Dec 012016
 

More Millionaires 

The best way to make a lot of money is to work for the mint. 😄 But even if you don’t, chances are your finances have been improving. About 25,000 Canadians became millionaires in the past year according to a report released last week by Credit Suisse. The bank claims that there are currently 1,117,000 individual adults with net assets exceeding US $1,000,000. 😀 We normally see studies of Canadian millionaires based in $CAD, but this study uses $USD to define millionaire status. These kinds of wealth studies are telling, but they tend to underestimate real net worth because participants may forget, or choose not to disclose particular assets such as their precious metals, art, collectables, jewelry, etc. Many of these items such as gold can be acquired anonymously with no paper trail. I think the real number of millionaires is quite a bit higher.

Based on its forecasts in the growth of Canada’s GDP and equity market capitalization, Credit Suisse expects the number of millionaires to increase by 50% to 1,680,000 in 2021. I hope one of those new entrants will be me. 🙂

But 2021 is still five years away and a lot can happen since then. I believe low interest rates are the main cause of asset price inflation which has resulted in so many new millionaires in recent years. But a pull back could be right around the corner. Let’s take a look at history.

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Between 1988 and 1990 much of the world was in recession with riots breaking out in the UK. 10 years later between 1998 and 2000 we had the Asian financial crisis and the dot-com crash. 10 years after that between 2008 and 2010 we had the great recession with the Lehman and AIG panic, and European banking crisis. They say history doesn’t repeat itself, but it rhymes. And I am certainly seeing a pattern here. 🙂

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Jul 282016
 

University Grads Make More Money Over Time

According to a recent study from the University of Ottawa, the cost of higher education is still worth it. University degrees are linked to higher salaries almost regardless of the subject. 🙂

The study published this week looked at income data for 620,000 graduates of 14 different universities and colleges between 2005 and 2013, spanning an 8 year period to gauge progress over time.

On average, graduates from universities in 2005 made $45,200 in inflation-adjusted income in their first year after school. This number increased every year after that, growing by a total of 66% to $74,900 in 2013, which covers an 8 year period. But college graduates started off somewhat lower. The average income for a new college grad was $33,900 in 2005. After 8 years it has grown by 59% to reach $54,000. These numbers only represent the average. Individual results of a college or university education can be very different from one person to another.

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A closer look at the study’s findings reveal a big difference by gender. Both men and women start off making about the same after graduating university. But 8 years later, those averages diverge. The typical male university graduate who started working in 2005 was making 91% more money by 2013. His female counterpart who graduated with him saw her income only increase by 42% from 2005 to 2013.

I think there are a couple of main reasons for the gender discrepancy in income growth.

  1. Men and women tend to choose different majors. STEM fields, particularly technology and engineering, are pursued more by men than women. These fields also consistently offer lucrative career paths.
  2. Many women tend to take time out of the workforce to raise children. This is due to a fact of nature. Nearly every research has shown breastfeeding increases a baby’s intelligence. Men can’t give birth or breastfeed.

Higher Education in Universities

As with any report we have to consider any hidden agendas. A university study that concludes going to university is a good decision is like a real estate agent advocating for home ownership. It doesn’t mean they’re wrong, but we should be aware of the bias. 😉 We can also keep in mind that university graduates have been pre-screened to have certain qualities like being smart or ambitious enough to attain high grades in high school. These personality traits often lead to higher earnings regardless of attending university; correlation ≠ causation.

Higher education isn’t for everyone. Some folks excel at formal education, while others do better with a trade or entrepreneurship. The important thing to remember is that learning is a lifelong process and we can pursue it in many different ways. 🙂

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Random Useless Fact:

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