Millennial Money is a weekly submission-based series that provides financial advice to millennials. Read the full series here.
As a professional dancer, 28-year-old Kate’s life is busy and often unpredictable, frequently travelling for shows and teaching on the side.
Since she’s a freelancer and her salary varies between $50,000 and $60,000 per year. She’s wondering if it’s possible to save up to $10,000 a year and eventually invest in property.
Her busy schedule means that she doesn’t often feel like she has time to cook at home, meaning Kate spends a lot on takeout meals and coffee while she’s on the go. Right now Kate says she’s on tour, meaning she’s jumping between cities frequently and almost always in rehearsal.
On a typical day, Kate makes breakfast at home before heading out to rehearsals, costume fittings and her side job as a dance teacher. For lunch, she grabs something to go — usually “something of the fast-food genre,” Kate explains, adding she rarely cooks dinner and often orders in.
Weekends are rarely a reprieve from her busy schedule because performances happen on any day of the week. When she does have a day or two free, Kate goes out with friends to a bar or nice restaurant, and sometimes meets friends for a morning walk and coffee.
Kate wants to know how she can make her money work harder for her so she can build up her savings and eventually move out of the three-bedroom house in Little Italy that she shares with two roommates.
We asked Kate to share a week of her spending to get a better idea of her expenses.
The expert: Jason Heath, managing director at Objective Financial Partners Inc. on Kate’s situation.
Kate is a 28-year-old professional dancer with a good grasp on her budget, even if she is not saving month to month. Most Millennial Money participants list off monthly expenses well under their after-tax income, suggesting they should be socking away a lot of savings. Some certainly are saving, but many are cash flow neutral or even negative, struggling with debt, meaning they are probably underestimating their spending.
Kate’s budget is almost $4,000 monthly and her after-tax income is about the same. If she wants to achieve her goal of saving $8,000 to $10,000 per year, she can only do so by increasing her income or decreasing her expenses.
As a professional dancer, her income is variable, but she has the opportunity to work more and earn more. She arguably has more control over her expenses and there are a few things that stick out. She buys her lunch on the go most days, usually at a fast-food restaurant. A $10 submarine may not seem like much, but you could probably make a sandwich at home for a couple bucks.
She orders dinner for delivery most nights. The food costs are more expensive than cooking yourself to begin with and delivery fees and a tip adds to the cost.
Cutting back on takeout and delivery seems like low hanging fruit to try to improve cash flow and start saving.
I notice Kate does not have any insurance cost in her monthly budget. Given she earns her living from dancing, if she were to have an injury, that could limit her ability to work. Disability insurance could help mitigate that risk and replace a portion of her income if she cannot work. That could be an added expense, but a consideration for her overall financial planning.
Given Kate’s income changes from month to month, her saving should likely start with an emergency fund. A Tax-Free Savings Account (TFSA) with a high interest savings component is probably best. Over time, she could consider medium term savings for a home or long-term savings for retirement in riskier stock market investments. It will require delayed gratification though and living below her means.
Results: She spent less. Spending in week one: $1,788.85 Spending in week two: $512.
How she thinks she did: Kate feels much better about her spending after two weeks of focusing on her finances, she says.
“I was definitely more conscious about spending on food,” she says. Over week two, Kate purchased groceries and only went out for dinner twice — a major decrease from the week before.
“I did my best to make as many meals as I could, even during my busier days,” Kate says.
Take-aways: After a week of closely watching her spending, Kate feels like she’s in a better position to start saving.
Being money conscious can be “stressful, but also rewarding in a way,” she says. On her work days, she tried to pay attention to where her cash was going.
“I was hyperaware of each time I went to make a transaction,” Kate shares, adding she’s planning on pursuing some of Heath’s suggestions for increasing her savings and possibly adding insurance to her monthly budget.
She also put a lot of effort into choosing not to spend money she had on hand. Overall, Kate is looking forward to making her changeable income work harder for her.
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