More Money Podcast - 033 Millennial Money Matters - Rob Carrick, Personal Finance Columnist for The Globe and Mail

Episode Date: January 20, 2016

I discuss the biggest money matters for millennials, such as student loan debt, unemployment, going back to school, and buying a house with personal finance columnist Rob Carrick from The Globe and Mail. Long episode description: I was incredibly nervous to interview Rob Carrick from The Globe and Mail for this podcast episode. I’ve been reading his words for years and when it comes to personal finance, he really knows his stuff. But since Rob is such an awesome guy, when I cornered him at the Canadian Personal Finance Conference this past fall and begged him to be on my podcast, he was kind enough to say yes. Highlights from this Episode I love this episode so much because we talked about one of my favourite topics — millennial money matters. As a millennial who’s mission it is to help other millennials understand the core concepts of personal finance so they can take control of their lives and prosper, well it was more than a treat to talk to someone as passionate about educating Generation Y as I am. We start off with discussing two of the biggest downfalls of post-secondary students: budgeting and taking on student loans. The facts are that students don’t budget (hey, I didn’t even know what a budget was when I was in university) and they take on student loans without truly understanding what it means to be indebted. It’s no surprise that most university grads are drowning in debt and don’t know how to manage their money. On top of that, many students are going to university because they believe that’s the right step to take in order to have a successful career down the road. Unfortunately, that’s just not the case anymore, and many graduates are having a hard time finding a job in their field and have to get a professional certificate for an applied skill just to get their foot in the door (myself included). Another big topic we discussed was housing. I wrote a lot about my experience house hunting in Toronto last year, but in the end I backed off and chose to continue renting instead because it just didn’t look like a good investment. It may have been 10 years ago, maybe even 5, but that just isn’t the case anymore. It was for Generation X and the Baby Boomers, but I agree with Rob in believing that more millennials need to proceed with caution when it comes to investing in property. Shownotes: jessicamoorhouse.com/33 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, and welcome to episode 33 of the Mo Money Podcast. I'm so freaking excited for my next guest because he's kind of a big deal. He's probably one of my biggest guests. No offense to all of my guests. You're all special in my heart. But this guy, I've been reading his columns, his articles for years. Even before I started my blog four years ago, I've probably been reading his articles, honestly, since high school. I'm not going to lie. Who am I talking about? I'm talking about the one and only Rob Carrick from The Globe and Mail. He is such a delight.

He was such a delight to talk to. So informative. He's always one of the keynote speakers at the Canadian Personal Finance Conference. And when I was there, I kind of just bombarded him. I'm like, please be on my podcast. And he was nice enough to say yes. So I'm very excited to share this episode with you. We talk about a lot of stuff, specifically millennial money issues, housing, which I'm pretty passionate about, and a whole other bunch of stuff.

So get ready for one of my favorite podcast episodes ever, episode 33 with Rob Carrick. Thanks, Rob, for joining me on the program today. I really appreciate you taking the time to talk with me. No problem. So since you are a financial expert, and I've been reading you for years, by the way, I don't think you've known this, but when I was just starting to get into personal finance and blogging, the Globe and Mail in your section specifically was kind of the only section in the newspaper that I read. And kind of still, you're kind of the only reason I go to the Globe and Mail. Good. Well, I appreciate that. I'm glad you find something to bring you to

the Globe. Absolutely. So since one of the things that you do besides writing for the Globe is you also go to universities and teach financial literacy to post-secondary students, I thought we can kind of talk about millennial money matters. Sure. Glad to do it.

Awesome. So I guess what I'm kind of curious about, especially since you do talk to a lot of post-secondary students, what are some of the biggest, I guess, concerns that you're hearing from people that are, you know, in university or about to graduate that are about to embark on their kind of outside of school lives? Well, it's interesting. You know, the ones who are still in university, who are, I guess, first, second, third year, their biggest concern is budgeting and getting by from week to week and month to month. A lot of them are not sure how all the numbers are going to work. And so just basic financial survival is what they're thinking about.

And the ones who are graduating are concerned about repaying their debt. And that's natural because six months after you graduate, you will have to start repaying your loan. Although if the liberals act on one of their promises, you will not have to start paying until you have a job paying at least $25,000. But regardless, I think debt repayment becomes the number one concern in year four for sure. And do you think that most students literally haven't thought about that while they're in school?

It's only kind of when they're on the cusp of graduation? I think so, yeah. I recently looked at an interesting study that York University in Toronto students were polled along with about 18,000 U.S. students about their attitudes about debt. And one of the things that came through was a lot of the students in borrowing money didn't consult with anybody else. They just basically made it up on the fly how much they thought they needed and how much they were going to borrow. So that to me sort of highlights how there isn't a lot of thought going into taking on debt. Students know they don't have enough money to pay. They know they need to borrow, but they're kind of making up as they go along. And that's part and parcel of not really thinking too much about the repayment. It's all about just getting by in the here and now.

Is that right? And you find that most students will go to a student loan before even thinking about, hey, maybe I can get a scholarship or maybe there's a bursary or a grant or something like that out there. Well, yeah, I think they may do that. I think the availability of scholarships and bursaries is a little bit overblown. It's sometimes made out to be that if you just go and look in the cupboard, there'll be something for you. And I think that's probably raising expectations beyond what's really available. I certainly think bursaries and scholarships are worth checking out. And they may be a piece of the puzzle about how you're going to afford things.

But I think a lot of kids are going to say, here's what I've got. Here's what my parents got. Here's what I can get in scholarships and bursaries. And I still need to borrow a chunk of money. And another thing that I was kind of wondering, and it's because, you know, when I was in school, I kind of went the route where I did look for scholarships and bursaries first because my parents, you know, were a little bit savvy on that front. And also I had to pay for my own school. So they're like, check that first before getting a loan. And so I did, and I did get a scholarship for my first year. So that helped me out a bit. But I

also worked two years in high school and all throughout university. And a lot of my friends in university, they didn't have a job. They said that they needed to focus more on doing well in their studies and then they'll figure that out later. Do you find that that's kind of a trend with post-secondary students that they aren't, you know, thinking so much about, oh, I can earn while I go to school and that might help me with taking on less debt? Yeah. You know, I think, I think there's a real mix out there. Some students are working and probably working so much there, it's affecting their studies. And I'm not convinced that's a great thing because you're taking on debt

as an investment in your education. If you're not getting the most out of your education, it sort of calls into question the whole process. But yeah, I think some students just think I'm going to concentrate on school. I'm not going to work. But I think if you do that, and that's legitimate as long as you're out there

getting good marks and maxing out the value from school. But if you're going to do that, it puts a lot of onus on you to get a good summer job and work hard from basically May through the end of August. No, that's very true. So besides, I guess, student loan debt, which is definitely, I'm sure, a big topic with students, what other kind of things are they worried about, I guess? One of my concerns, because I didn't really have a huge student loan when I was graduating, but my biggest concern was how am I going to afford to live? I mean, I graduated with a film degree and arts degree, so I didn't have that many options,

probably less options than if I went and got a marketing or a business degree. But I was more just concerned with the budgeting, but also how am I ever going to afford some of those things that I think I'm supposed to have as an adult, like a house or investments, retirement, all that kind of stuff. Yeah, I think they're trying to figure out where they fit in the economy. I think that's where it comes down. So yes, they're exactly looking at all the issues you just said, but they're also wondering how am I going to get a job period? So it's like a two stage process. One, I have to find employment and two then I have to start thinking about how I'm

going to start affording the things I want. I want basically want to get on with their lives. They want to travel. They want to start accumulating money for a house maybe or saving for retirement or building an emergency fund or, you know, moving out, all that stuff. But I think what students have to do to get ready for this before you graduate, well before you graduate, maybe even before you even go to university, you have to be thinking about what am I studying and how am I going to make that interesting to employers? So it may mean strategizing a bit about what you study and thinking what's in demand in the workforce today and how will I meet those requirements. So some students, I think there's a trend for people

who don't think hard about this sort of thing to think, okay, I'm going to graduate from this degree, now I'm going to get this degree, now I'm going to get this degree. And, you know, more, more courses and more education and more debt isn't the answer, but I think you might want to strategically think about, uh, maybe a one-year college certificate on top of your undergrad degree. That might be a good investment to, to get you into the workforce. And then once you're in the workforce, you know, um, I don't think you have to like have it all figured out immediately. You can go get yourself a place, rent a place, see how your cash flow is, try to save a little bit. And you're entitled to live a little bit and not be financially responsible immediately after you're employed.

And you brought up a really interesting point. And I do find this is a bit of a trend with us millennials. We grew up with our parents telling us, oh, you could do whatever you want. You could be whatever you want. And I believed it. I certainly believed it. That's why I got a film degree. And I have lots of friends that also got arts degrees, philosophy degrees, this and that, and graduated with like $50,000 in debt. And they really, and myself included, I didn't really think about what I was going to do after university until it was my last year. And like, oh crap, I need to figure out how I'm going to move out of my parents' place and survive. But, yeah, it's just a tricky thing.

I wonder if it's just because we grew up having this, you know, dream of, oh, we could be whatever we want. I think the you can be whatever you want slash study your passion advice is really not very helpful. It isn't. I agree. From the director of The Greatest Showman comes the most original musical ever. I want to prove I can make it. Prove to who?

Everyone. So the story starts. Better Man, now playing in select theaters. And like you mentioned, I actually went to university. I got a degree, worked a few years, not necessarily in the field that I want to be in. And then I went back and got a certificate. And that helped me kind of jumpstart my career. Yeah, I think that advice is, that's 1970s, 1980s, maybe 1990s for the new millennium. In the new millennium,

you need to have skills that employers want. You can't just graduate with an interesting degree and someone will pick you up because they're always bringing new people into the company. You know, most companies want to hire people on very short-term contracts now. And if you want to separate yourself from the pack, you're going to need to have, you know, good, solid credentials that are in demand right now. And, you know, I hate to say it because I'm a journalist and not really a numbers guy, but, you know, the math and computer science related fields, engineering, that sort of thing, give you a much better chance of good, solid employment prospects immediately after school than some of the other stuff does. But that's not to say you shouldn't study the other stuff, but you just have to think, okay, how can I take this degree and make it into something that an employer is going to want? Exactly. And that's kind of what I've done. And that's what I think lots of people that I know have done. They went to school for something and then they kind of realized a bit later while working a random job what they want

to do. And then they figure out a way to, okay, how can I make the skills that I have that may not be even related to my degree, but how can I make it interesting for, you know, the employer that I eventually want to work for? Yeah, you know, ideally, high schools would be wising kids up like grades 11 and 12, saying, you're going to be picking your courses for university let's review what professions are in demand what the starting salaries are what the employment and unemployment rates are like you know what the percentage of full-time jobs are versus contract jobs and then you go back and think about what you're good at and what you

want to study and these statistics that we've just shown you then at and what you want to study. And these statistics that we've just shown you, then you decide what you want to do. Give people more facts. And I think they also need to stop assuming that the ideal thing, what's really best for everybody is to go to college or university and start doing a better job of, A, playing up the benefits of learning a trade and also the idea of starting your own business, being an entrepreneur. I agree with that. Yeah, actually. And it could be because I'm a blogger. And so I've got a lot of blogger friends that are starting to either just do freelance full time or start their own

businesses. But that wasn't ever anything I learned in school. I thought you had to work for a company and you had to work up, you know, work up your way through the ladder. And that's just kind of always something that I believed in. Both my parents worked for companies as well. But now that I'm getting older, I'm like, huh, I, that's actually kind of interesting. And I really hope that, you know, younger people will realize that they don't necessarily have to find a job at the company, but they can maybe create something that's great and their own business and make money that way. But anyway, you know what, we have to live in the world that we live in. And in that case, you're going to have a lot of people sort of graduating from school.

And I think one thing I'd like to tell them is that if it doesn't all happen for you right away, it's not the end of the world. It's quite widely known that we're going to be living longer and longer lifespans. And today's grads are probably going to live to be 95, 100 years old. And, you know, I was recently reading an interesting article saying that, you know, we currently look at long lifespans as basically you get to 65, and then someone says, okay, you got a bonus 30 years now. But another way we could play that is to say, let's enjoy the extra time all through our lives. And so maybe we don't start working full time until our early 30 a long time and we don't want to spend 25 or 30 years basically doing nothing we want to we want to sort of stay a little active for part of that time so anyway i don't want young

people to think that they're on this timetable and that if they're not locked into a great income by age 25 or 27 that uh that life's over you know what you can afford to take your time and figure it out. And I think, yeah, that's definitely something I've been feeling just as I'm approaching my 30s now. And I'm kind of realizing that the path that my parents went does not exist anymore. And that's just always the frame of reference I've had. And that's true in quite a number of ways. It's true in terms of who you'll work for. It's true in terms of how younger people will save for retirement. The vast majority of them, it'll be entirely on them to save. There won't be any company pensions for them.

You know, so there are home ownership. A lot of today's young people are never going to own homes unless there's a big, big pullback in house prices. Yeah, which I'm not sure is ever going to happen. And yeah, that's another. If it doesn't happen, then the natural reaction will be for, look at American young people. A lot of them have completely opted out of the housing market. Their housing market crashed and it was a long slog for it to stabilize

and start to move up again. So that soured a lot of people. They also had a worse recession than us. So that soured a lot of people. They also had a worse recession than us. So that soured people as well on home ownership. But there's quite a large percentage of young Americans who have no interest in owning a home. And Canadians, though, are much different. Young Canadians all want to own homes,

but they also all can see that they may never own them because of how expensive they are and what their earning prospects are. And, yeah, kind of a joke with some of my friends. I'm like, I think the only way I'm going to own a home is if I buy land somewhere like up North Ontario and build my own tiny house. Yeah. But then you're going to think, but my tiny house isn't near my job. I know. So I'm going to spend all my time commuting or else I'll have to have a job where I can work from home. The problem is, the answer to the expense of housing used to be able to move to the suburbs. But who wants to live in the suburbs? I don't.

A lot of young people don't. Yeah, it's true. I think, you know, there's nothing wrong with renting. You know, there's an important message we can get across to young people. It's that you're not a failure if you're renting. You're making a smart economic decision in a very expensive housing market. And you can rent and be an aggressive saver and end up with just as much money as a homeowner. Exactly. And it's interesting that you bring that up because I was actually just having

a conversation with a friend today. And he lives in the suburbs. He still lives at home with his parents, but I think he pays rent. But he's seeing him moving to the city. And I live in downtown Toronto for a couple of years, but me and my husband rent. And we did look for a house and couldn't, you know, we just didn't see that it was a good investment. You know what? You made a smart economic decision there. Like we looked at a house and realized we couldn't afford it and we didn't buy.

Now people do that with cars and they do that with clothes and they do that with trips and they do that with electronics. It's too expensive. I can't buy it. But for some reason with houses, they think I've got to somehow make it work and they do that with clothes and they do that with trips and they do that with electronics it's too expensive i can't buy but for some reason with houses they think i've got to somehow make it work and they get money from their parents and they go to alternative lenders who who aren't with the banks and they somehow they make it happen i don't know why people think that they should even if you can't afford a house you should still find a way to get one i know and i think it's just because and when i was talking to my friend he's like no seriously if you crunch the numbers

say if you you know and he had this whole spiel and basically he was just trying to prove that it's still a better option than renting because you will make money down the road. I'm like, well, that's assuming that the economy is, you know, going to be this way and housing prices are going to continue to rise and all this stuff. And yeah, like, yeah, the reason we decided to opt out was just like, my gut was saying you should never buy out of fear. And that's what I was starting to feel like.

I felt like we were being pressured to buy something that I'm like, we should just pick whatever house that is sort of affordable, even though it's falling down. But we'll worry about that later. Yeah, I really wish more young people would take that view. You know what? You know, they're afraid of being left behind by the housing market. But if the housing market leaves you behind, there's something wrong with the housing market. Exactly, exactly.

The housing market won't continue to go up if more and more young people are priced right out. There's not enough rich foreign investors to buy up all the houses that are going to go on sale in the next 20 years as the baby boomers decide, you know what, I'm getting on in years and I don't want to keep up this house anymore. They put them on the market.

There's going to be a big imbalance coming. I see it coming. And unless housing prices somehow move more into line with incomes, but that's going to take a lot of jockeying for sure. Yeah, you bring up a good point because lots of the people that I know that are my age and they want to buy houses, they're afraid that if they don't buy now, even though prices are so inflated and so expensive, if I don't buy now, in five years, I definitely won't be able to afford it.

I'm like, well, you can't afford it now though. And wouldn't it be nice to not have a house, not pay a ridiculous amount on your mortgage and maintenance fees and all that kind of stuff, and then save that money and invest it in a different way. And I think that's something that young people, they don't really think about. They always kind of think that housing is the best investment you can make, but there's other options to invest. Well, you know what? The housing is great message comes from their parents. Exactly. Who, you know, most, you know, for most people of, you know, Gen X and baby boomers, you know,

their biggest financial home run in their whole lives was buying a house and owning it for 10 years. I mean, it was the easiest thing they ever did. And they made, you know, on paper, they've made tons and tons of money. And of course, they believe that is the one true path to financial success in life. But you know what? I've written columns on this and it's pretty clear. If you're a renter and you invest the savings you realize by not owning, and those are considerable savings, you could end up with a investment portfolio of equal or greater value than the homeowner. And that's liquid money. The homeowner owns a block of property.

It's not a cash machine. There are ways of getting cash out of your house, but they usually have to pay interest to do it. The renter who invests has got an investment portfolio. You can do anything you want with it. It could be for retirement. It could be for a sabbatical year. It could be for traveling.

It's wide open. And I think if young people thought more about it, they'd find, I think a bunch of them would think, you know what, I'll go for the rental and investing option and enjoy the flexibility, I guess. Well, exactly. And that's part of the reason we decided to rent too, is we really enjoyed having our flexible downtown lives. We were really close to work. We're able to travel. I was able to go back to school. I mean, if we had owned something, say in Vancouver, we wouldn't have been able to sell it and afford to move to Toronto to try our luck in this city. But because we were renting there, we had the flexibility that we can quit our jobs and we had some cash in the bank. But otherwise,

we literally just started fresh in the city. But we were able to do that because we had the cash in the bank. And we wouldn't have been able to do that if we owned something in Vancouver. Right. And if you want to move to another city for a job opportunity, you're free to do that because we had the cash in the bank and we wouldn't have been able to do that if we owned something in Vancouver. Right. And if you want to move to another city for a job opportunity, you're free to do it. You have to give 30 days notice. I mean, in a tough job market for young people, being mobile is a huge asset and buying a house makes you immobile. And the house has to go up a lot in value to offset the cost of buying it and then selling it again in a year or two. So that's the same reason I'm not a big fan of starter condos because if you buy one, live in it for a few years and sell it, you're probably going to end up poorer even if the condo did appreciate a little in value. And there's no guarantee that's going to happen.

Exactly, exactly. So one thing I would like to talk about is retirement savings. I've always been pretty conscious of it just because I think my parents kind of ingrained in my head how important it was just because, you know, they got married young. They started really poor. And they, you know, always said, you know, when you're our age or, you know, in your 20s, your early 20s, make sure to start saving for retirement sooner rather than later. Not like us. And yeah, honestly, their retirement savings is a good portion is their house, which I know I won't be able to do myself. But I do find that a lot of people my age, and I'm almost 30, they haven't even started thinking. They're just about to pay off their debt or they're still in

the middle of it. But what can you say about, you know, millennials and retirement savings and what things they should know? I think millennials are going to have to get on that pretty quickly. But I mean, I think if you haven't started until 30, no problem. Like, let's not over dramatize this and say you have to start saving the second you start drawing an income. No, you don't. And in fact, you know, people don't save level amounts all through their

lives for retirement. You know, a good, I would say that you really early on, once you've got your student debt paid off, because I'm a big believer in just pounding that down and clearing the decks and then moving on to the next thing. Once you got to that point, you're going to have to decide, do I want a house? If I want a house, you're probably gonna have to put all your savings resources into building a down payment and forget retirement, just get the house. And then, um, you let you, you try to find a retirement savings room after you bought the house. And anyway, most people, if they put money in an RSP, end up taking the money out to buy the house through the home buyer's plan. But I think, um, I think, you know, by age 30, you should have a, you should be

committed to putting away 10% of your income, your gross income, for retirement and getting used to that, making it automatic and do that for 30 or 40 years and you will be all set. But, you know, it's starting early and committing to it and not making it discretionary, not doing that nonsense where you wait until RRSP season and try to find the money. You contribute to your rsp or your tfsa whatever you're using for retirement every time you get paid you make it automatic and you uh you know 30 years down the line you will be amazed at how smart you feel for what you did and well i've been doing like those automatic withdrawals for every paycheck for i guess i don't know since my first job five years ago. And I think the thing that people don't really realize is like, not only is it a great financial decision, but it takes the thought process out of it. You don't have to think about it. It just

happens. And then you're like, oh, look, there's money in the bank. Yeah. And the more people are thinking about it, the more they're thinking of excuses not to do it. So the automatic thing is great. But like I say, you're going to come to a fork in the road, house or retirement. And if you're the renter who's going to be saving, you can sort of divide up all your savings money into, let's say, two-thirds goes for retirement and one-third goes for short and medium-term goals in your life. But retirement should, you know what, all millennials should be thinking about their plan of when they're going to start saving for retirement. It doesn't have to be over

in a set year or a set point in life, but if you're not going to have a pension, it's all going to be on you. CPP and OAS are going to be just a piece of the puzzle and you're going to need to have your own savings. Absolutely. Absolutely. Well, yeah, I think those are kind of everything I wanted to talk about. It was a pleasure talking to you, Rob. No problem. Glad to do it. I find that the millennial predicament isn't something that the mainstream media seems to want to talk about much. So I feel it's sort of wide open to me. And I've got two sons. One's 18 and one's 21. So it's an area of personal interest. And, you know, I hope that millennials will read the Globe and Mail too to find out about personal finance aimed at them

and not just, you know, the older population. Absolutely, absolutely. Well, thanks again for joining me. I really appreciate you taking the time. Glad to do it. And that was episode 33 of the Mo Money podcast. Make sure to check out the show notes at jessicamoorehouse.com

slash 33. Thank you again to Rob if you're listening for being an amazing guest. It was such a pleasure to talk to you. And of course, if you loved what you heard, which why wouldn't you? It was a great episode. Please leave me an iTunes review or a review on Stitcher. I'd really, really appreciate it. And yeah, that's really all I got. So see you here next Wednesday, y'all. This podcast is distributed by the Women in Media Podcast Network. Find out more at womeninmedia.network.