BUILDING WEALTH AND DEBT FREEDOM GOES BEYOND A WAGE INCREASE
Unless you get a wage increase that is far beyond your norm the only gratification most people get is seeing the bigger number on their pay cheque. Even then if you’re not putting that wage increase to work you’re hiring and firing your own staff costing your more money in the long run.
Reality is that without doing something with that money to help increase your net worth it won’t make a blind bit of difference. This perspective of a wage increase simply leaves you right back where you started.
November is financial literacy month and I wanted to take a few minutes to talk about why a wage or salary increase isn’t always the answer to our financial problems.
You have to start somewhere
** Let that be your motivation for the day, month, year **
You may not be in debt but you’re certainly not going to get ahead financially if you aren’t making changes to the way you manage it. The key: Financial Literacy.
If you’re in the negative you may still be in the negative but climbing out from the hole. You’re still gaining momentum which is in part how we paid our mortgage off so fast. It was our biggest debt and will always be a debt for anyone who owes money to a lender.
ANY money owed= A Debt that MUST be paid even if that money is making you money. There’s a good and bad side to investing which you will learn more about as you invest in financial literacy.
For the past 6 years blogging at Canadian Budget Binder we have learned so much about finance but not enough. It’s never going to be enough. This isn’t about having the most money in the bank it’s about playing your cards right so you don’t have to worry about money day in and day out.
This tells us that there is no end-game with money.
You can’t just sit back and watch it grow even if you are worth millions and have millions coming in. Sure you might have everything you want, more than most will ever have but even you too can blow debt high in the sky. The minute you look away is when things can come crashing down on you, and hard.
Nobody likes defeat especially when something you’ve worked hard on turns into a disaster.
Just yesterday the provincial government passed the minimum wage increase and finalized Bill 148 which means by 2019 minimum wage will reach an all-time high of $15/hr. Now that the Ontario minimum wage will increase in January 2018 from $11.60 to $14/hr many employees are celebrating the extra income they will be receiving.
The problem is that with any wage increase there is a potential ripple effect in the business industry especially small businesses. Time will tell how the economy will adapt but we’re already seeing business plans taking place to lighten this wage increase.
Don’t pop the cork just yet.
I was making approximately $15/hr living in the UK 11 years ago where the cost-of-living was/is greater in comparison to Canada. I owned a home and was barely getting by on my own which is why I was more than happy to sell it before moving to Canada. I could have kept it as a rental but today the house is worth less than what I sold it for. Risky for me.
Is a wage increase needed in Ontario?
Of course it is because the struggle is real when you’re trying to do everything right but you’re not getting ahead. Will you get ahead though? Maybe, it’s up to you and your current financial health.
It’s no surprise then that many people earning minimum wage have more than one job to make ends meet. Back home earning $15/hr was a great income compared to most. But was it really? Add debt repayment into the mix and you’ve got a recipe for disaster unless there is a second income coming in without any further debt. That’s a hard financial line to follow when you are single but it can be done.
I did it but I wasn’t able to do all the things I wanted to do. I still needed to earn more money which is why I worked over-time whenever possible. Too busy working not enough time living. By things I meant increased savings, holidays and splurging once in a while on a pack of beef mince.
Mrs. CBB will tell you she thought I was frugal beyond frugal and now that I think about it, I was. I had to be. I still am but on a different level. You do what you have to do with what you have and that’s really what it all boils down to.
Don’t celebrate a wage increase too fast
Just like that…
Metro grocery store announced the same day as the wage increase that they will no longer stay open 24 hours due to the minimum wage increase. This will chop hours from employees who probably already struggle to get part-time hours. I’m sure other businesses will follow suit.
Someone mentioned in a comment I read online that if a business bases profit/loss on paying employees minimum wage then maybe they shouldn’t be in business. What that means is that even a business must be prepared for such financial changes. Everyone needs a back-up plan and for some businesses the only plan is to downsize.
The wage increase is great when you’re seeing it from a dollars and cents perspective in the bank but eventually it will even out economically (consider lifestyle) and you’ll be right back where you started UNLESS you do something about it and fast.
A minimum wage job is not meant to make you rich it’s meant to put food on the table and roof over your head. A few extra dollars put aside is an emergency savings which is a lifeline. This might sit perfectly fine for you or it is a reality you can’t change for whatever reason. Embrace your golden opportunity to make small changes that will filter into to growing your wealth or just getting the heck out of debt.
You might be part of that one percent that got it right, got lucky or never gave up on a dream that increases your wealth year after year. I think they call this, “Living the Dream” or “Living the High Life” from a frosted perspective.
We all live our dreams and the high life in different ways but add money to the mix and you can go from dancing in your living-room with a bottle of cheap wine to flying off for a date night dancing the tango by the ocean sipping on fine wine under the stars.
Remember everyone’s financial situation is different and getting out of debt may be your Golden ticket. You can’t compare what someone else has because you don’t know what’s happening behind closed doors. Just as well no one should do the same to you.
Financial Literacy is your best friend
When Mrs. CBB moved to the Greater Toronto Area the only job she could find was working at Tim Horton’s. Back in her hometown the job prospects were no better and after graduating from college the only way to increase her opportunities was to move away. So she thought.
After 3 years of minimum wage income she landed a job in manufacturing earning $15/hr which was huge money to her at the time. Looking back she knows that it was more but not enough. It was then that she started learning more about living a frugal life and dove into the financial industry at a snail’s pace. But she did it.
Learning as much as she could about finance without confusion (the basics) and asking questions she wanted answers to was the basis of her motivation. She knew that to be successful financially you need to know what the heck you are doing first.
Most people don’t and never will.
Moving forward 9 years she was making around $22/hr, single, rented a room and was able to stash away loads of cash. No she had no consumer debt but she did have a vehicle payment. Yes she enjoyed sports with friends, worked out at home, went for walks, shopped and did all the things that interest her but on a mind-budget. You know…running numbers in your head. She had savings and that was good enough for her. Now she knows it wasn’t the smartest financial plan. The worst, really but something is better than nothing.
When earning $22/hr wasn’t enough to satisfy her financial lust she decided to go back to University to earn a degree which landed her one of the best jobs of her career.
Keep in mind we live in the Greater Toronto Area (GTA) which means comparing apples to apples is the only way money will work. Someone who earns $20/hr in a small town where costs of living are lower may fare better than one would living in the GTA. If you really think about it though it somewhat balances out for the debt-free individual.
Turn the tables around and earn $30/hr in a small town and $20/hr in a large city and you’ll certainly see the difference for the debt free person once again. I’m using examples with no debt here just income because everyone’s situation is different.
She went from $22/hr to a bit over $30/hr (salary) which was only bound to increase had she not been made redundant. In fact after 3 months she was given a $3000 a year raise only to wave good-bye the next. So much for a long-standing profitable company.
Just remember, nothing and I mean nothing is secure in this world, not even your relationship. Important? Of course it is when you have combined incomes. Hang on to your pants folks and keep the cocky attitude locked away.
Company downsizing hurts everyone involved which is why with the current increase in minimum wage not everyone is celebrating. Losing your job or even reduced hours no matter how much you earn is a blow that is hard to grasp at first especially when you don’t see a direction for yourself.
Many times I’ve said that it’s not how much money you earn it’s how you save and this couldn’t be anymore true of a statement. Now is the time to make that statement part of your daily financial workout. A simple disconnect of cable will save you hundreds of dollars each year.
What would you do with that money?
My reasoning for this is simply because if we wait for the perfect job earning the perfect amount of money we will be old and gray and wishing we did something different. If you’re the type of person who will procrastinate or pushes things to the side in hopes of better opportunities you’ll be sorry.
The gist of the matter is that even when you have what others deem an excellent career anything could happen. College teachers went on strike for 5 weeks and many of them earned little under $2000 for strike pay and others nothing at all.
Feel no sympathy?
That’s fine because most people who have savings feel none for those who have debt. Point being, stop caring about what everyone else is doing and worry about what YOU are doing.
You need savings, You need a back-up plan. Never rely on what you THINK will last because odds are it can be taken away from you at the worst time possible.
Is there ever a good time? Not really.
No matter where you live, how much you earn and how much consumer debt you have please start filling your piggy bank. At the least start a Tax Free Savings Account, get involved with free money from your employer (RRSP/Investment matching programs and so on. Start thinking about your money TODAY and learn everything you can about financial literacy so your Plan A and B in place.
Discussion: What financial mistakes were you making that you’ve learned about and corrected?
Our Net Worth October 2017
Where all the money went:
Even though we had a lot of expenses going out and we didn’t earn as much as usual, our investments performed fantastically enough to keep our Net Worth buoyant. See our October Budget update for more info.
We didn’t post our Net Worth in September 2017 due to a family emergency. Below is the chart.
Understanding Net Worth
What Does Individual Net Worth Mean?
Net Worth is a snap shot of your financial health sort of like a picture or debt to net assets. In simple terms it’s a total of the value of your assets minus your liabilities.
We credit the growth of our net worth due to patience, perseverance, using a monthly budget and not giving up. Your numbers may go up and down but don’t let the numbers scare you rather understand why and move on.
If you would like to use our budget I offer a FREE downloadable budget which I created and that you can use at home just like we do. I don’t charge for it because I want you to save money not spend more!
There are tonnes of other free printable lists offered at Canadian Budget Binder to help you achieve some of those financial goals and build your net worth. Now determine just how much net worth you actually have and go from there.
Enjoy and let me know what you think.
Determining net worth
Figuring out net worth is fairly easy as long as you know your personal numbers or monthly finances which means you need to do your homework. Net Worth is simply adding up all your assets (what you own) then taking away your liabilities (what you owe) which will give you a net worth number.
Understanding your net worth will help you determine if you are on track to meeting or beating your personal financial goals. It doesn’t get any easier than that.
Net Worth = Assets – Liabilities
Calculate net worth
Do you know how to calculate your own Net Worth?
Now you can stop asking yourself the question, how do you find out your net worth? Why? It’s easy to determine. We like to calculate our net worth every month so we know if we are still on track. Some people calculate it yearly or quarterly. It’s really up to you and how informed you want to stay when it comes to your financial health.
Net Worth is essentially an estimate and not everyone uses the same type of figures. Some people don’t include vehicles like we do or they may leave out the assets inside the home like we have. It depends on what you want to calculate or what you can sell today and make money on.
Why not go ahead and calculate your own using our Free Money saving Tool Net worth Calculator (Canadian Budget Binder 2012)
Why you should set financial goals
Below is our progression chart towards our goal of a million dollars net worth which should happen according to our net worth calculations by Mid August 2017 (this year). Note: Since we went on holidays and spent money buying a new truck this goal has now changed and will likely take us into 2018. I will have a more accurate update shortly.
Setting goals are the only way we work towards achieving what we want to get done as a couple around the house and in our financial life. I know that without them we would be flying by the seat of our pants which wouldn’t work for us.
I find it’s much easier being held accountable when I share what we need to do with all of you. Yes, my wife refers to the list when she asks what I plan to do next. I’m not sure if that’s a good thing for me or not.
In the graphical representation above, I have used excel to provide a trend line prediction based on the past years monthly net worth figures.
Using figures from our actual net worth gains over the past 12 months (the solid blue line) it has suggested that by the end of (2016) we should have been around $900,000.00. We fell short of this goal by $9000 which is perfectly fine as it was only an estimated goal based on current financial trends. This can change over the course of the year and is only a prediction based on known historical figures from our finances.
According to the chart, we should hit the million mark in or around August to September 2017. (didn’t happen)
This is nice to know but anything can happen over the next year. Hopefully with some careful planning we can achieve this goal and go beyond it.
Do you set financial goals for the year?
Our financial numbers
When budgeting anything is possible, we are proof of that although we still have a long way to go in our journey. These are our numbers and our goals, not a means of comparison towards your own goals to others target goals.
We don’t care how much money others make or if they have a high net worth or if it is lower than ours as it’s not a competition. I hope our experiences perhaps will help guide you along your financial path working towards debt freedom.
Different financial paths
Not everyone has the same path in life. Some of you may have had to start over like I did or go to school a second time and now have OSAP loans to pay back.
Others may have divorced, lost money in the stock market or other investments, suffered job loss, fell ill or injured on the job etc. but you can’t let that stop you from achieving your financial goals.
Some of you may have been given trust funds, paid-for homes, paid educations or perks in life that give you a financial kick-start and that’s OK too. Remember what I said, “It’s not about how much money you make, it’s how you save it”.
Focus on you and don’t let the evil eye of money jealousy or keeping up with the Kardashians cloud your vision. No one cares about your money as much as you do so don’t waste your energy trying.
The only reason people accumulate wealth is because they know how to save or invest it wisely even if they did inherit money or win the lottery. The smallest improvements should mean big strides in working towards reaching your goals.
Sometimes we have to fail in order to learn and we’ve all been there. Money can be an evil force for some people especially those who have a negative attitude towards their own financial situation.
I urge you to be optimistic and little by little with determination you too should see improvements, if you want that to happen.
Net worth updates 2017
Below you can click the links to read earlier months net worth updates 2017 to see how we made out following our own financial rules.
- January 2017
- February 2017
- March 2017
- April 2017
- May 2017 Not available due to holidays.
- June, July, August – See this post above
- September 2017- No post
That’s all for this months net worth update but please check in at the beginning of December 2017 to see how we made out in November 2017 with our financial portfolio.
Remember: “It’s Not About How Much Money You Make It’s How You Save It“
Check out our 2012-2017>> Monthly Budget Updates