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. 🙂

 

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. 🙂 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. 🙂

 

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

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. In 2015 I created a 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. 🙂 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

May 152017
 

Different Priorities for People in Different Income Groups

According to the U.S. Bureau of Labor Statistics, people from across the income spectrum have different priorities when it comes to their spending. The graph below from npr.org shows average spending patterns for U.S. households in 3 income categories — one just below the poverty line, one at the middle of the income distribution, and finally one at the top of the distribution. 🙂

Here are some interesting notes to take away from this data:

  • Everyone pretty much spends the same ratio of their income on housing, clothing, shoes, and entertainment.
  • Poorer households tend to spend a larger share of their income on home cooked meals and utilities.
  • Richer households allocate a bigger chunk of their spending to education and saving for retirement.

Some expenses are more elastic than others. They take up a bigger piece of the household budget if the household has more access to money. Earning more income is generally a good thing for financial security. But if all new income is being squandered on entertainment then that’s not going to help someone in retirement.

Since my priority is financial independence here is how I like to use the information from the chart. The average person buys a bigger home when he makes a bigger income, as represented by the data. But housing is one of the largest expenses and does not need to be bigger than necessary. By living in my current home for the past 8 years while doubling my income I have effectively reduced my spending on housing by 50% over time. 🙂 I can use these savings to put towards my retirement portfolio so I can reach FI/RE sooner. The same concept can be applied to transportation and gasoline as well. Instead of upgrading to a gas-guzzling luxury SUV, I’m still driving my 10 year old hatchback.

The idea is to keep expenses the same, while increasing income, and investing the difference. 🙂 Of course there are times when it’s appropriate to capitulate to lifestyle inflation. When I start a family I will probably need a larger home and a bigger car. Knowing when to delay gratification, and when to upgrade is a personal decision that everyone is capable of making for themselves in their own way. That’s why personal finance doesn’t start with our money. It actually starts with our personal priorities and values, I think.

 

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Random Useless Fact:

Say what you want about North Korea, but they are better at celebrating Earth Day than any other country.

Apr 062017
 

A New Way to Measure Your Success

There are varying degrees of success and many different ways to define it. For example, in order to be a successful frequent flyer, you will probably need a lot of connections. 😀 And if you’re trying to lose weight, success is all about mind over platter, and winning that Nobelly Prize. 😄

how much do you value your free time?

Financial success is often evaluated in terms of income or wealth. But I often argue that time is our most precious resource. Unlike money, all our days are numbered. So given this reality, perhaps the best way to evaluate our success is to find out how much we value our free time. 🙂 This can be done with the following steps.

  1. Think of an activity that is neither pleasant nor unpleasant to do for you. It also can’t help you gain skills or make you smarter.
  2. Determine the minimum amount of money you would charge to perform that service for 1 hour for a stranger.

This mental exercise will reveal how much you value your time at an hourly rate. 🙂 For example, services I can provide that I neither like nor dislike include slowly folding laundry and walking around town for no reason.

I would have gladly accepted $20/hour to fold laundry 10 years ago. But things have change now. I would not give up my free time for any amount less than $40/hour today, because I can offer valuable skilled labour. Furthermore, I’m 10 years closer to death so there has to be an added premium on the remaining time I have compared to the past me. Due to simple economics, the fewer days I have to live, the more valuable those days are to me.

In a way, $40/hour is an indicator of my level of success in society. Perhaps a doctor or lawyer would value their free time at $120/hour. This wouldn’t be surprising given their place on the social economic ladder. It is not only a measure of their immense human capital compared to mine, but also their financial status.

How the Value of Time is Tied To Success

As self sustaining adults, the value of our free time should be the lowest at the start of our careers. But over time this value should increase to keep up with our growing human capital. Over time our demand for time is increased, and demand for money is reduced because we can earn money easier and more quickly.

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Mar 132017
 

I recently came across an informative and inspiring thread on the financial independence subreddit about additional income streams that people have. Here are some ones I thought could be relevant to people who read this blog.

Ideas for Extra Income

  • Rent your car. Turn a depreciating asset into an income stream. 🙂 “I rent my car out on Turo. It’s the AirBnb of car rentals. I live walking distance from work and rent it out all the time. I rent my Wrangler for about $50/day and have been making around $800/mo in gross margin.” ~plz_callme_swarley
  • Invest in a rental property. “I’ve got two rental properties, both I pay someone else to manage. I made 8k off of one last year and 21k off of the other one in net profit (new roofs are expensive). They’re both paid off and provide a small but steady trickle of income, I’ll probably try to save enough to get 1 more each year for the next 7-8 years.” ~SEJeff
  • Buy profitable blogs and websites. “Bought a few niche websites on Flippa, earning a little over $100 per month. Import some stuff from China and sell it on Amazon as well.” ~jb611
  • Walk other people’s dogs. “Signed up through rover.com but now my clients pay in cash to avoid extra fees. I only have 2 clients because I’m too busy to take on more. I mostly work on lunch break from my job with occasional overnight stays. Make about $300/month….I recommend signing up on Rover.com. The process takes a little effort and you need 2 references – I had my girlfriend write one and a buddy wrote the other. The site isn’t extremely easy to navigate which is partially why my clients pay me under the table now.” ~CalPolyJohn
  • Write online. “I make about $3,000/month editing Wikipedia for pay. I get my clients from https://www.buildersociety.com/, they’re great! I know a lot of other people doing this so if you want in, just start editing Wikipedia, learn the rules, and then all you need is just clients…..I can do a new page in about an afternoon and I charge $500-$1,000. It’s only 3-6 actual jobs/month. If you want to do it, make sure you spend some time editing the Encyclopedia to learn the rules.” ~TaylorSwift2015
  • Become a freelance translator. “Freelance translating (Japanese>English). Brings in $4200/month pre-tax for 50 hours/month of work…Professional (and non-professional) translators usually create profiles on both ProZ and TranslatorsCafe to look for and offer work. People with no real translation background may use a site like Gengo, whose rates are considerably lower (3 to 8 cents/word). Finally, it is also common to Google “Translation agency” and send your resume to as many translation companies as possible (rarely works, but then again you really only need 1 good client to establish yourself).” ~nakoyao
  • Monetize your lifestyle/hobbies. “I rent out my place on AirBnB when I’m travelling ($6300 in 2016). I offer private lessons as a cross-country ski instructor ($1600 this season). I host house(boat) concerts ($1-2000/event). My friend sells the overflow from my vegetable garden at the farmer’s market ($700). I take tourists out fishing/netting/ice fishing/canoeing ($3200 in 2016)” ~Holy_BatLogic
  • Teach English online. “I teach online classes for $20/hr. Just started last month, made $692 in half of February.” ~OzarkCatholic  “There are online tutoring gigs for ESL, you can get 16-20 an hour pretty easily. Check out VIPKids” ~brikky

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