Malik, 32, dreams of owning property in the Rockies. He’s a producer living in Toronto’s entertainment district, making $60,000 a year before tax, and the rising cost of living and inflation has pushed his monthly rent up to $1,900.
“My dream home is a hybrid of a cottage or a year-round home in an area not too heavily populated that is surrounded by wilderness and gives me enough room to live comfortably, have my own garden and allow my future dog to run around,” Malik said.
But first, he has to pay off his $10,000 credit card and student debt.
Malik says his credit card debt is “tied to inflation and increased cost of living” and his main goal at the moment is to become debt free.
He goes into work on most days and often makes a breakfast stop at Tim Hortons. Dinner varies depending on whether he cooks or decides “to be lazy and UberEats something.”
On the weekends Malik likes to go out and see friends but he says “this month has been quieter” as he’s trying to cut back on spending to save money for Christmas gifts and other holiday costs.
Can Malik pay off his debt and get his dream property in the Rockies? We asked him to share two weeks of spending to get a better idea of his expenses.
The expert Jason Heath, managing director at Objective Financial Partners.
Malik has a very specific goal in mind to own a property in the Rockies with enough space to have a nice garden and room for his future dog to roam. In order to achieve this, one of his biggest obstacles may be his lifestyle.
In fairness, cost of living has spiked over the past year and he and a lot of others are getting pinched. He says he has limited going out on the weekends in December to save up for the holidays but if he wants to be debt-free, he may need to make it a year-round affair.
I note his week of tracking expenses included eating out or ordering delivery seven times, three trips to the bar, and cannabis and vape supplies. That is a lot of discretionary spending for someone who is trying to cut back. If he wants to get rid of his $10,000 credit card and student debt that has been rising this past year, he is going to have to reduce spending even more or find a way to increase his income. Lower spending or higher earnings are the only two options to boost your cash flow.
It sounds like he works in a profession where he might be able to freelance, subject to his employment contract. That may be a consideration for 2023. He also notes that he goes into the studio mainly because his internet connection at home is too slow. The cost of faster internet at home may be less than ride-sharing or public transit costs, grabbing takeout midday, and the lost time he could spend doing freelance work. Internet access fees are also tax deductible for an employee who works primarily from home.
Malik may want to set a specific goal for becoming debt-free so he can work toward his long-term goals. If he wants to be debt-free by this time next year, for example, he may need to cut $1,000 per month from his spending. Whatever the target is, he needs to be conscious about not pulling out his credit card and going further into debt. That may involve limiting his discretionary spending each week or even each day to a certain limit that he might literally need to put into his wallet and stick to, so he can stay on track.
It bears mentioning that Malik’s current $1,900 rent is equivalent to a mortgage payment on about a $300,000 mortgage, but home ownership requires a down payment over and above and also comes with ancillary costs like property tax, home insurance, and repairs and maintenance. If he wants to buy a place in the Rockies, or anywhere for that matter, he is going to need to find extra cash flow from somewhere in his budget to pay down debt and eventually have the funds to cover those higher costs.
Results He spent more. Spending in week one: $557. Spending in week two: $864.75
How he thinks he did Christmas shopping pushed Malik’s total higher, and with the holidays so close, it’s hard to cut back on that spending.
Take-aways Malik said rising cost of living will continue to make it difficult for him to save but he will make an effort to apply Heath’s advice moving forward.
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