Shawn, 30, has entered a new chapter of his life: fatherhood.
He earns $50,000 a year as a carpenter, lives with his partner in Toronto, and shares $1,600 in rent. He is figuring out how to pay off a large amount of debt while expecting to spend more on childcare.
“I want to pay off $30,000 in debt after a bad investment,” he said. “It’s not ideal now, especially with a child.”
While he doesn’t spend a lot of money, he also believes in buying organic groceries, which is a bit more expensive. On a typical day, he brings food to work and cooks at home for almost every meal, with the exception of a few weekends when he and his girlfriend have a date night.
“With a baby around, it will change a lot,” he added. “I’ve always believed in organic produce and healthy choices, so I’m willing to spend more to cook at home. With the kid, our food costs and everything else have gone up $600 a month.”
His girlfriend, who is now on maternity leave, earns almost double his income. Still, he doesn’t want to rely on her to figure out his finances.
“I don’t want my partner to pay for it, so it just gets full,” he said. “Also, my work is inconsistent and it’s a bit of a challenge to get my goals together.”
While they are happy in their rental situation, the impending $30,000 debt has really eaten up Shawn. He said he is ashamed that he became a father in this situation.
How can he fight this? We asked him to share a week of expenses to get a better idea of his finances.
the expert: Jason Heath, Director at Objective Financial Partners Inc. about Shawn’s situation
Congratulations to Shawn and his partner on the birth of their baby. It’s an exciting time, but can be financially difficult. They are now a one-income family, but even after she returns to work, their cash flow will be strained by childcare costs and other expenses.
We can start with the good news.
Ontario recently signed a deal with the federal government to introduce $10 per day of childcare by September 2025. The cost reductions will be implemented over time. The goal is to reduce childcare costs by an average of 50 percent for children under six by the end of 2022. Childcare allowances in Toronto are over $100 a day, so Shawn and his partner are sure to take advantage.
The bad news is that kids can be more expensive than diapers and childcare. There are kids activities, clothes and saving for college or university. In Shawn’s case, their family may one day outgrow their one-bedroom apartment. So they could even see their housing costs rise.
Shawn mentions that he does a lot of work in cottage country. That begs the question of whether being closer to work could be beneficial for him and his partner, depending on where she works and what flexibility she can have when she returns. It’s definitely something to consider.
Shawn’s guilt will come with some challenges.
It’s $30,000 and he describes it as “charging”. I’m guessing this means it’s rising rather than falling. He keeps his expenses fairly modest with inexpensive hobbies such as hiking and by eating most meals at home and packing his lunch during the week. You can really only pay off debt or save by earning more than you spend.
There must be a combination of higher income or lower expenditure. If Shawn’s costs continue to rise and his credit card debt continues to grow, he may need to consider talking to a licensed trustee about options, including a consumer proposal. This could be a way to work out a reduced payment plan so he can start over and he and his partner can focus on long-term financial goals for their family.
Results: He spent less. Week 1 spend $1,330 Week 2 spend $472.5
How he thinks he did it?“I think it was typical of how much I usually spend,” Shawn said, adding that his first week split was a time that included rent and car insurance.
“Everything is getting more expensive and I just hope we can go back to a better place.”
Takeaways: The most eye-opening of this exercise? For Shawn, Heath’s advice is to move closer to work and out of town.
“We had a discussion because (my partner) mainly works remotely and is currently on maternity leave,” he said. “We love the city, but it’s impossible to keep up, especially with a kid.”
Shawn is also hopeful for the $10-a-day childcare, but hopes it comes sooner.
“It’s absolutely ridiculous here,” he said. With that in mind, he hopes they can both eventually go back to work while their child goes to daycare.
When it comes to debt, Shawn has always been afraid to tackle it, but at least now he knows the steps.
“Like I said before, it’s embarrassing. But I’ll just have to figure it out,” Shawn said, adding that he’ll be looking at a trustee soon.
“I remain hopeful and just be honest about my finances going forward.”
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