Millennial Money is a weekly submission-based series that provides financial advice to millennials in the GTA. Read the full series here.
Working as a grocery clerk earning minimum wage and as an UberEats delivery cyclist, 30-year-old Ahmed believes he makes around $ 35,000 a year. “When I tell people I don’t live at home and I also live in downtown Toronto, they really wonder how I do it,” he said. “The reality is I share a basement with two other people.”
His monthly rent is $ 700, and he’s been living in that same spot with the same two roommates for the past four years after trouble at home. “We get along well and help each other out. One of the roommates makes more than the rest of us and treats us to takeout sometimes,” he said, adding that their communal living has always been great, but 1,000 square feet underground doesn’t provide a lot of space.
This became especially worrying for Ahmed throughout the pandemic. “I did essential jobs, indoors at one job, and the other delivering things.” Recently, he was able to get his vaccine at the Rexdale pop-up, but throughout the pandemic he spent money on a lot of PPE to make sure he could keep himself and his roommates safe.
What are Ahmed’s goals? Right now it’s to just grind through the pandemic until he can see the end of the tunnel. Eventually, he’d like to pay off his $ 10,000 remaining student debt for an incomplete undergrad degree, and also $ 3,000 on his credit card.
Also, he wants more independence: “Rent is still crazy in Toronto but one day, I’d like to get my own place to rent. I just don’t know where to start.”
Currently, he saves around $ 200 to $ 500 depending on the UberEats traffic. He also lives quite frugally, mostly bringing food or buying meals for $ 5 at the grocery store where he works for lunch.
On weekends he chooses activities that cost little — bike rides, walking and watching movies with the roommates.
We asked Ahmed to share this weekly spending for a better idea of his costs.
The expert: Jason Heath, managing director at Objective Financial Partners Inc., on Ahmed’s situation:
Increasing your saving or your debt repayment can generally only come from higher income or lower expenses. Ahmed is a great example of someone who is intentionally doing both. He has a full-time and a part-time job, and the extra income combined with his frugal ways is helping him put a dent in his debt.
There are some important take-aways from Ahmed’s story. First off, he’s taken his passion for biking and turned it into $ 10,000 per year of extra income. Biking helps keep his transportation costs low because he doesn’t need a car and bikes instead of using public transit. Toronto is a city that allows this. But it’s also clearly a city that doesn’t allow a grocery clerk to earn a decent living. He needs a part-time job just to afford a three-way split of a basement apartment with roommates. Salaries and rents aren’t going to change overnight, and not by themselves, so his consideration of a move elsewhere is prudent. He could work a similar job at a similar wage in a much more affordable housing market.
Something else that’s interesting when someone summarizes their income and expenses is that Ahmed’s numbers suggest he should be saving almost $ 1,500 per month, but his actual monthly savings are reportedly $ 100 to $ 200. Most people grossly underestimate their expenses or forget the miscellaneous stuff. That’s not a commentary on Ahmed, but an important lesson for anyone creating a budget, especially before moving out on their own or buying a home. It’s important to be realistic.
I love the irony that Ahmed does bike delivery but rarely eats out himself.
Ahmed should focus his extra cash flow on paying down his credit card balance, as the interest rate will be higher and more punitive than his student loans. I wouldn’t be investing in his case. His tax rate is too low to benefit much from RRSP contributions and he’d need to earn a hefty and unrealistic return on his TFSA to be better off than avoiding the credit card interest costs. Increasing your assets or decreasing your liabilities both increase your net worth (net worth = assets minus liabilities).
It’s a shame he’s paying off debt from a half-finished university degree. If he chooses to return, it’s a great time given the current Canada Student Grants for part-time and full-time students. The current part-time grant is up to $ 3,600 per year for a single person with an income of less than $ 31,468, and a pro-rated grant up to $ 63,381 of income. Full-time students get up to $ 6,000. In addition, students who completed high school more than 10 years ago can get an additional $ 1,600 per year from the Skills Boost grant.
Ahmed’s $ 10,000 of bike delivery income is taxable, unfortunately, but he should be able to deduct some of his expenses against that income. Some of his bike repair and gear costs should be tax deductible, but his personal protective equipment (PPE) won’t be unfortunately. The Canada Revenue Agency only allows a potential medical expense tax credit for PPE for those who have a health condition and a doctor’s letter.
The result: He spent more. Spending in week 1: $ 101 Spending in week 2: $ 272
How he thinks he did: This week, Ahmed had an unexpected expense after someone stole his bike lock when he was getting into the house. “I really try to do everything for my bike and it’s my main form of transportation so it really sucks to shell out another $ 100 because of that,” he said.
Other than that, his weekly spending don’t change much week-to-week, he added.
Take-aways: “Wow, this has really changed my perspective,” Ahmed said. First because he was only doing a rough estimate with his savings, he didn’t realize that his current work was bringing in more than $ 1,000 in savings a month.
“This changes a lot, and realistically means I should value the amount more and put it toward my debt so it doesn’t grow as the adviser recommended,” he said.
He also was unaware of the Canada Student Grants as he’s been out of school for more than five years.
“I was studying general arts because I didn’t really know what I wanted to do,” he said. Now, he’s planning to do more research to perhaps get into trades — a shorter program that still come with costs, but would result in much better pay than what he’s doing now.
Also, he’s going to take a closer look at his bike expenses next year. “It is my main mode of transportation and I use it quite a lot for work or even to commute,” he said.
Finally he appreciates Heath’s comment on his self-control: “It’s ironic, after delivering and picking up food so much, sometimes it’s easier to just make something simple at home after working that much. Proud of myself for it.”
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