A Lesson In Extreme Cost Cutting

MNP's TAKE: If you're a post-secondary student or the parent of a post-secondary student, this time of year can be especially hard on your finances. Pair increased tuition prices with a soaring cost-of-living, a weakened loonie and a struggling economy and we've got ourselves a perfect storm for back-to-school financial distress.

When it seems like you're back-to-school expenses are endless, it can be easy to turn to credit for a quick buffer as one bill leads to the next. Credit reliance however, can also be an easy trap to fall into, one that's incredibly hard to get out of. Before you pull out your credit card or dig deeper into a student line of credit, try sitting down to create a detailed budget that really addresses your financial situation from a 360 degree perspective. Once you have a deeper understanding of exactly where your money is going, you might find room to cut costs and ensure you're getting the most out of post-secondary studies without putting your long-term financial well-being at risk.

If debt has already started to take hold and you feel trapped, you still have options. Depending on your circumstances, there may be several solutions available to help you get on track to achieving a fresh financial start. Contact Grant Bazian, CIRP, President of MNP Ltd. at 778.374.2108 or grant.bazian@mnp.ca for information on what debt solutions are available to help you.

BY ROB CARRICK FROM THE GLOBE AND MAIL

One postsecondary student is pushing the reset button on his spending habits to show peers just how much they could be saving

A 21-year-old university student is taking on the consumer culture that turned back-to-school season into spend-o-rama.

Jahnome McEwan plans to go through the entirety of 2017 without spending on anything but necessities and a dinner out now and then with his girlfriend.

Spending on everything else – clothes, electronics, socializing with friends – is out.

“We’ve been trying to figure out ways we can save our money,” the York University student said in an interview. “We decided, let’s just do a complete paradigm shift and not spend at malls at all. Don’t buy clothing, don’t buy anything for a full year. See how much we can save, see how much we can invest. Do the complete opposite of what’s going on.”

Right now, what’s going on is a back-to-school season that ranks second only to winter holiday shopping in terms of how much we spend. Inflation’s up 1.3 per cent on a year-over-year basis, yet a recent poll of 1,506 parents suggested spending on school supplies, clothes and such will on average rise 43 per cent over last year. The poll, commissioned by coupon website RetailMeNot.ca, pegged average spending at $472 per child.

Schools are demanding more spending from parents, but there’s a discretionary aspect to all of this.

It feels normal to us to spend more from year to year on ourselves and our kids, and so we do.

Mr. McEwan understands this urge to spend because he has given in to it. He has a taste for the finer things – he particularly likes watches – and admits to carrying a credit card balance. In an e-mail he sent me, he admitted that he and his girlfriend shop a lot at high-end stores.

“We figured it would be interesting to see how much we could actually save in a year by stopping,” he wrote. “Our aim is to show ourselves how much we can save to invest at our young ages by cutting our costs to the highest degree possible.”

He’s young and he has made mistakes, but Mr. McEwan is an example to us all about handling money. Though he’s still completing an undergrad degree at York combining English and marketing, he’s the author of a self-published book of financial tips for young adults called 50 Rules for 50 Fools. He’s also an active investor who has a goal of reaching $1-million by the age of 35.

Here’s his plan for the year ahead: Save 70 per cent of the money he earns through the 30 or so hours he works every week at a home improvement chain, and save or invest it. Ideally, he wants to put $5,000 a year into his investment account annually over the next several years. To accomplish this, he intends to spend only on necessities such as food, transportation and stuff for school.

The most basic way to improve your finances is to cut spending, but not everyone can do this for reasons that include low-paying jobs and family obligations. Mr. McEwan’s challenge is peer pressure. People want to socialize with his girlfriend and him, and he’s had to say no a lot lately.

“People are saying you’re crazy, you’re too young,” he said. “They call me cheap, although I’m still spending. I’m just not spending on things that give me immediate gratification.”

There’s definitely some immediate gratification in our back-to-school spending habits. We’ve gone from equipping children for school with such necessities as paper, pencils and some new clothes into a complete annual refit of supplies, clothes and electronics. Mr. McEwan is opting out this year. He’s got his cellphone, laptop and winter gear ready to go and doesn’t plan to buy any more.

He said his financial reboot was made necessary by his use of credit cards, which is noteworthy because of how easy it is for postsecondary students like him to get credit cards these days. Mr. McEwen used his card often to generate travel reward points and found he was unable to pay his balance in full when the bill arrived. Lately, he has been using his paycheques to hammer down the balance.

Based on his past spending history, some of Mr. McEwan’s friends question whether he’ll be able to disconnect himself from our consumer culture.

He insists he’s committed to saving and investing ahead of spending. “I have tunnel vision,” he said. “I don’t let anything get in the way of the goal I’m trying to achieve.”

Follow me on Twitter: @rcarrick

This article was written by ROB CARRICK from The Globe And Mail and was legally licensed through the NewsCred publisher network.