millennial living in Toronto or the GTA and need help with saving your money? Be a part of #MillennialMoney and email