Making $ 54,000 a year working two jobs, 23-year-old Margaux wrote in to Millennial Money to shed light on the actual struggles some millennials are facing.
“Something I’ve noticed from this column is that most people have heavily subsidized rent or help from parents, a partner, or a significantly high income (at least enough to only work one job),” she writes. “I don’t really have much of any of this and think I’d offer a realistic view of how money is spent for a lot of young Torontonians.”
Living with four roommates, Margaux works for a non-profit and part-time as a server, totalling 50 to 60 hours a week. She is going through the hard grind of surviving in the city.
With $ 24,000 in student debt, Margaux has been putting $ 600 a month toward paying it off, but still has to keep up with the cost of day-to-day living. That includes a whopping $ 500 a month on food, between restaurants and groceries, which is elevated because she has celiac disease. “Foods are very expensive,” she says.
On a typical workday, Margaux will either meal prep a lunch or stop to buy groceries to leave at her workplace. “We have a small office with a nice kitchenette so I am able to prepare lunches from groceries in office.” For transportation, she usually cycles — but on occasion takes the TTC when the weather gets bad.
Another money saver? She gets her hair cut by hairstyling students for free.
During the weekend, Margaux often stays at home to curb her “affinity for shopping.” On the rare occasion that she ventures out, she’ll hang out with friends, walk around the city and grab lunch.
Her goals? Besides paying off her OSAP, Margaux is hoping to save at the same time — which means every month, $ 100 goes into her TFSA, and $ 200 into a savings account which she wants to put toward travel or bigger purchases.
She’s hoping a money coach will help her figure out how to more efficiently pay off her debt — which she wants to accomplish in three and a half years.
The expert: Jason Heath, managing director at Objective Financial Partners Inc., lays down advice for Margaux.
> Margaux should keep her receipts when she buys gluten free products given she has celiac disease. The incremental cost of buying gluten free items is considered an eligible medical expense. She will need to calculate the cost of buying similar products with gluten. Her medical expenses will need to exceed about $ 1,500 per year to see a tax benefit based on her income, but medical expenses can include out of pocket costs on other health and dental care, and even health plan premiums if she has a group benefits plan for which she pays premiums.
> I note her monthly grocery expenses and her restaurant and take out budget are the same. Given her food costs are higher than most people because of her health issues, she should watch her food spending outside the house.
> Kudos for the cost cutting measure of having her hair cut for free by hairdresser students.
> Her after tax income and spending suggest about $ 1,000 of extra cash flow each month, and that lines up with the $ 600 per month going toward OSAP, the $ 100 to her TFSA, and $ 200 to her savings account for large purchases and travel. Student loan rates range from about 5 per cent to 7.5 per cent right now in Ontario, so I would reconsider the TFSA contributions. Even if Margaux has a high risk tolerance and low investment fees, earning 5 to 7.5 per cent or more on her TFSA may be tougher. In addition, interest rates are relatively low right now and could rise in the future. The guaranteed return of saving OSAP interest may be a better investment than TFSA investing.
> The $ 200 monthly savings account allocation is nice to see. That money would be better put toward student debt repayment than a savings account, but the way Margaux uses the account makes it worthwhile. Saving up for vacations rather than relying on credit cards and worrying about paying if off later, can keep Margaux from getting behind on payments. The other benefit of a slush fund like that is the need to expect the unexpected. Extraordinary expenses come along when you least expect them, especially were Margaux to get a car or become a homeowner.
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Results: Improved! Week 1 $ 522.85 vs. Week 2 $ 352.06
What she thought: For week one, Margaux said she spent significantly more on dining out and groceries, which brought up costs but isn’t too common in her spending patterns. “I have been making an effort to purchase less recently, however, and I believe this is reflected in my second week,” after she gained advice from the Millennial Money coach. However, because most of the tips are more long-term, she shifted focus to future planning.
Take-aways: First thing’s first, Margaux will be diligently tracking her food spending. “I have already started the process of saving my grocery receipts and cataloguing them in a tracker for tax deductions,” which she can claim because she has celiac disease.
Another big goal? “To move the money I am spending on “extras” into savings and amp up my monthly TFSA and savings inputs,” she says.
What has a weekly savings log taught her? “You spend a lot more money than you’d think in a week and keeping track of it all is a great way to learn how to improve bad spending habits,” she says. Now, she’ll be continuing to track her spending, in hopes that long-term, she will make better choices.