Sep 152017
 

Median Income Grows to $70,336

The results from last year’s national census about family incomes have been released. Below is a table showing how much we all made in 2015. Overall the median national income was $70,336. This means half of Canadian households made more than this number, and the other half made less.

Atlantic provinces and Quebec saw the lowest median incomes for some reason. There seems to be a trend for younger people to leave Newfoundland and Labrador in search of better job opportunities in other provinces. I often hear people complain that jobs pay less in B.C. than in other provinces. According to the data above, it appears B.C. is right in the middle with a rank of 7 out of 13 for household incomes. Not too bad. πŸ™‚

 

Comparing 2015 Incomes to 2005

Keep in mind that inflation (as measured by CPI) has eroded about 19% of our money during the 10 year span between 2005 and 2015. But the data is inflation adjusted to 2015 constant dollars as a commentator pointed out below.

However income is just one aspect of personal finance and doesn’t necessary determine how well off households are. For example just about anyone who held real estate in Canada between 2005 and 2015 would have experienced tremendous growth to their home equity. This wealth could be used to either create passive income or lower their housing costs through gradually reducing the cost of their mortgage over time.

  • To be in the top 10% of all income earners in Canada you would have to make over $93,390.
  • To be in the top 5%, you’d have to earn at least $120,219
  • To be in the top 1%, you’d require an income of $234,129 or higher.

If you want to know exactly how you compare to other people of your demographic, you can plot your income on this fun interactive chart released by Statscan. πŸ™‚ This is for individual incomes. For example, I learned that for my ripe-old-age of 30, my earnings are in the top 10% of my cohort. Not too shabby.

 

Additional key findings from the Census

  • Ontario had the slowest growth in median income since 2005.
  • Fewer children living in low income. But there are more low income seniors.
  • The incomes of 32.0% of couples were fairly equal (both earning from 40% to 60% of the couple’s total income).
  • Same-sex couples have higher incomes. For example, over 12% of male same-sex couples had household incomes over $200,000, compared with 8.4% of opposite-sex couples. (Time to find me a boyfriend, lol. Just kidding.)
  • 67% of the population aged 15 and over reported income taxes. This means about 1/3rd of Canadians didn’t pay income tax in 2015.
  • Of 14 million households, 65% are saving for retirement.

Overall this was a pretty cool look at recent Canadian household incomes. πŸ™‚

 

Sources:
https://www.statcan.gc.ca/daily-quotidien/170913/t001a-eng.htm
http://www.cbc.ca/news2/interactives/census/2016/income/
http://www.cbc.ca/news/politics/statistics-canada-census-2016-income-hightlights-1.4287179

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Random Useless Fact

Aug 172017
 

Holding some cash for emergencies or opportunities is a sound idea. But having too much cash sitting around instead of putting the money into investments can be financially unwise.

Like most things in life, there is a cost component to cash – which is that cash usually produces lower returns than other asset classes such as stocks or bonds. One advantage of holding cash is to deflect volatility in a portfolio. But with a longer time horizon investors can manage volatility by using fixed income vehicles instead of cash. Long term corporate bonds from large, stable companies such as Enbridge pay 3.5% or higher annual returns, easily beating the interest earned in a savings account. πŸ™‚

According to investment management company, BlackRock, people who have allocated their money towards cash or cash equivalent assets actually lost purchasing power in the past. The value of their savings slowly whittled away at 0.8% per year on average between 1926 and 2014. This gives a whole new meaning to cash poor.

Holding cash for one or two years isn’t a big deal because the loss is very small. But over time it can build up to significant loss of buying power. The longer the investment time horizon, the less cash investors should consider holding. For a multi-decade horizon and high return objectives, which is the strategy I’m personally using, having excess cash savings would be a liability because it produces negative real returns. Sometimes the risk is not being aggressive enough with our investment plan and losing out on easy gains.

According to a survey by State Street’s Center for Applied Research, globally retail investors are holding 40% of their assets in cash. Uh oh. If someone has 60% of their portfolio in bonds, and the rest in cash then they could be making zero progress with their portfolio after inflation and tax.

If I’m sure I won’t touch my money until I retire, then I should take advantage of my long time horizon. This is why I don’t keep more than 1% of my net worth in cash, unless I’ve earmarked savings for a large, specific purchase. πŸ™‚

 

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Random Useless Fact

Aug 092017
 

It was a slow month in July. But Β at least I’m back in the black. πŸ™‚ Household expenses were pretty normal, but incomes were above average; I received $800 of interest payments from a variety of loans such as P2P lending contracts and mortgage investment corporation funds. Yay!

Liquid’s FinancialΒ Update

*Side Incomes:

  • Part-Time =Β $1100
  • Freelance = $700
  • Dividends =Β $800
  • Interest = $800
*Discretionary Spending:
  • Fun =Β $300
  • Debt Interest = $1100

*Net Worth: (Ξ”MoM)

  • Assets:Β = $1,111,700 totalΒ (-2,000)
  • Cash = $2,500Β (-2800)
  • CanadianΒ stocksΒ = $146,400 (Unch)
  • U.S. stocks = $91,400Β (-200)
  • U.K. stocks = $19,900Β (-200)
  • RRSP = $83,100 (+500)
  • Mortgage Funds = $31,500Β (+500)
  • Peer-to-Peer Lending = $21,100Β (+200)
  • SolarShare Bonds = $9,800
  • Home = $270,000
  • Farms = $436,000
  • Debts: =Β $481,600 totalΒ (-4,400)
  • Mortgage = $182,500Β (-400)
  • Farm Loans = $188,300Β (-500)
  • Margin Loans = $57,900Β (-2400)
  • TD Line of Credit = $12,400 Β (-600)
  • CIBC Line of Credit = $24,500 (-500)
  • HELOC = $16,000 (unch)

*Total Net Worth = $630,100Β (+$2,400 / +0.4%)Β 
All numbers above are inΒ $CDN.Β 

I took some savings in July and paid down some of my higher interest debts. Now that the cost to borrow is 0.25% higher I have to lower my overall debt to not become overwhelmed by interest payments.

 

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Random Useless Fact

Sometimes tough love is the best way to learn.

Jul 312017
 

One of the best thing we can do with our incomes is to deploy it as efficiently as possible. This means spending money on the highest priorities before paying for less important things.Β In 2015 I created aΒ priorities list detailing how to spend one’s income to maximize financial success. The last time I updated that was chart was last year.

I recently came across another flowchart on the internet created by Reddit user u/atlasvoid. It has a lot more information than mine and is worth a read because there might be something in there that we didn’t think of before. Of course since everyone has different values and priorities, there can never be a once-size-fits-all income allocation flowchart. πŸ™‚ They are only a reference point at best, based on people’s average financial situation. Feel free to move around certain nodes in the flowchart to better suit your own individual circumstances.

Here is the Canadian version. Click the flowchart to make bigger.

 

Click here to download the income flowchart for Americans, created by the same Reddit user.

 

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Random Useless Fact

Some bartender added 1 cent to this customer’s bill in order to make the total come to $69.69

Jul 272017
 

A recent poll from Harvard University points out that 51% of young adults between 18 and 29 years of age do not support capitalism. πŸ™ Only 42% said they support it. Of course the results of these kinds of surveys are not easy to interpret. Capitalism doesn’t have the same meaning for everyone. One explanation for the outcome could stem from the fact that not all millennials understand what capitalism is. They may be frustrated with crony capitalism or corporatism, which is rampant in the world today. But those are not the same as capitalism.

The idea of capitalism simply means a free market system where individuals have the rights to personal property and the enforcement of their contracts. πŸ™‚ That’s it. Another survey that included people of all ages found that only respondents who are at least 50 years old supported capitalism for the most part. Older people understand that capitalism works well because government intervention was measurably less in North America before the 70s so there were less lobbyists and public bailouts. The ratio of government employees to the general population in the United States has grown under Obama and Bush.

It’s ironic that the cohort most against capitalism is generation Y. They of all people are most dependent on the advantages offered by the free market system. πŸ™‚ Millennial don’t really care about government pensions or public health insurance all that much. But they will be become very upset if you take away private services like Facebook, Amazon.com, Netflix, or any of Google’s services (Google Search, Gmail, etc.)

Popular TV personality Jim Cramer once created the acronym FANG. It represents 4 of the most popular and best-performing technology companies on the stock market. FANG stands for Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google (GOOG) (GOOGL), which has now become Alphabet.

Last week I purchased 8 shares of Facebook at $164 each. πŸ™‚ It’s a U.S. stock and doesn’t pay a dividend, so for tax purposes I bought it inside my TFSA at TD. Year to date all the FANG stocks have returned at least 25% to investors. Yay! I already had the other 3 stocks so by picking up FB I now have a full FANG portfolio. πŸ˜€ Amazon has grown to a market capitalization worth half a trillion dollars as of writing this post!

Millennials in general may say they don’t support capitalism. But they sure spend a lot of money, time, and attention helping some of the most capitalist entities in the world become even more profitable. As the saying goes; actions speak louder than words. And the trend is clear. For the sake of my financial goals I will continue to invest in large tech stocks and trust the free-market will provide growth over the long run. πŸ˜‰

 

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Random Useless Fact:

Carrots were originally white or purple. Then a yellow carrot appeared through mutation and the familiar orange carrot we see today was bred from it.