Millennial Money is a weekly submission-based series that provides financial advice to millennials in the GTA. Read the full series here.
Was the PhD worth all the time and money? That’s what 27-year-old Ashley is wondering as she falls deeper into student debt finishing up her final year of studies. (Editor’s note: Ashley is pursuing her PhD in Psychology)
After years in school, Ashley now owes $ 20,000 in OSAP debt. She’s losing confidence that she’ll be able to find a career quickly after graduation to help her start attacking her payments, especially because she doesn’t have a stable job.
“At this point, I really question whether or not the PhD was worth the time and money required to complete it, especially since I will finish during a global pandemic, which makes for some grim career prospects,” she says.
Living in Guelph paying just under $ 1,000 in rent, she’s been relying on her student loans and the Canada Emergency Student Benefit to stay afloat. Last month, she was relieved to secure a 60-hour contract, paying $ 40 an hour, that she’s been working on from home, but it isn’t permanent.
All these concerns — precarious employment forecasts, the pandemic and her debt — have transformed Ashley into a super saver. She opts for free activities for entertainment, including making use of her local library for reading material. She also sometimes goes to her partner’s parents’ for dinner and walks her dog. In fact, being a first-time puppy owner has brought her joy in this challenging time.
The only impulse spending? “An occasional stop along the way where I’m a sucker for buying snacks,” which doesn’t cost too much, Ashley adds.
Other than family dinners, her eating costs are relatively low, coming in at $ 460 a month because she’s able to work from home for now. That means that breakfast, lunch, and dinner are all prepped at home with one well-planned purchase of groceries a week.
So what are her savings goals? To be honest, she’s not too sure.
“When I do finish and secure myself a job, I’m not sure I fully understand what the next step should be financially, as I hope to afford a home one day but don’t want to do so unless it “makes sense financially — not that I know what that means,” she says.
“The ultimate goal would be to have a bit of land to live as sustainably as the location allows,” she adds.
We asked Ashley to share her frugal spending with us to get a better idea of her financial situation.
The expert: Jason Heath, managing director at Objective Financial Partners Inc., on Ashley’s financial future.
- I’m sure it’s a tough time to find work for a PhD student. Ashley’s 60-hour contract in August will mean she cannot receive the Canada Emergency Student Benefit (CESB) for the final four-week period of August 2 to 29 because the contract is more than $ 1,000.
- I’m sorry to hear she is questioning the time and money spent to complete her PhD. One of the biggest challenges for a high school student or someone in undergrad considering graduate studies is trying to plan a career path. There are 30- and 40-year-olds still trying to figure out what they want to do when they grow up.
- Ashley seems to be doing a pretty good job keeping expenses down. She doesn’t spend much beyond rent and food. I’m hesitant to pick on her pet care costs, but for a university student with tight cash flow, pets are probably something to put off until their studies are complete. Ashley’s pet care is taking up about 10 per cent of her monthly budget, though I’m sure she’d say her dog is well worth it!
- She’s not sure what her next step should be financially, but I think her $ 20,000 in student debt is probably the best place to start. Unsecured loan interest rates tend to range from modest to high. Allocating money to investments over debt repayment would require a high rate of return and low investment fees to be a better option to just paying down debt.
Both saving and debt repayment increase your net worth by either increasing your assets or decreasing your liabilities. Both will help a young person save for the future. But despite being young, saving for a 20-something is probably more tilted toward short and medium term goals like a car, a home down payment, a wedding, a family, and so on.
If Ashley can reduce her student debt to better position herself for the future, then she can consider other short-term and long-term saving options. The exception might be if she found a job with a pension or group RRSP account with an employer matching contribution, but that’s a consideration for after her PhD is completed.
Results: She spent a bit more, but it’s a record on low purchases for a week in our series! Spending in week 1: $ 55 Spending in week 2: $ 77
How she thinks she did: “There wasn’t much to follow,” Ashley says. As someone who is already disciplined at keeping costs down — only breaking out the credit card once each week to buy groceries under $ 100 — all her buys are essential.
“While I did spend more on groceries this week, I had been away and needed some staples that I don’t purchase every week,” she adds.
The one difference? Pre-pandemic, Ashley says that she would have spent more at the end of the semester to celebrate going out for drinks and dinner with friends. “I won’t admit how much I may have spent on this, but let’s just say my budget is much better off without this expense.”
Take-aways: She appreciated the advice that her puppy was part of her family, and worth 10 per cent of her budget. “My pet is worth every penny. I am extra thankful that these pet care costs are also shared with my partner, who was the one who paid for our puppy.”
As a first-time puppy owner, Ashley is thankful that they’ve also invested in a health-care program, which spreads out regular health care over a year so that the vet costs aren’t sky high.
“Between the pet insurance and the health-care program, which includes checkups whenever we need, we’ve actually been able to save some of the more predictable costs of having a pet.”
Additionally, even though the pandemic made her feel unhopeful for the future, Heath’s advice gave her a bit more confidence. “I will certainly be keeping an eye out for jobs at organizations that offer pensions or group RRSP accounts once I finish this PhD,” she says.
Finally, she has a message for others getting into higher education. “I hope my story helps them really consider personal finances before and throughout their education.”