Sophie, 39, makes $78,000, and has spent her working life paying off her mom’s debts. It’s almost done. What should her goals be now?

Millennial Money is a weekly submission-based series that provides financial advice to millennials in the GTA. Read the full series here.

Nearing 40, Sophie, is making $ 78,000 working in the transportation industry and has been helping pay off her mom’s debts for her entire working life.

“I’m turning 40 this year and have literally come from nothing. I’ve worked super hard for everything I’ve ever gotten, often working three to four jobs at a time although I’m just down to two jobs these days,” she said, adding she has had work reductions during the COVID-19 pandemic.

“(My mom is) hoping to retire this year, and I wanted her not to worry.”

Sophie seems close to retiring the debt. How did she do that? She juggled all those jobs, and an investment became a big help. “I bought a house in Hamilton for next to nothing and then sold it for a lot more.”

She’s nearly finished a mortgage that she shares with her mom. “We’re so close, between my credit card debt and the mortgage, it’s about $ 4,200 left,” she said, adding that she believes she can now think about fully investing in herself, including potentially buying her own place.

“I work 12-hour days and commute 2.5 hours a day without traffic — the one thing the pandemic is good for. I would love to be able to move closer to work but the jump in house prices in Toronto seems unattainable.”

Also, she’ll need a new car in about a year or so, another cost that she’ll have to take into account. On the bright side, Sophie has been saving quite a bit over the years.

“I have a bit of savings ($ 7,000) in a TFSA, $ 4,000 in the bank, and $ 30,000 in an RRSPs. I put $ 100 aside each month for my TFSA as well as saving $ 250 a paycheque from work that I have taken off as additional taxes that I’ll get back as tax time.”

“I would like to not have to worry. I’d like to have some extra savings since both my parents have no savings, and I don’t want to end up the same way if possible.”

We asked Sophie to calculate a week in finances to get a better idea of her spending.

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

It’s great Sophie and her mother have been able to buy a home together. I assume her mother is into her 60s or 70s, so she should make sure they are clear on what happens in the event her mother dies.

You can own a home as joint tenants or as tenants in common. If they own the home as joint tenants with right of survivorship, on her mother’s death, Sophie will own the whole house. If it is owned as tenants in common, her mother’s share of the house will be distributed based on her will. If Sophie has other siblings, she may find herself needing to buy out part of the house from them.

Sophie has been squeezed a bit during the pandemic with a reduction in her usual hours. I note she has a credit-card balance and is making payments but still contributing to her Tax Free Savings Account. If her credit card is at 18 per cent interest, her TFSA would need to return 18 per cent to be better off saving versus paying down her debt. I think that is unlikely and would encourage her to just pay off her credit card with her TFSA.

I think it is great she is saving every month and makes that part of her budget. Given her cash flow is less during the pandemic due to reduced hours, she should consider reducing her monthly savings, even if it is just temporary, to avoid running a credit-card balance.

It is OK to have a bad week, month or year financially. It happens. Your long-term financial plan should anticipate some bumps in the road, though COVID is admittedly a much bigger bump for some than for others.

Sophie has car costs but not car payments. Given her daily commute, no doubt she will be needing a new car at some point. She could save in her TFSA for it or could consider borrowing. Although dealerships often offer low- or no-interest financing, the interest costs may be built into the purchase price — that is, the car may cost less if you provide your own financing or buy it with cash.

She may be able to use her home equity to buy a car outright with a lower purchase price than if she used the dealer’s zero per cent financing.

Mind you, the best deal you are going to get is a slightly used vehicle, given how much they depreciate in the first year of ownership.

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The result: She spent less. Spending in week 1: $ 2,446.26 Spending in week 2: $ 368.98

How she thinks she did: Sophie says that she doesn’t believe her daily finances and spending are the problem, and a big help was organizing automatic monthly payments to her savings accounts.

Take-aways: “It’s nice to hear it’s OK to re-evaluate during a yearlong pandemic,” Sophie said of Heath’s advice.

Though she’s used to a savings routine, she believes it’s time to focus on how much she should be saving in each account to make sure she is doing it efficiently.

Sophie is also re-evaluating is about buying a car. “I tend to gravitate toward buying a new car just for the peace of mind on the road, but I will also now look at used cars and the best way to finance it.”

Finally, she’s giving herself a mental break after the constant hustle to save: “It’s OK to adjust and probably for the best.”

Are you a millennial living in Toronto or the GTA and need help with saving your money? Be a part of #MillennialMoney and email ekwong@thestar.ca

Digital design by Cameron Tulk

Evelyn Kwong

TORONTO STAR