Editor’s note: This Millennial Money profile reflects how this couple lived before the COVID-19 pandemic hit Toronto.
This “urban on-the-go” couple living in a condo in Roncesvalles makes over $ 175,000 a year combined. Ash works as an epidemiologist, and Seb’s a PR professional who also works freelance on occasion. Their passions? Being out and about — trying new restaurants, seeing friends, going to yoga and the gym. They’re hoping to move into a townhome closer to the heart of the city.
The problem? “I have considerably more debt than Ash,” Seb says. He has $ 18,000 in student loan debt that he has been paying off bi-weekly for the last nine years. According to his payment plan, he should be able to pay it all off next year. Also, he owes $ 5,000 on his credit card which he has been paying off monthly with his freelance job.
For Ash, it’s the mortgage. “She fully owns the one-bedroom condo we currently live in, and besides her mortgage, she has no other kind of debt,” Seb says.
Because of their carefree spirit, they have no fixed grocery schedule on the weekdays. “The system is basically when the fridge is empty, we discuss and determine who will buy what.” During the weekdays, Ash mostly does takeout for lunch whereas Seb meal-preps the night before, though he admits that he sometimes forgets or is “too tired.” Another challenge? A balancing act of two diets — Ash is a vegetarian, which means prepping two different dinners separately that may up the grocery costs.
On the weekend, the two like to take part in social activities, but try not to stay out too late or spend too much. This usually means: Committing one night to go see a movie for a cost of around $ 50, or a cultural event like the ballet. They’ll usually spend an afternoon or evening having drinks with friends. “Regardless of weekend activities, I usually make dinner for us from Friday to Sunday before we go out for any planned activity. This helps keep the costs down,” Seb says. To fulfil their sense of adventure, every two weeks the couple will try a new eatery.
Other ways the couple is limiting spending? “We have chosen not to get a car to avoid the lease, fuel, maintenance and insurance costs,” Seb says. This also gives Ash the ability to rent out her parking spot for $ 270 a month. However, because some friends and family members live out of town, the two have rented a car for both short and extended visits. “This has added to our monthly expenses although we suspect it is still less than actually owning a car.”
By 2023, they’re hoping to buy a home in the city, as well as maintaining Ash’s condo to rent out. Longer-term? “We also want to keep travelling overseas once a year and I need to consider other costs related to a future engagement and wedding. We have agreed that if we were to get married, we would split the cost of the wedding,” Seb says.
The expert: Jason Heath, managing director at Objective Financial Partners Inc., gives advice to the millennial couple.
“Ash and Seb have pretty good incomes, but I think they could benefit from a better understanding of their expenses. Their take-home pay is $ 9,500, but their expenses are only $ 5,255. That suggests they should be saving $ 4,245 per month — but I suspect they are not. That means they are spending nearly twice as much as they think they are spending. This is common,” Heath says.
- I would definitely focus on getting rid of Seb’s credit-card debt first and foremost. The student debt interest rate will no doubt be lower than the credit-card debt. Given (that) the student loan is probably at 5 to 8 per cent, I would probably prioritize repaying that loan over investing.
- Ash only has a mortgage, and given her relatively high income, she could benefit from RRSP contributions. However, given this couple’s goal to buy a townhome soon, TFSA contributions or mortgage repayment may be better options for her extra cash flow. She will not be able to use the Home Buyer’s Plan to take an RRSP withdrawal (since) she owns a condo currently. For TFSA contributions to be a good choice, her TFSA investments would need to earn a higher rate of return than her mortgage interest rate. If she is saving for a home down payment in three years, she probably should not take a lot of investment risk, so it may be a toss up between TFSA contributions or extra mortgage payments.
- It looks like their Uber and car-rental costs may still be more reasonable than car ownership. Cars can be an expensive and an unnecessary luxury depending where you live.
- Travel is important to them, and their budget is still fairly modest relative to their incomes.
- I do note that they went grocery shopping five times in seven days, and they mention they usually only buy a few things at a time. They may be better off doing a better job of stocking their fridge and cupboards to try to reduce their restaurant expenses. They ate out 16 times during a one week period. If they are looking for ways to save, they could probably do better by just having more food at home.
Result: Success! Spending in week 1: $ 1,053.31. Spending in week 2: $ 698.01.
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What they thought: “We were pleasantly surprised with how little we spent this week compared to last,” Seb says. Instead of the impulse grocery buys, the two also tried doing a big grocery run at the local store. “This allowed us to make lunches and dinner on almost every weekday (and Saturday),” Seb says. “We feel that cooking at home was the game-changer of the week that helped us lower our expenses.”
By doing this, they were able to still see friends and shop for things like T-shirts without spending more. “Both of us are guilty of buying takeout when we see that there are few food items at home, and fall into the trap of buying lunch every day because it is convenient and effortless,” Seb says. “Simply having a full fridge is enough to motivate us to cook more in our home.” With the bulk-buying mentality, Seb also leveraged having a rental car to go to Walmart to buy items that would last longer.
At the end of the week, Seb had $ 200 extra left over, which he used to pay off his credit-card debt. “It was only a small amount of what’s owed but it will help in the long-run to be debt free,” he says.
Take-aways: For Ash, it was “eye-opening” to take a closer look at the TFSA account, and she will be factoring in monthly contributions into that account moving forward. She has been in touch with a financial adviser to look into her options further.
“We feel the real-estate advice was another important takeaway and we will be considering it when the time comes. For now, we will focus on lowering that credit-card debt and in being smarter about our everyday choices, especially food and groceries.”