After a divorce, Patty, 49, sold her Toronto home for $1 million, and is finally financially independent. Living a frugal life, should this cleaner now put her money in the stock market?

Millennial Money is a weekly submission-based series that provides financial advice to millennials in the GTA. This is a special edition, featuring someone who is Gen X. Read the full series here.

Patty, 49, has spent more than 30 years of her life working as a cleaner in other people’s homes making around $3,000 a month. After leaving an abusive marriage and selling the Toronto home she shared with ex-husband for more than $1 million in March 2020, she wants to be able to take back control of her finances.

“I decided I couldn’t live in that house anymore,” Patty said. “I needed a fresh start.”

She combined the $200,000 she made on the house sale — after paying a backlog of unpaid property tax bills, splitting funds with her ex-husband and giving money to their three kids — with her savings to buy a two-bedroom condo in Markham.

Currently, she lives there with her daughter and their dog.

“I feel very lucky now but I endured a lot to get to financial independence,” Patty said. This includes working 60-hour weeks for most of her life, bouncing from home to home, to help raise her children, cook and clean.

She started with one cleaning job back in the 1990s after moving from Hong Kong to Toronto. But after learning a little bit of English here and there, and connecting with the Chinese-Canadian community, she was able to find more work.

When the pandemic hit Canada, Patty lost some of her employment in the first lockdown. “I also applied to CERB, but it was quite difficult to do and I had to bother my daughter to do it,” she said. Then restrictions eased and she was able to return to work.

In a typical work day, she takes the TTC and York Region public transit to her employers’ houses. She packs her own lunch from the regimented one-week grocery shopping she’s stuck to since she moved to Canada. “I don’t spend money on myself at all. Just the essentials,” she said.

Recently, their dog had to be rushed to the vet. “It was $500 for a checkup. For medicine and better food, I think our prices will go up a bit, but it’s OK.”

What she wants to know is how to invest for her kids’ futures. “They’re all done school, but I want to know what stocks to buy. I also heard about bitcoin,” she said. “I just want to be smart with my money because it’s mostly just sitting in a bank account now.”

We asked Patty to share a week in expenses to get an idea of her finances.

The expert: Jason Heath, managing director at Objective Financial Partners Inc., on Patty’s savings.

Patty is a great example of both failure and success. Sometimes, a so-called “failed” marriage can mean a successful fresh start. She has also been successful financially despite a failure of people to pay her fairly. She makes $40,000 per year working more than 60 hours per week, which is less than a $13 hourly rate. The current general minimum wage in Ontario is $14.25.

She works for four different households and has no car. She takes public transit to four different locations, all in the middle of a pandemic. She clears $3,000 per month and only spends $2,000. She’s paid less than minimum wage and she manages to save every month. Granted, she has a fully paid-off condo. Her big splurge is $20 a month on Hong Kong pineapple buns.

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Her frugality has put her in a position where she can think about investing her savings. In her mind, she’s saving for her kids, which is noble, but I think she may have her priorities wrong. At some point, she’ll stop working, and she’ll need an income in retirement to cover her modest expenses. Old Age Security (OAS) pays a maximum of $618 per month at age 65 currently, and that number will grow over time with inflation until Patty retires. She’ll have some Canada Pension Plan (CPP) retirement pension entitlement based on her contributions, but her income is below the year’s maximum pensionable earnings. That means she won’t likely receive the maximum CPP (currently $1,204 per month at 65).

There is a supplementary pension for low-income OAS pensioners called the Guaranteed Income Supplement (GIS). Her combined CPP/OAS/GIS could exceed her $2,000 monthly spending, but she may need some savings to help fund even a frugal retirement. On that basis, I think she needs to save first for herself and think about her kids second.

My worry is what if she has some sort of injury or illness that prevents her from working? She may not have disability insurance coverage and her employers may not be paying Workplace Safety & Insurance Board (WSIB) premiums to cover her in the event of a workplace injury or illness. Not everyone who wants to work until 65 is able to do so.

In her case, I would start by opening a Tax Free Savings Account (TFSA). Her income is probably too low to benefit from Registered Retirement Savings Plan (RRSP) contributions. She likely has the maximum cumulative TFSA room of $75,500 if she has not contributed in the past.

She asks about investing in the stock market and crypto. Stocks are a great way to grow wealth. They may be volatile in the short run but should provide 6-8 per cent annual returns over the long run for a patient investor. She should consider as aggressive an allocation to stocks as her risk tolerance allows and try to keep her costs low.

I don’t think I would be considering cryptocurrency for a new investor. Digital currencies are speculative. Patty should start with a diversified portfolio of stocks and bonds.

The result: She spent less. Spending in week 1: $1,109 Spending in week 2: $247

How she thinks she did: “My spending seems a lot lower, but really it’s because of monthly transit passes and the emergency for my daughter’s dog,” Patty said.

Overall, she has always been quite frugal. “I get those Chinese buns because they’re quite cheap and filling.”

Take-aways: “I didn’t know I was working under the minimum wage!” Patty said. Her wages are different depending on each employer and how many hours she works as it ranges from 50 to 60 any given week. “I think I will have to ask those who pay me lower than $14.25 for a raise, even closer to that number if possible,” she said.

One thing she hadn’t considered is saving for herself. “I always think I’m going to be OK and I have to give a lot to the kids,” she said. Moving forward, she’ll still prioritize savings that she can eventually give to her children and potential grandchildren, but she’s more conscious now that she needs to put some money aside in case she gets injured. “Just last week I sprained my ankle and had to tell work I was sick. That’s an example of something that could happen, I guess.”

Finally, with the money she has, she’s going to open a TFSA, as per Heath’s advice. “I want to make sure more than anything my money is safe.”

Are you a millennial living in Toronto or the GTA who needs help with saving your money? Be a part of #MillennialMoney and email ekwong@thestar.ca



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