Carlos makes $43,000 as a hospital cleaner in Toronto. He’s about to come into a large inheritance. How should he use it?

Millennial Money is a weekly submission-based series that provides financial advice to millennials. Read the full series here.

At 36 years old, Carlos is about to come into a lot of money due to a family inheritance.

Making $43,000 a year working as a cleaner in a hospital, Carlos is fortunate to have found a place to rent in Regent Park. It's close to his work and just over $1,000 a month. Now, with an estimated $50,000 to $100,000 (or more) coming his way, he wants advice on what to do with it.

I'll be getting an inheritance soon. It's not a big deal or a rush, but with it, I want to invest smartly. Do I buy a condo? A house? Do I open a new account? I am unsure," he said.

On a typical work day, Carlos is able to walk to work and back, saving on transit costs. What does pile up is costs on food - around $450 a month with the majority being on takeout or UberEats costs.

I don't know how to cook well so I often buy food from the hospital food court, after skipping breakfast. I usually order something on UberEats or get takeout for dinner," he said.

Working in a hospital during the pandemic has been extremely stressful for Carlos, and he also acknowledges that he's spent more after things have opened up - especially after overcoming a breakthrough case of COVID-19.

Being in a hospital and cleaning, I've been attached to seeing my friends. I will spend three to four nights out getting drinks with friends," he said. It was hard to test positive after being vaccinated two months ago - and thankfully it saved me from a trip to a hospital bed."

Earlier in the pandemic when things were closed, Carlos saved enough to finally pay off all his OSAP. Currently, he still has $5,000 in credit card debt.

With this money coming in, I don't want to mess it up," he said.

We asked Carlos to share a week of spending to learn more about his habits.

The expert: Jason Heath, managing director at Objective Financial Partners Inc., on Carlos's spending.

Congratulations to Carlos for just finishing paying off his student loan. He is nearly debt-free. He should focus on paying his remaining $5,000 credit card balance off as a priority before investing. It was $15,000 just two years ago so he has definitely been living below his means despite having a modest income.

Once his credit card is paid off, he can start to invest his extra cash flow. His income is relatively low and so is his tax bracket. As a result, he may want to contribute to a Tax Free Savings Account (TFSA) instead of a Registered Retirement Savings Plan (RRSP). RRSP contributions are more beneficial at higher levels of income and higher tax brackets. One exception would be if his employer offers to match contributions to a group RRSP or pension plan that he can take advantage of at work.

He is expecting an inheritance of $50,000 to $100,000 or maybe more. If he has never contributed to a TFSA, his cumulative TFSA room since the accounts were introduced in 2009 is likely $75,500. He should contribute the maximum to get his money growing tax-free. If he plans to buy a condo or a house, he may want to invest the TFSA relatively conservatively to avoid stock market risk.

If he has $100,000 for a down payment, he may only be able to get a mortgage for $125,000 based on his $43,000 income. It could be tough to find a $225,000 condo in Toronto, so Carlos may need to keep building his savings for the time being. Now that his OSAP loan is gone, and his credit card will be paid off, he should be able to save that much more each month. His $1,100 monthly rent in a community housing building is pretty reasonable as well, compared to a mortgage payment, property tax, home insurance and condo fees.

If Carlos plans to rent for the foreseeable future, he may be able to take more risk with his investments. I think the key will be sticking to his frugal ways despite the inheritance. Sometimes, money in the bank or having access to a paid off credit card can be tempting, so Carlos should set some goals on his own or with the help of a financial planner.

Result: He spent less. Spending in week 1: $432 Spending in week 2: $288

How he thinks he did: I made it a big point to try and spend less this week," Carlos said. As a personal challenge to himself, he decided to do a big grocery haul at the beginning of the week to make several lunches and dinners.

I'm not a great cook, but I can see how this definitely helps me with day-to-day spending," he said. I'll challenge myself to do this more without compromising."

Take-aways: For Carlos, the first point on being debt free has been really affirming.

When you're under a cloud of student debt, in the tens of thousands, it's really awesome to take in how much progress you've made," he said, adding that despite pandemic stress, this is something positive he wants to reflect on more.

Moving forward, his priorities will shift to paying off his credit card as soon as possible, as Heath pointed out.

With the inheritance coming soon, Carlos is now making sure he can get his ducks in a row, starting with opening up a TFSA. It's true that because I don't make too much money I want to make sure that I'm doing what I can to save properly. The TFSA sounds like the best option," he said.

He's also making a big decision on what he wants to do about his living situation. I mean, nothing is wrong with renting for life especially because I do like living in this space," he said. I'll weigh my options and see if I need to invest in real estate."

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

Digital design by Cameron Tulk.

Evelyn Kwong is a Star team editor based in Toronto. Follow her on Twitter: @evystadium