Millennial Money is a weekly submission-based series that provides financial advice to millennials. Read the full series here.
After completing design school, being unable to find a job and doing gig work for the past decade, Weng, 31, is determined to finally pursue a career as a designer.
Due to a competitive job market, Weng struggled to find a stable career as a designer living in Barrie. She did freelance gigs here and there to build her portfolio, but decided to ultimately take up serving part-time.
Between earning minimum wage as a server and her freelance work, she makes around $ 45,000 grinding between the two. “I’m in my 30s, and a little embarrassed that I haven’t built up my portfolio to be a designer full time,” she said.
She adds that she’s also facing $ 15,000 in student debt, and $ 3,000 in credit card debt, which on her low income is difficult to pay off.
“Thankfully, I live at home with my parents, and have been all my life,” Weng said. “If I had to pay housing costs, I don’t know what I’d do.”
When the pandemic hit, Weng, like many other service industry workers, was laid off. “That’s when my credit card debt started to build,” she said.
As the province reopened she returned to work as a server, but had spent more than a year planning her move to become a designer. Now, she’s focusing on making ends meet to build a better design portfolio and find a full-time job.
“Working in creative … this is the challenge for so many,” she said.
Weng serves three to four times a week, and is given a 50 per cent deal on meals cooked at her restaurant, which works out to around $ 5 to $ 7 a meal.
“I also try to eat at home before my evening shifts, but sometimes when I get home at midnight I’ll order UberEats,” she said. On days off, she’s likely doing freelance gigs where she can eat at home, although she admits she goes out once or twice a week for drinks with friends.
So what are her saving goals? First it’s to pay off her student debt, which for years has “gnawed” at her finances, and then the $ 3,000 on her credit card as she works to transition out of serving and into design. Also, because she’s always lived with her parents, she’s wondering how she can save up to move out.
“I want to eventually move out of my parents’ home and rent a spot with a roommate or roommates closer to Toronto,” she said.
We asked Weng to share a week of spending to get a better idea of her finances.
The expert: Jason Heath, managing director at Objective Financial Partners Inc., on Weng’s situation.
The slow start to Weng’s design career has no doubt been a financial challenge. I talk to lots of young people in my industry who need three years of experience to become a certified financial planner but who cannot get hired if they are not yet a CFP. It is one reason not to jump the gun on moving out or buying a car or incurring other big costs too early. Some people are lucky right out of school, and for others, it can take longer, or more schooling or training could be necessary.
Weng lives at home and that has helped her to pay down her student debt a little, but she acknowledges it has been plaguing her and repayment has been slow. I think that should probably be her priority over investing. Her income is low, so RRSP contributions are not that beneficial due to a low tax rate. Although she could contribute to a TFSA, paying down her debt and avoiding interest gives her a reasonable and guaranteed rate of return. Her credit card debt should be her number one priority as no doubt it is at a higher interest rate than her OSAP debt.
I note her $ 600 car payments and $ 1,040 all-in monthly car costs are about 40 per cent of her after-tax income. There is not much left over for debt repayment and saving let alone to pay rent if she moves out. The problem is she lives in Barrie and needs a car to get around town and to drive to work. Public transit in the suburbs may not cut it but the cost of having a car can take a big bite out of your budget. The tradeoff to live in a city like Toronto is that rents are higher, but you may be able to live close to work and do without a car, especially given plentiful ride-sharing options.
I worked a part-time job on Saturdays for several years after I went to university, and it definitely helped me go into my 30s in a better place financially. You sacrifice your free time but often the financial sacrifices you make when you are young will not pay off until many years later. Your older self will thank you. There is no quick path to getting out of debt so little things that Weng can do to reduce costs and increase her debt repayment rate will help. She should try to increase her monthly payments on her debts and do her best to get to a point where her credit card is paid off monthly rather than maintaining a balance.
The results: She spent a bit less. Spending in week 1: $ 277 Spending in week 2: $ 264
How she thinks she did: For week 2, Weng was determined to buy more groceries and meal prep instead of buying food at work. “I did a big haul at the beginning of the week, watched a YouTube video and made pasta … it was fun but I realized I bought too much,” she said.
Spending $ 110 on food, Weng unfortunately was not able to finish all her produce — with some spoiling. “Next time, I need to go in with a game plan not to overbuy and just stick to the minimum,” she said.
As for going out on the weekends, it has become a release. “Everything is open, my friends all want to hang out and it’s hard to say no,” she said. “But after this advice I might have to limit my outings to once a week.”
Take-aways: “Yes, the car costs have always driven me insane,” Weng said. “But it’s the only way for me to get to my job unfortunately.”
Despite her high car costs — a necessity because she’s still working part-time at the restaurant — she’s happy that the financial planner has given her a more clear-cut plan.
“If I have to grind like this and live at home until I can get my debt down, so be it,” she said.
This means tackling her credit card first before jumping in and thinking of a new housing situation. After, she’ll move on to her OSAP payments.
“As I design more and more, I’ll be able to raise my rate and eventually put down a lot more on the money I’m owing,” she said.
Finally, she feels a sense of relief that she isn’t the only “slow bloomer” in terms of finding a career. “I could sit around and have regret, or I could try to change my life, and I’m determined to do this.”