In our Smart Money series, #MilliennialMoney, we ask people living in the Greater Toronto Area to record every penny they spend in a typical week. Then, using tips from a financial adviser, we challenge them to cut their spending the following week so they can save more money. Will they fail or succeed?
“I’m a momma’s boy,” admits Marques. The 29-year-old hospital co-ordinator has gone back to living with his parents in Mississauga after a living downtown for a year on a trial basis. Why did he move back? “I found myself buying too much takeout. Usually my mom buys and cooks all the food I eat.”
His favourite is his mom’s home-cooked crab and Japanese fried rice. He finds comfort in knowing that it’ll be there at home for him, as opposed to the Big Macs and hot takeout food from Loblaws he dined on while he was living with a roommate. It isn’t really about the money — he makes $70,000 a year — it’s more about being able to have delicious home-cooked meals.
But recognizing that he’s turning 30 soon, he says the next step to growing up is to make saving money a priority. His girlfriend is hoping that they can finally pool their cash together and buy a house somewhere in the Greater Toronto Area. Initially, moving back to his parents’ place made it seem like these goals of home ownership were more attainable — after all, he was saving more than $1,800 a month on rent — but now his challenge is that he finds himself spending money on “random” things.
“It could be anything from expensive dinners to drinks to bets on sports games,” Marques says. As of last year, he’s been using an app to calculate all his spending to see where his money goes. But it hasn’t really controlled his spending, which is often on fun, impulsive buys like Raptors or concert tickets the night before the event.
Other than those impromptu buys, he doesn’t think his monthly recurring expenses are too excessive. He spends about $150 a month on pot at the Ontario Cannabis Store, and he has a few subscriptions, like Apple Music for $10.99 a month, but he says these aren’t really the problem. Plus, he still saves when he can — he uses his old roommate’s Netflix account, for instance — so that’s “free-ninety-nine.”
Before he even began tracking all his purchases in week one, he warned us that he’d be dining out more frequently, because his mom was on vacation. He also said that he was prepping for a trip to Hawaii with his girlfriend, so his costs skyrocketed, what with buying Hawaiian shirts and a new luggage with a USB charging port built right into it.
This is how his week went:
The expert: Jason Heath, managing director at Objective Financial Partners, reviewed Marques’s spending and had this advice to offer:
It looks like Marques spent his whole after-tax salary for the week, and he doesn’t even have to make a rent or a mortgage payment at this point.
He says he wants to buy his own place, but one of the biggest problems with buying a house is making sure you can afford the ongoing costs. Some people just budget for the mortgage. But there are property taxes, insurance, repairs, maintenance, and plenty of miscellaneous expenses that pop up as a homeowner.
- Marques has lots of expenses for food, shopping, and entertainment that are variable in nature. Home ownership means ongoing fixed costs that may not leave as much extra as Marques is used to right now.
- As a young person, one of his most valuable assets is his income. I’d be sure to check out his group disability insurance plan at work and make sure his income is covered in the event he becomes disabled and cannot work — especially ahead of a home purchase. Sometimes, third-party disability insurance may be necessary to supplement group insurance coverage.
- In the long run, he will need to balance home ownership and saving for retirement, as well as the potential future costs of a family. It seems like a lot, but the earlier you start to make space for these costs, the less impact there is to the lifestyle to which you may become accustomed.
Results: Success! Spending in week 1: $1,015. Spending in week 2: $480
What he thought: Like Marques anticipated, when his mom returned from vacation, his food and shopping costs for groceries were almost cut in half. Additionally, because his first tracking week took place before his vacation to Hawaii, he had many extra costs which “aren’t regular buys.”
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Take-aways: This week, Marques said he tried to make a budget for “fun” spending — however, plans he had made with his girlfriend to watch Cirque du Soleil pushed his spending price up quite a bit. “It’s a once-in-a-lifetime experience for some, so it’s OK to spend more for dinner and a show,” he says.
He also knows that he isn’t exactly ready to buy a home, but wants to start by categorizing his spending to come up with a more accurate number of what he can put aside for a down payment to proceed with his plans. To further the conversation, Marques reached out to Jason Heath who gave him tips on how to use a home-buying calculator, and highlighted the hidden costs he’d face being a first time homebuyer. After that conversation, Marques recognizes he may need the co-operation of his girlfriend to say no to dinners or other weekly fun activities if they’re going to get serious about become homeowners.
For now, he’s limiting his “fun” budget, which is everything from Raptors tickets to impromptu bets to $200 shopping trips. For everything else, he’ll try to benefit from living at home — which includes eating those home-cooked meals.
“I’m in a good place now to start clean with how I budget,” he says. “Hope I can stick to it.”
Are you a millennial living in Toronto or the GTA and need help with saving your money? Be a part of #MillennialMoney and email email@example.com
Digital design by Cameron Tulk.