Millennial Money is a weekly submission-based series that provides financial advice to millennials in the GTA. Read the full series here.
It’s been a difficult year for 38-year-old Shawn. In the first wave, he was laid off as a bar manager after his place was shuttered. Relying on Canada Emergency Response Benefit (CERB) for several months, he was able to make ends meet, living cheque-to-cheque.
Now, as Toronto’s COVID-19 numbers push past 700 new cases daily, and with lockdown precautions in order, he’s been laid off again.
“When everything was more normal in the summer I’d be making $ 2,000 on a good month, and even more in the summer. Not anymore. It’s barely enough,” Shawn said.
For now, his only saving grace for income is the car he shares with his partner which has enabled him to spend hours on the road working for Uber and UberEats.
Even though he rents a spot for just $ 1,220 — a steal for a two-bedroom in Toronto — payments are adding up and have left him $ 10,000 in debt since COVID-19 started. Also, he was getting free food at his bar gig, which he now no longer has and food costs are adding up.
“My parents are driving long ways to bring me a large amount of home-cooked food, at least once a month,” he said. Thankful for that, he still wants to give what he can to local cafes, restaurants, for their survival.
“I don’t have too much to give but on a good day with deliveries, I might just go and buy a coffee to support the city.”
For now, his savings goal is simple: to start chipping away at his $ 10,000 debt.
“I’m not sure if renting is the best idea now that I’ve been living month-to-month, but hopefully this calms down and I can find something to make up for all the losses,” he said.
We asked Shawn to give us an idea of his daily spending to get a better idea of his financials.
The expert: Jason Heath, managing director at Objective Financial Partners Inc., on Shawn’s situation:
The hospitality sector has been hit particularly hard by the pandemic. I’m sure it has been difficult for Shawn, but he’s obviously up for the challenge having been laid off twice and now doing delivery part-time.
I think one issue with his current gig is that if he makes $ 2,000 a month doing delivery, he’s not keeping as much after considering the wear and tear on his car, but it’s hard to identify the actual cost of his vehicle use for delivery.
What I’m getting at is that Shawn isn’t keeping all the money he’s being paid. From a financial perspective, Employment Insurance (EI) or the Canada Recovery Benefit (CRB) may be more lucrative for him if he qualifies. The CRB in particular could be helpful because if his average weekly income has declined by 50 per cent, he could be able to earn self-employment income from delivery as well as $ 1,000 every 2 weeks from the CRB.
Shawn should be mindful of the fact his delivery earnings won’t have tax withheld and his CERB payments over the summer will have tax consequences as well.
He should be able to deduct some of his business expenses against his delivery income, particularly car expenses. He should maintain a logbook of his delivery driving, including starting and ending kilometres on his car for days he’s working. He’ll be able to deduct a pro-rated amount for his gas, repairs, and insurance, as well as ownership costs like depreciation.
Shawn’s rent is 60 per cent of his income and that doesn’t leave much for spending. He’s keeping food costs low by buying groceries and not eating out.
I think it’s great that his parents stock him up on home-cooked meals once a month. I remember when my youngest son was born and people asked what we needed for gifts. Home-cooked meals was my answer, because that’s something money can’t buy. Other parents can help their kids who are in a tough spot by finding indirect ways to support their finances and health.
Shawn is spending a couple hundred dollars more each month than he’s making, so anything he can do to keep discretionary spending down for now will help him when he comes out of this. The hospitality sector will recover and he will be working full time some day.
Chipping away at his debt slowly at that time will allow him to consider other saving goals. In the meantime, he seems concerned that renting is wasting money. It’s not, for a lot of reasons, and his main short-term priority should be maximizing cash flow through higher income, lower expenses, and eventually getting debt paid down.
The result? He spent less. Spending week 1: $ 214.50 Spending in week 2: $ 120.50
How he thinks he did: Following Heath’s advice, Shawn tried to cook more at home and prepare snacks for his work delivering food. “I brought some bananas, cookies and chips on several of my trips to ensure I wouldn’t impulse-buy food,” he said. “I guess it’s less than last week because it’s a couple more dollars saved, which is still good!”
He admits he’s still tempted to help his favourite local businesses, but is working to have more controlled spending. For example, just getting takeout once a week and minimizing coffee buys. “His advice on looking out for myself first, during this time, really made me realize how much has changed in my life while I wanted it to seem sort of normal.”
Take-aways: “I don’t really understand how benefits work, so this advice has given me a lot of clarity.” He admits his car payments are an expense that add up with it comes to gas, which doesn’t necessarily pay off with deliveries. He will not look into EI or CRB to see if he qualifies, which may pay him exactly the same, or more during this time, without using the car so much.
“It’s also hopeful to hear someone say that the hospitality industry will return,” Shawn said. “It seems far away but I hope to be ready for that.” Whenever that day is, he wants to be as best prepared as possible and that includes slowly chipping away at the $ 10,000 debt and managing spending.
“I’m going to start using my free time to learn how to cook meals that last a long time and are delicious,” Shawn added.
Finally, he’s thankful he’s at least able to rely on the monthly cooked meals from his parents. “It makes me cherish what I have even in this weird time where I feel like I lost everything. Hope our (COVID-19) numbers go down, and we’re able to get back to work soon and get back the time we lost this year,” he said.