Who are Millennials?
If you are in between the ages of 18-34, as of 2015 you are classified as a “Millennial”. Every generation has their own battles, experiences and outcomes that shape and mould their views and actions.
Millennials grew up with extreme changes in digital technology and the birth of the internet era. They are seen as the generation that seeks peace, wealth, travel and are mainly liberal. This is the generation that stays at home longer, puts marriage and children off longer than previous generations and are more focused on developing their careers first. They are against animal testing, have a more ‘laxed’ idea on debt and are focused on being fit and eating well. They are more of a global citizen than just a group confined to their local surroundings. They can become very passionate about various causes and can be very vocal about making change happen.
Millennials are inundated with information as well as opportunities. The internet, social media, Youtube and so on has provided new social and monetary streams for this generation. With their current environment, how do Millennials handle their finances, or at least one particular Millennial?
The monthly budget we’re going to analyze comes from a “Globe and Mail” article published on May 10, 2016. It is part of the Newspaper’s “Pay Cheque Profile” series and its entitled “Downtown Toronto on $60,000 a year: What a Millennial spends.”
In the article we’re presented with the profile of a 27 year old Millennial named Nataleigh. Nataleigh lives in downtown Toronto (which can be quite pricey) and this is her finances at a glance:
- Makes $60,000 a year
- Has $1000 in the bank
- Has $2000 in mutual funds
- Owes $200 on her credit card
The article gives us a break down of what Nataleigh spends every month. The purpose of my post is to highlight habits and potential savings that might inspire you to do the same with your monthly budget. Because you will see that Nataleigh’s expenses may not differ from yours at all.
The article only mentioned Nataleigh’s annual salary which is $60,000. Since I am in Canada, I used the Canadian Tax agency’s payroll deductions calculator to figure out Nataleigh’s monthly after tax income because let’s be honest, after tax income is all that matters when looking at your budget.
There are many online salary calculators but I just decided to go straight to the tax source (CRA). I have decided to input her salary as being received on a semi-monthly basis to keep things simple.
At $60,000/year if she gets paid semi-monthly that comes up to $2500 pre-tax or $1872.24 semi-monthly. (Bi-weekly and Semi-monthly are the two most common frequency of payments for employees).
So her monthly after tax income would be $3744.48.
|Rent||She has a roommate who splits the $1650 monthly cost to live in downtown Toronto.||$825|
|Food||Includes groceries costing up to $200, dining out at $240 and coffee at $20.||$460|
|Commute/Travel||Includes $150 on gas and $160 on insurance.||$310|
|Utilities||includes $60 for Hydro, $60 for Cell phone service, $80 for Internet and TV and $10 for Netflix||$210|
|Total Living Expenses||$1965|
|Online Courses||Monthly design courses||$40|
|Gym Membership||Nataleigh has a Gym in her building which she can use for free, she plans to cancel but never gets around to it||$66|
|Pets||There is also an annual checkup that costs $200 which she splits with her roommate who has has a dog.||$50|
|Personal Events||wedding/trips or holidays.||$310|
|Total Lifestyle Expenses||$706|
Putting Nataleighs total monthly expenses at $2671
Savings has $200 a month allocated. It doesn’t seem to be for any particular reason as Nataleigh doesn’t have an RRSP or TFSA set up as yet.
Total Savings equal $200
There is about $873.48 unaccounted for when looking at income that comes in and income that goes out based on Nataleighs information.
No monthly deficit
The good news is that Nataleigh brings in a good salary for her demographic. This article from Workopolis states that the average salary for those in Toronto was $49, 088 in December 2014. Nataleigh’s income is above that average and is a great starting point when considering she is only 27 years old. She also does not spend more than she makes. A spending deficit is the number one mistake anyone can make with their finances. You can never get ahead by digging yourself deeper into debt, something Nataleigh is avoiding with her spending habits.
Also, she does save a lot in living expenses by having a roommate especially since she’s living in expensive downtown Toronto. Rent alone would have cost Nataleigh $1650 but she saves 50% of that by simply having a roommate. This also allows her to save on utilities and even pet expenses. This particular factor could be seen as a growing trend among Millennials. Without feeling any pressure to marry early on, Millennials are more focused on their individual lifestyles and having a roommate helps them achieve their independence without breaking the bank. Sharing accommodations with strangers or someone you barely know is not an uncommon practice today thanks to the new ideals of this generation.
As for the idea of saving, while $200 a month is not the best, especially since there’s leftover money that’s unaccounted for, at least Nataleigh is saving something every month.
A lot on alcohol
Unnecessary gym fee
Debt (though very minor)
I think spending $240 a month on alcohol is a bit excessive. If Nataleigh would limit her cocktails after work or perhaps find cheaper alternatives, she could cut down on this expense. Many social expenses, like having a drink out with friends, can add up if we’re not careful. So we have to find cheaper alternatives or just limit the outings per month.
Nataleigh could also automatically increase her savings by $66 if she would just simply cancel her gym membership. She has a gym in her Condo that she can use for free but yet she pays $66/month for a membership that is never put to use. This is costing her $792 a year, $792 that could be invested or saved towards her financial goals. The focus on health, which is a big factor for Millennials, is a good focus. However too many people get gym memberships they seldom or rarely use which does not justify the monthly cost. If you’re unable to commit time to going to a gym instead of signing up for a membership, look to alternatives like running or purchasing group deals (like Groupon) for specific short term physical activities (such as boot camps).
The other issue is the $873.48 that is unaccounted for. When it comes to budgeting, every dollar should be assigned a title. This helps in proper planning and even allows for you to make adjustments to the budget as needed. If you’re not recording all expenditures, you won’t even know what needs to be adjusted. This issue could also be a result of Nataleigh underestimating her expenses every month which is a big problem if that is the case. She could be overspending in actuality while in her head she thinks she’s on budget. If the expenses are accurate and there is $873.48 left every month, that’s a great savings and investing cushion that Nataleigh can use to help build her financial future. I don’t want to say this is a Millennial thing, but the current generation needs to do a better job with tracking their spending and sticking to a budget.
Another minor point would be the $200 credit card balance mentioned in the intro of Nataleigh’s financial profile. There’s no mention in her monthly spending of paying that off, which she can easily do. If you can pay off your debts, however minor, pay them off immediately. It creates one less worry for you as you handle your finances.
The point of this article is to show you how to break down your monthly expenses. Sometimes it’s easier to see errors when we’re looking at someone else’s situation. I hope this article inspired you to take note of your monthly income and expenses to help you start the process of fixing your finances for the better.
Ensure you take note of every single dollar you spend. This may seem tedious at first but you will quickly become addicted to tracking your money when you see the benefits. By tracking your spending and budgeting your money, you can take full control of your financial goals and future. Even if you’re not making $60,000 a year like Nataleigh, if you budget and spend less than what you do make, you’ll be on the right track. If you find you’re spending more than you make, sacrifices and cuts will have to take place.
Millennial or not, lots of information and tools are available thanks to the internet. You can find many budgeting apps (check this site for 11 suggested apps) to help you get on budget and reach your goals today.