Responsibility to his family is a given, but to save for a car he is going to have to kick his very pricey fast food habit
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Jun 30, 2020 • • 6 minute read
Spent is a new column in which the Financial Post’s Victor Ferreira takes an entertaining and insightful look at the financial lives of everyday Canadian millennials. Some toil in lower-paying jobs while others are earning six-figures — what unites them is their desire for more and their everlasting struggle to get it.
Every millennial with immigrant parents has heard some variation of what is a now a timeless classic about their father’s walk to school as a child. The details change ever so slightly depending on the storyteller — the walk often ranges between 10 and 20 kilometres, may or may not involve heavily-calloused bare feet and is typically all uphill, both ways. The story is regurgitated in an attempt to convince our generation that we have it easy and that we would never survive in the conditions in which our parents were brought up.
A 25-year-old customer technical support worker from Mississauga, Ont., who we’ll call Nabeel was told a different story — one he was expected to live up to.
His father grew up in Pakistan and as the eldest sibling in his family, he took on extra responsibility that the others didn’t. When Nabeel’s father graduated from university — becoming the first in his family to do so — Nabeel’s grandfather retired and assigned him the job of being the family breadwinner. Each paycheque he received, he turned over to Nabeel’s grandmother. It was his income that paid for his younger siblings to study abroad.
Are you a millennial who wants to get the most out of your money? Contact Victor at email@example.com to appear in a future edition of Spent.
“Dad always tells the story that he was the full earner,” Nabeel said. “That’s how his household would run. That kind of storytelling, and as a kid looking up to your dad, it instilled the (sense of) responsibility…. Culturally, the idea is that I have to be responsible for the family when I grow up.”
Nabeel heard the story so many times he understood that when the time came, he would have to contribute in the same way. He gives his parents, on average, about 50 per cent of his paycheque ($1,300). It’s a responsibility he’s so devoted to that he intends to maintain it when he eventually moves out. Doing so has meant sacrificing the advantages that other millennials who live with their parents reap. Plotting even the most short-term of financial goals becomes an uphill battle.
Take his plan of buying a car for the summer. Nabeel is tired of not having the independence that comes with having his own vehicle. Last year, he began the process of saving for a car, which he estimated would cost between $5,000 and $10,000, by transferring $2,004 to his tax-free savings account. Everything he did financially beyond that only pushed his dream further away.
His responsibilities increased one recent month when the family’s furnace unexpectedly stopped working — Nabeel chipped in for a new one. In that same month, his parents’ car also needed some maintenance work on its brakes so the 25-year-old again stepped up to help. His usual $1,300 monthly payment rose to $1,900.
Those costs are out of his control, but he takes responsibility for the rest of his spending, which in that same month significantly exceeded his income.
With only $771 left from his take-home pay of $2671 after helping his parents, Nabeel nevertheless spent $684 on food, $682 on shopping and $511 on transport. He’s the first to admit that his spending on food is problematic. There were some days where he bought his breakfast, lunch and dinner. In one day, he ate at Church’s Chicken and twice at Chick-fil-A and McDonald’s, spending a combined $51.
This spending is far from necessary, he said, and nothing is stopping him from packing a lunch to eat at work with leftovers from the previous night’s dinner, except his own lack of enthusiasm for doing so.
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“Sometimes what happens if there’s no leftovers, I have to make my lunch and I’m too lazy to do it so it’s easy to just buy outside,” he said.
His shopping bill also soared, particularly because of his $260 purchase of shoes at Brown’s Shoes and a $136 on a bracelet for his partner at Alex and Ani.
Should Nabeel continue to spend as much as he does on food and shopping while staying committed to helping his parents, he won’t be able to save for a car. Spent asked Richardson GMP director of wealth management Serena Cheng to assess Nabeel’s financial situation.
That shiny bright goal is all about sacrifice right now
Richardson GMP director of wealth management Serena Cheng
Rather than attempt to put limits on Nabeel’s spending, Cheng started by looking at what was absolutely essential. She took the $2,670 he earned and subtracted $1,300 to support his family, the $300 he spent on public transportation and the $468 in student debt payments. Everything else, she said, can go.
To be able to buy a car in the price range he’s targeting, Cheng said Nabeel would have to save $500 per month for six months. That would leave him with $3,000, which combined with the $2,004 he initially put in his TFSA would give him enough to meet his target. The drawback of her plan is that it only leaves Nabeel with $102 per month to spend on himself.
From a financial perspective alone, buying a car is probably something Nabeel shouldn’t be doing, but she won’t stop him from making the decision. It’s Nabeel who has to decide how much having a car is worth to him.
“Is it something that’s that important for you because if it is, you have to eliminate shopping … you’re going to eat in as much as you can and you’re going to be extremely strict with yourself,” she said. “That shiny bright goal is all about sacrifice right now.”
Beyond his usual sacrifices, Cheng said, Nabeel would likely have to eliminate shopping, completely, for the next six months. His remaining balance would allow him to eat out a maximum of once per week, she said.
Ironically, Nabeel would also likely have to cut down on the driving he’s currently doing with cars that belong to his family members to save on gas, while Uber would be out of the question.
Cheng has had to make similar suggestions to her own clients in the past and their ability to “hunker down” and stick to the plan has been noteworthy, she said.
What might make the plan more realistic for Nabeel is if he can negotiate some sort of reprieve with his parents. Even lowering the amount he’s responsible for to about $1,100 per month would markedly improve the next six months for him, said Cheng, who added that he might convince them by showing them his TFSA statements each month.
Cheng’s suggestions may sound harsh, but Nabeel thinks they’re doable. His shopping expenses were only an outlier that one month, he said, and are something he can easily wipe out. He’s already been cutting back his food bill. He thinks his parents will be flexible, too.
“My mom always says only pay us if you can afford it, so they’ll be fine with that,” said Nabeel, who knows his spending has to come down either way. “I’ll enjoy my car even more then.”
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