He has no savings to travel to Grandma’s. What to do?

The financial adviser suggests that if Peter limits spending on things like takeout, coffee and ski trips, he may be able to take a trip to see his grandmother in Colombia without relying on his credit card.

Millennial Money is a weekly submission-based series that provides financial advice to millennials. Read the full series here.

It’s officially the third calendar year of the pandemic, and with the easing of restrictions Peter, 30, is looking forward to catching a plane to Colombia.

“My grandmother is 91 and has become very weak,” said Toronto-based technician Peter. “COVID has made it difficult for us to see each other.”

Earning $60,000 a year, Peter was on track to save enough money to spend a month in Colombia, while also saving for a vacation in Asia with friends for two weeks later this year.

But a month ago, his car broke down. His savings of $5,000 are gone.

“It further delays my trip. I want to see her one last time,” he said.

Peter was heavily in debt before – nearly $20,000 – an amount that piled up because of his habit of using his credit card to buy things he couldn’t afford.

“I’m wondering if I should just put the trip to Colombia on my credit card now and go, hoping I can be disciplined to pay for it,” he said. “I’m afraid it’s getting out of hand.”

Luckily, he still lives with his parents and can save a lot on housing costs, but the new car payments are something he has to consider.

Due to his long hours at the office, Peter buys takeout for every lunch, ranging from $12 to $20 per meal. He also has a habit of buying coffee on the way to work.

On weekends, to relax, he also goes skiing occasionally, maybe three times a month, and stays each time.

Eventually, he plans to move on, but doesn’t expect that to happen anytime soon.

We asked Peter to share a week of expenses to get an idea of ​​his finances.

The expert: Jason Heath, Managing Director at Objective Financial Partners Inc.

Peter may not have any savings right now, but he paid off $20,000 in credit card debt to break even. Her expenses are modest living at home and paying for nothing but Wi-Fi at her parents’ house. This means he can and should be able to save money for the future.

His goals aren’t a down payment for home or retirement at this point. His main goals seem to be short-term like a vacation to make up for lost time during the pandemic.

His income is high enough that modest RRSP contributions might be worth considering for a tax cut, but he should probably start by opening a TFSA.

He can build up an emergency fund and also save for his travel expenses. He may want to start by saving cash in his TFSA before investing in higher-risk stocks and TFSA investments.

The two trips Peter wants to take in the near future are a two-week vacation in Asia and a trip to South America to visit his sick grandmother. The problem is that both of those should be credited to the credit card he just paid off because he spent all of his savings on a car deposit.

I think if he looks back 10 years from now, he’s unlikely to regret postponing his Asia vacation. If his grandmother is really sick, that, for me, is more of a priority. Although I’m hesitant to suggest using a credit card for discretionary spending, I would at least consider that based on her grandmother’s health.

The caveat, however, is that Peter may not need to use his credit card. His expense diary showed hundreds of discretionary expenses in the week he tracked alone.

He doesn’t pay for food at home and now admits he’s back in the office, he’s still getting takeout. If he’s packed his lunch for a few months and skipped a ski trip or two, he might just be able to afford the trip to see his grandmother with some savings.

Financial planning is often a matter of sacrifice. But it is not an unrewarded sacrifice. If you spend less today, you can spend more in the future.

When the future is many years away, you can invest those savings and spend a lot more as your investments grow. But even in the short term, if you get used to spending everything you earn when living at home with no rent or food costs, it’s much harder to move on your own and absorb those extra costs without you. indebted.

The sooner you can get into the habit of delayed gratification, the sooner you can become more financially independent.

Results: He spent less. Week 1 expenses: $914.25 Week 2 expenses: $339.25

How he thinks he did: “I need to start cooking more,” Peter said, adding that it would help him feel more in control of his money.

“Seeing it listed line by line is quite an eye-opening experience that makes me re-evaluate a lot more.”

Take away food : What set Peter back the most was the immediate purchase of a new car after it broke down.

“I paid off all my debt, I was saving and waiting during this time so I could feel like I could spend my cash flow, and then all of a sudden – the car payments. I can’t even imagine if I had a mortgage,” he said.

However, the advice he received from Heath gives him much more hope. It’s just a question of organization, says Peter.

“I currently feel like I have this looming debt in a car, but maybe with different accounts I can sort this out better,” he said. In the future, he will create a TFSA, although it is not a huge contribution, to ensure that he can take advantage of some savings.

As for his car payments, he will put them in another savings account, separate from his vacation fund and other emergency funds.

In the future, Peter will immediately travel to South America to see his grandmother, because he wants “no regrets”.

“Family is everything, and even if it’s a bit of a drain on my credit card, I hope the organization can help me pay things back as soon as possible,” he said. “The trip to Asia, well depending on what happens, can even wait until next year.”

Are you a millennial living in Toronto or the GTA and need help saving your money? Be part of #MillennialMoney and email [email protected]


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