■ Millennial Money: After a family emergency, Chele is hoping to turn her financial situation around.

In our Smart Money series, #MillennialMoney, we ask people 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 fai

It’s been quite a rough couple of years for 34-year-old Chele, a manager in financial services making $45,000 a year. Although she was fortunate to keep her job in the pandemic, a family emergency from 2019 and lending money has landed her $100,000 in debt.

“My ex-husband borrowed money on my name which I’m paying right now,” she said. Luckily it’s interest free, and she’s gaining support from family and friends toward these payments.

It’s taught Chele to be extremely frugal with her money, only buying necessities. She also shares a space with three roommates in North York, paying $700 in rent per month.

On a typical work day, Chele drives into the office. She won’t always pack a lunch, but will choose takeout options that are affordable. “I will buy a $5 sandwich from Tim Hortons if I need to and other snacks,” she said.

On the weekends she’ll spend most of her time at home or go for an occasional drive with a group of friends — being mindful of her money.

Her largest monthly expense goes to her car, her main mode of transportation. Insurance and car payments set her back $810 a month, even more than her rent.

The main goal for Chele is to first pay off the $100,000 in debt, which went toward the survival of her family, she explains. “We went through some serious medical issues in the year 2019 back home in the Philippines,” she said.

Her second goal is to find a way into eventual home ownership, knowing that path may be long.

We asked Chele to share a week of spending to get a better idea of what she can do now to plan for her future.

The expert: Jason Heath, managing director at Objective Financial Partners Inc., on Chele’s situation:

Chele is in a pretty challenging position. Her income just covers her expenses, so she is simply treading water. However, noticeably absent from her budget are the payments on her $100,000 of debt.

I think Chele could benefit from a second opinion from a licensed insolvency trustee. If she still has $100,000 of debt after a consumer proposal, that is a lot to pay off at her modest income, which can barely cover her expenses. Even if the balance has no interest payable, that is a lot of debt to pay off with the help of friends and family over the next five or more years. If they would effectively give her $100,000 to pay it off, that same money could go a long way toward her financial future if she declared bankruptcy, despite the negative implications of going bankrupt.

If she chooses to proceed with paying her debt off with lots of help from her generous loved ones, she could start building a down-payment fund but would need a minimum five per cent down payment. A lot can happen in the next five years though, with her job and in her life, that could make home ownership easier.

I think Chele needs advice from an insolvency expert about which route — continuing with the current consumer proposal or declaring bankruptcy — will help her achieve her long-term goals sooner.

Her ex-husband borrowed money in her name and now she is stuck with the debt. This is an important lesson for anyone incurring debt jointly or who is a primary credit cardholder or co-signer for a spouse, partner, or child: You are responsible for the full debt if the other person does not pay.

Chele’s rent is relatively modest at less than 20 per cent of her gross income, which is great. However, her car payments, insurance, and gas total more than 20 per cent of her pre-tax income. She mentions that going for a drive with her friends is one of her weekend activities, but her car costs are taking a huge bite out of her cash flow.

Hopefully, a debt-relief option will provide Chele with a path to financial freedom where she can consider things like home ownership and saving for retirement.

The result: She spent less.

Spending in week 1: $66.79

Spending in week 2: $49

How she thinks she did: “I am 100 per cent satisfied with my budgeting as all my expenses are 99 per cent necessity,” she said, adding that she’s not one to impulse-buy after years of budgeting.

“I haven’t shopped online for more than a year now. My lifestyle is simpler than most of my peers.”

Take-aways: Chele was already aware of the consumer-proposal option Heath suggested to help pay off her massive debt, but because of her current circumstances she isn’t too concerned about it. “Family friends of mine help me here and there and I have flexibility to pay these $100,000 off at my own pace,” she said.

Chele says she will now research further Heath’s advice on building a down payment as her debts decrease.

As for the car, she says it’s something she can’t let go of. “My job wouldn’t be the same without it. I have to go to different locations in a single day and transport business accessories a few times a week,” she said.

Despite the challenges, Chele is still hopeful that she will be able to find a spot in Toronto.

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#MillennialMoney and email ekwong@thestar.ca