Millennial Money is a weekly submission-based series that provides financial advice to millennials. Read the full series here.
Arriving in Toronto from Indonesia three years ago as an international student, 24-year-old Saul fell in love with the city.
That’s why he envisions his future here, whether it’s finding a career or starting a family.
The problem? He struggles to get permanent residency, which he can only acquire after landing a full-time job for at least a year in his field of marketing.
“I want to have a future here in Canada, but I have to find an employer who will sponsor me or let me work for a year,” he said. “It’s harder than I thought.”
Currently, he works as a waiter in a restaurant, earning around $30,000 a year while doing an unpaid internship. He hopes to eventually expand his portfolio and take on freelance gigs that are more in line with his schooling.
While he has $15,000 in looming student debt, he said he was lucky to have found $600 a month’s rent living with another international student.
He’s also obsessed with keeping costs low.
“I usually make food at home. If I’m in a rush, I eat frozen dinners or lunches before going to my service job or my internship twice a week,” Saul said. “I try to keep costs low because I earn minimum wage.”
Saul has also invested in an electric bike, at $250, which he uses to get around town. “I spend next to nothing on transportation,” he added.
While he lives frugally, he still has worries. First, pay off student debt. Second, he wonders if he needs an emergency fund. “I just hope I’m in a safe place if something suddenly happens,” he said.
Then it’s about finding an employer who can help him extend his stay here.
To get a better idea of her finances, we asked her to share a week of her expenses.
The expert: Jason Heath, Managing Director at Objective Financial Partners Inc. on Saul’s situation
Saul came to Canada as a student and hopes to obtain his permanent residence. The challenge is that he lives in an expensive city – Toronto – and works as a waiter for minimum wage.
He is careful with his money so that his after-tax monthly income of $2,000 lasts the month. He shares a one-bedroom plus den at $1,200 a month with another international student. He lives near his work and uses an electric bike he bought for $250. When traveling longer distances, he takes public transport instead of carpooling or taxis. He cooks his food at home and tries not to dine out.
An additional challenge in Saul’s case is that he has a student debt of $15,000. The federal government has suspended the accrual of interest on Canada Student Loans until March 31, 2023, but this does not apply to the provincial portion of Ontario Student Loans. The provincial rate is based on the prime rate plus one percent, and as rates continue to rise, interest charges will also rise.
The federal portion of a student loan may have a floating interest rate with prime (prime plus zero percent) or may be based on a fixed rate of prime plus two percent. The default option is a variable rate that changes with the prime rate, but you can switch to a fixed rate once you’ve finished your studies and enter the repayment phase, like Saul. Since interest rates have already started to rise, it’s unclear if it’s best to switch to a fixed rate and increase your rate automatically by 2%. It’s an option for those who are worried about rising rates, but once you switch to a fixed rate, there’s no going back.
Saul wonders if he should create an emergency fund. I think if he can build up a small cash reserve, that would be desirable. Emergencies happen when you least expect them. As her student loan interest increases, paying off that debt becomes more urgent. But given that you can pay off your Ontario loan over nine and a half years and your federal loan over 14 and a half years, it’s probably a good idea to focus on any credit card debt first and a small emergency fund. .
If Saul is having trouble finding a job that pays more than minimum wage, he may consider moving to a less expensive city. Minimum wage is the same across the province, but rent can be much lower outside of Toronto. Of course, he may be more likely to find an employer who can sponsor him in Toronto, so there are pros and cons to staying put.
Results: He spent less. Expenses week 1: $134.50 Expenses week 2: $737
Take away food: Although he hadn’t thought of it, Saul realizes that if his rent goes up – or other emergencies arise – Toronto might not be the best place for him.
“I really like the city and the experiences here, but the tips make me think,” he said. “Maybe I should think about other options.”
He recently contacted a friend who moved north from Collingwood to work at a hotel, to find out more about life there. “It’s just good to have options at this point,” Saul shared.
Learning more about the breakdown of student debt, Saul explained his frustration with Ontario’s repayment program.
“It’s a pandemic time,” he said. “How can we survive without help? »
Fortunately, Saul has already opened a savings account and will continue to pay off his debt. He now hopes his internship will turn into a full-time job.
“Maybe things are looking up for me because they like me during my internship,” Saul said. “I will continue to save money, work hard and hope to be able to apply for permanent residency soon.”