Millennial Money is a weekly submission-based series that provides financial advice to millennials in the GTA. Read the full series here.
Brandon, 28, is a registered nurse making $ 75,000 working in the emergency unit at a downtown Toronto hospital.
“I have been hustling since school and working full-time, overtime shifts. But this year, complete burnout,” Brandon said.
So, he’s moved from full-time work at the hospital to part time in hopes he can prioritize his mental health and keep his family safe. “It was a hard decision because I thought if I work a lot and make money, I could help my family and eventually move out,” he said. “But this year it just became too much anxiety.”
One saving grace is that because he works on the front lines, he has received the vaccine. “I feel extremely lucky, but we’re still seeing how bad it is every day,” he said.
Brandon lives at home with his parents and two younger siblings in Brampton. On the two to three 12-hour shifts he has a week he drives to Toronto and back.
“I usually try to prep food or if my parents have leftovers on work days, but we have a big family so I allow them to bring food first,” Brandon said. On those days, he’ll opt for a sandwich at Tim Hortons or Subway.
“I work 12-hour days so once I’m done I drive home right away and sleep most of the day.”
On weekends Brandon plays video games, goes on hikes and occasionally plays soccer at a local park. “Maybe twice a month I’ll drive downtown to meet a friend (who works as a nurse as well) at a park for some takeout food,” he added.
What are Brandon’s savings goals? First, see if he can move closer to work, which he already tried four years ago. “I spent one year renting in downtown Toronto with a roommate in the Annex area ($ 1,600) when I was working full time. I felt like I didn’t have as much savings as I’d like.”
So he moved back home and was able to save. “I currently have $ 30,000 in RRSPs but I want to know if it’s ever possible to buy a home, or I’m thinking of moving to somewhere more affordable in Ontario. I’ve seen houses for $ 300,000 in Ottawa alone, but here it’s all over a million, even in the suburbs. What should I do?”
We asked Brandon to share a sample of his weekly spending to get a better idea.
The expert: Jason Heath, managing director at Objective Financial Partners Inc., on Brandon’s finances.
The pandemic has reduced incomes for many workers. Some have lost their jobs. Some have seen their business slow down. Others, like Brandon, have had to reduce their workload due to family obligations or impacts on their mental health. Brandon is lucky to have some flexibility with his workweek given his job as a RN.
Even working part time, Brandon is able to save. He is putting those savings into his RRSP. His income is relatively high, so the tax savings are beneficial, but I don’t know if RRSP contributions are the best option. Presumably, he has a pension plan as an Ontario nurse. That means that he and his employer are contributing to a retirement plan on every pay cheque. Brandon may need to focus more on his short- and medium-term needs instead of the long term.
It doesn’t sound like his parents are rushing him out of the house but having too much money in his RRSP could limit his ability to buy a home of his own. The maximum RRSP withdrawal for the Home Buyers’ Plan (HBP) is $ 35,000 and Brandon is close to that already. I would open a Tax Free Savings Account (TFSA) and try to build up some more flexible savings while his expenses are low right now. A TFSA can be more flexible than an RRSP to save for a variety of purposes, ranging from a home down payment to retirement.
The ideal minimum down payment for a home is 20 per cent to avoid Canada Mortgage and Housing Corporation (CMHC) mortgage default insurance. A 10 per cent down payment on a $ 500,000 home will require a $ 13,950 mortgage insurance premium to insure the mortgage. That’s 3.1 per cent of the mortgage balance. It can be added to your mortgage but represents a significant cost of buying a home. Many first-time homebuyers fall well short of a 20 per cent down payment with many putting down the minimum of five per cent on the purchase of their home.
Brandon’s idea to consider a move away from the Greater Toronto Area is relatively easy given his career. He could move to another hospital but that could take him away from family and friends. Regardless, it could provide a much better quality of life if home ownership costs allow him to save more for the future or to have more flexibility with his spending now.
Once his mental health improves and he can increase his hours back to a full-time workload, I would be more inclined to consider his housing plans. I would start by creating a realistic budget for renting or buying that would allow Brandon to move out and still have a bit of extra cash flow every month. I wouldn’t buy unless Brandon was fairly confident he could live somewhere for at least three to five years to justify the transaction costs of buying and selling.
Results: He spent less. Spending in week 1: $ 144 Spending in week 2: $ 137
How he thinks he did: “My spending has been quite routine after moving from full time to part time,” Brandon said. Usually that consists of eating at home on days off and one indulgence a week (the LCBO and takeout).
“Usually it’s gas and a quick and low-cost eat,” he said.
Take-aways: Brandon says that doing this exercise provided him with a sense of relief. “This whole year has been a blur; it’s good to know how I can focus my efforts,” he said.
That means staying at home for longer, and, when he’s ready, returning to full-time work to save more to have enough to put down for a condo closer to Toronto.
Another change? “I have started contributing to a TFSA per the adviser’s suggestion.” Brandon realized he didn’t pay enough attention to the type of pension he was contributing to per pay cheque, and feels like the TFSA, as Heath said, would give him more flexibility.
As for moving away to buy a cheaper property and work elsewhere, he’s still on the fence. “My life is here, my family is here,” he said. “Unless there’s an amazing opportunity, I think I’ll try to make it here.”