Millennial Money is a weekly submission-based series that provides financial advice to millennials in the GTA. Read the full series here.
Sammy, 29, is doing everything possible right now to save for his future. He is looking forward to sponsoring his fiancée to move to Canada and starting a family here. Unfortunately, he still has $ 10,000 in student debt to pay off while juggling monthly and daily expenses.
He’s in a state of limbo — making $ 38,000 a year as a junior accountant while also studying for his Certified Public Accountant (CPA) certification. He hopes after he’s finished with his schooling he can finally put pedal to the metal on his saving goals. His most immediate goal? Being able to afford a car to save time on commuting back and forth to work from Scarborough where he lives with his family.
“Currently I split our family car with my sister and spend the other bulk of transportation costs on public transit,” he said. “I am saving with the intent of buying a used or new car in the future.”
Sammy says that despite being a junior accountant, he’s been required to be in the office throughout most of the pandemic.
“I tried my best to work from home throughout the past year but the office I work at is small and requires people to be in person especially during the peak tax season,” he said, adding that there were times when they worked remotely part-time, or full-time, but those were brief periods.
Day-to-day, Sammy usually bags his lunch. “If I forget to bring lunch, I will do takeout, but usually Thursdays are our office takeout days,” he says.
Another daily cost? Coffee. “I do always get my morning coffee, either in the office, or from any other takeout establishment.”
For breakfast, Sammy will usually prepare something quick at home. Mom and other family members handle most dinners.
With his mom always cooking, Sammy and his siblings try to help out with the cost of groceries. They split the expense, and Sammy’s share works out to around $ 450 a month.
So, other than the used car what is Sammy hoping for? A vacation to the U.K. to see the rest of the family. “Hopefully all restrictions are eased (soon),” he said.
Longer-term, he hopes to move out of his mom’s place. “I am content with renting as long as I am getting good value. I see the net worth in the value of overall investments, and while home ownership is a big factor of that, I am averse to going with a mortgage,” he said, adding that he also hopes to save to sponsor his fiancée over to Canada.
He is also committed to paying down his OSAP debt monthly. “It’s decreasing. Hope to get that down to zero by the middle of next year,” he said.
We asked Sammy to share a week in spending to get a better idea of his finances.
The expert: Jason Heath, managing director at Objective Financial Partners Inc., on Sammy’s options.
Sammy has short, medium, and long-term priorities that he is balancing.
He is paying down his OSAP student loans while studying towards becoming a CPA. That means his income could increase significantly in the coming years. His housing costs are modest while living at home with his parents so he should take advantage of that to pay down his debt as much as he can.
Right now, he does not have a lot of extra cash flow for rent payments, but he also wants to buy a new or used car.
Surprisingly, he has been driving to the office all throughout the pandemic. Junior accountants are far from essential workers and even without a pandemic could arguably work from home. Finding a place to rent close to work or a job where he can work from home could allow him to manage with public transit or ride sharing. If he has to get his own car, a used car will likely give him the best value.
He is saving up to bring his fiancée to Canada. Beyond moving costs, there may be other immigration costs or living expenses until she can secure employment in Canada, like application and permanent residence fees, and legal fees, amongst others. Some immigrants also need proof of settlement funds to show that you have money to support yourself in Canada — generally, more than $ 13,000 for a single immigrant.
The more Sammy can keep his costs down, become debt-free, and put aside some money now, the sooner he and his fiancée can start their lives together.
Once debt-free, I would be using a TFSA to build savings that can grow tax free. His income is too low to benefit from RRSP contributions, and the savings are going to be needed for his short and medium-term goals — not retirement.
I think Sammy has the right approach with home ownership. He notes that if there is better value to renting, he is content with it. Given how many other goals he and his fiancée must address in the coming years, I would focus on home ownership and retirement down the road.
His spending journal included a lot of small fast-food costs that add up. There is nothing wrong with eating out and as long as people are achieving their saving or debt repayment targets, they should be able to spend the rest how they want. But if Sammy wants to ramp up his debt repayment and start to save for the future, he should consider how to reduce the recurring expenses he has now and avoid or defer future ones (like car payments or moving out too soon).
Results: He spent more. Spending in week 1: $ 445.27 Spending in week 2: $ 549.22
How he thinks he did: “I spent more than last week, but decided I had reached a lot of my saving goals and debt repayment goals recently, and decided to reward myself a little,” Sammy said, referencing the pastry, ice cream and personal care purchases. “I even got a haircut for the first time in a year.”
Take-aways: With the advice from Heath, Sammy has already made a huge change in his day-to-day activities. “I started taking public transit, although I still spend money on gas due to drive on the weekends,” he said.
He notes that it makes sense that he rely on public transit for now until he can complete his CPA and gain a higher earning position. He can consider car ownership at that point.
Just as the adviser pointed out, Sammy has already been putting his additional cash flow into a TFSA account. Now, he’ll be doing it more frequently with a set amount every month.
Finally, in terms of his long-term goals of home ownership, he’ll hold off for now. “It’s definitely something that I will look at down the road, like retirement, as it’s not urgent for me to own a home if I can find similar value renting,” he said