Posted by Canadian Dream on September 16, 2009
A general question for everyone: do you worry about money? If so, why? What is it you fear? Please give your answer in a comment.
I’ll go first. I’m increasing less worried about money as I get older. I used to worry a bit, but now I’ve built up a significant savings pool I’ve realized if I get laid off and I can’t find a job for a while that I will be fine. I might consume of a large amount of my savings, but I can be out of work with no EI and still cover two years of expenses. That’s provided a huge sleep a night factor that has reduced my old worrying habit done to nothing.
I used to fear not being able to provide for my family. Since I’m the major income earner in the family I feel compelled to look after them. So perhaps that is part of why I save. I save to provide in case I can’t (yes insurance helps in some cases, but I still worried back then).
Posted by Canadian Dream on September 15, 2009
I found this article on CBC very interesting. Basically it was saying almost 60% of Canadian’s are living paycheck to paycheck, which is disturbing to some degree but what got my attention was the number that 50% of people are saving less than 5% of their net pay for retirement.
I thought that looked a bit fishy as most people I know are at least saving that much, so I dug into it a bit more and found the original survey document. There the original question to this statistic was:
What percentage of your pay cheque do you put toward savings? Please check only one.
1. 0%
2. 1-5%
3. 6-10%
4. 11-15%
5. 16-20%
6. 20% or higher
7. I prefer not to respond
8. I don’t know / not applicable
As you can see it’s a bit different than the news article suggests. This isn’t CBC’s fault as they copied most of the original press release, which can be found here. So in reality the question ignores any payroll savings like a pension plan, group RRSP, or saving bond deduction that could be used towards retirement. Also it doesn’t even discuss retirement at all! It’s a damn lie they way they presented it.
Keep in mind the median income for Canadian families was $61,800 on an after tax basis in 2007 (see here), while for a single person it’s only $24,200. So after paying the mortgage, bills, payroll savings, CPP and EI and the typical spending habits. Yes, I can believe only half of people are saving more than 5% of their paycheque. That’s a statistic that I can believe.
So in general keep in mind news releases can lie, but also take heart. Even if you manage to save 5% of your paycheque your already ahead of half of all Canadians.
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Filed Under: Misc
Posted by Canadian Dream on September 14, 2009
I was reading MDJ’s post the other day on baby steps and I came to realize how these little steps do add up. The really interesting part of all these little steps is how you may not even notice them over a short period of time, it’s only in the long run do they appear.
Case in point, if you track your net worth you can actually see the progress over time. For example, if you dig up my very first net worth post on this site in Nov. 2006 you would have seen I had an investment net worth of $21,000 and a mortgage of $150,000. Not very impressive, but as of Aug 2009 those numbers are at $81,800 and $130,400. So in total in the last 33 months I’ve saved, had investment growth and paid off debt to the tune of $80,400 or an average of $2436/month not including any increases in my house value. Wow, that’s fairly damn good considering that also includes the biggest drop in the stock market in my entire investing career. At that rate I should cross the $100,000 mark sometime in 2010.
Now had you told me that in advance I would save/invest/pay down debt to the tune of $100,000 in about 3.5 years back in 2006 I think I would have looked at you like your crazy. I was trying my best, but to be honest in the start I did not feel like I was getting much of anywhere. It was only keeping track of the small things and improving my savings rate a little here and there where I felt like I was doing much of anything.
Now my investments are to the point I feel like I’m seeing progress each month. That whole compound interest effect has finally got big enough for me to notice, so progress now seems a bit more obvious now. In fact, I’m really starting to understand a comment I’ve seen on various blogs and books “The first $100,000 is the hardest.” Yes it is. With little to no compound interest effect that climb up can feel like it goes on forever. It’s only has you close in on that number does it feel like you are getting somewhere.
So regardless of how hard that first bit of your long term goal looks, keep going. It’s a long haul up to it, but trust me as you get closer it will feel easier. You will start to feel more confident about your long term goals if you keep taking those baby steps. Savings is like any other journey you only get there one step at a time.
