Scary Canadian Personal Finance Facts
With all the talk about a recession, I thought this post would be appropriate. The average Canadian is in dire financial straits. Here is a summary:
The average after tax income of non-elderly two-person-or-more families was $67,600 in 2005., the most recent year for which I could find data from Stats Canada. More detailed statistics are available here.
In contrast to this, the average family debt in 2006 was around $70,920 according to this article.
Cash-strapped Canadian families are racking up debt at an alarming rate and the record number of households declaring bankruptcy will continue to rise unless people tighten their belts now, a new report warns. "The alarm bells are ringing louder than ever," says the Vanier Institute for the Family, in a report on the state of family finances in Canada released on the weekend. "They rang for governments and for many businesses and they did something about it. It is now time for families to do something about their own situations."
The average household income is now about $55,000 a year, roughly the same as at the start of the decade and up only one per cent, or about $500, from 1990. In contrast, average household debt now stands at about $70,920, up 16 per cent from 2000, and 40 per cent from 1990. "On average, households are putting nothing away for a rainy day, for a bout of unemployment, or for retirement," the report says.
Taxes have increased 1700% (not a typo) since 1961 according to this article. I worked that out to be a 6.63% increase every year since 1961.
The average family back in 1961 earned $5,000 and paid just $1,675 in taxes. That works out to about a third of its income spent on taxes while 56.5 per cent was spent on food, clothing and shelter. Fast-forward to 2007 and the average Canadian family earned $66,496 and paid $30,213 in taxes. On a percentage basis, the average Canadian family gave 45.4 per cent of its income to governments in the form of taxes while spending 34.9 per cent of its income to provide itself with food, clothing, and shelter, with only a scant 19.7 per cent surplus.
"Taxes have crept into virtually every aspect of Canadians' daily lives," said Niels Veldhuis, co-author of Tax Facts 15 and director of fiscal studies at Conservative research group the Fraser Institute. "As a result, the average Canadian family's biggest total expense is taxation. Now, Canadians pay more of the family budget in taxes than food, clothing and shelter combined. In contrast, the cost of living has not risen nearly as fast. The average family's expenditures on shelter only increased 1,063 per cent, food by 505 per cent and clothing by 455 per cent.
The book examines direct and indirect or "hidden" taxes such as sales taxes, excise taxes on tobacco and alcohol, amusement taxes, and gas taxes. While most Canadians are aware that income taxes are the single largest tax they pay, Veldhuis points out that many don't realize that income tax represents less than half of their total tax bill. Income taxes accounted for only 34.7 per cent of the taxes the average Canadian family paid in 2007.
Read about some poor saps here.
So what can you do if this article describes your situation? First, STOP spending! Cut up your credit cards and stop buying crap you don't need! Your monthly spending MUST be less than your monthly income for your situation to be sustainable. It really is that simple.
Next, seek the advice of a financial advisor or debt counsellor (I'm not one).
Try to consolidate your debts into a monthly payment you can actually afford. Cut your monthly expenditures (cable TV, eating out, etc.) to create an income stream to pay down your debt.
Once your debts are paid, set aside at least 10% of your income automatically. If you know nothing about personal finance, use a basic savings account to start with.
Avoid being house poor. Do not buy the biggest house the bank will lend you money for. Buy a house that you can pay off in a reasonable amount of time. Personally, I don't consider 25 years, let alone 40 years, reasonable.
Finally, don't ignore your situation. It isn't going to get better on its own. It isn't going to just go away. The only way your financial mess will get better is if you do something about it. Better to start fixing today than tomorrow.
After all, I need someone to pay for my retirement.
The average after tax income of non-elderly two-person-or-more families was $67,600 in 2005., the most recent year for which I could find data from Stats Canada. More detailed statistics are available here.
In contrast to this, the average family debt in 2006 was around $70,920 according to this article.
Cash-strapped Canadian families are racking up debt at an alarming rate and the record number of households declaring bankruptcy will continue to rise unless people tighten their belts now, a new report warns. "The alarm bells are ringing louder than ever," says the Vanier Institute for the Family, in a report on the state of family finances in Canada released on the weekend. "They rang for governments and for many businesses and they did something about it. It is now time for families to do something about their own situations."
The average household income is now about $55,000 a year, roughly the same as at the start of the decade and up only one per cent, or about $500, from 1990. In contrast, average household debt now stands at about $70,920, up 16 per cent from 2000, and 40 per cent from 1990. "On average, households are putting nothing away for a rainy day, for a bout of unemployment, or for retirement," the report says.
Taxes have increased 1700% (not a typo) since 1961 according to this article. I worked that out to be a 6.63% increase every year since 1961.
The average family back in 1961 earned $5,000 and paid just $1,675 in taxes. That works out to about a third of its income spent on taxes while 56.5 per cent was spent on food, clothing and shelter. Fast-forward to 2007 and the average Canadian family earned $66,496 and paid $30,213 in taxes. On a percentage basis, the average Canadian family gave 45.4 per cent of its income to governments in the form of taxes while spending 34.9 per cent of its income to provide itself with food, clothing, and shelter, with only a scant 19.7 per cent surplus.
"Taxes have crept into virtually every aspect of Canadians' daily lives," said Niels Veldhuis, co-author of Tax Facts 15 and director of fiscal studies at Conservative research group the Fraser Institute. "As a result, the average Canadian family's biggest total expense is taxation. Now, Canadians pay more of the family budget in taxes than food, clothing and shelter combined. In contrast, the cost of living has not risen nearly as fast. The average family's expenditures on shelter only increased 1,063 per cent, food by 505 per cent and clothing by 455 per cent.
The book examines direct and indirect or "hidden" taxes such as sales taxes, excise taxes on tobacco and alcohol, amusement taxes, and gas taxes. While most Canadians are aware that income taxes are the single largest tax they pay, Veldhuis points out that many don't realize that income tax represents less than half of their total tax bill. Income taxes accounted for only 34.7 per cent of the taxes the average Canadian family paid in 2007.
Read about some poor saps here.
So what can you do if this article describes your situation? First, STOP spending! Cut up your credit cards and stop buying crap you don't need! Your monthly spending MUST be less than your monthly income for your situation to be sustainable. It really is that simple.
Next, seek the advice of a financial advisor or debt counsellor (I'm not one).
Try to consolidate your debts into a monthly payment you can actually afford. Cut your monthly expenditures (cable TV, eating out, etc.) to create an income stream to pay down your debt.
Once your debts are paid, set aside at least 10% of your income automatically. If you know nothing about personal finance, use a basic savings account to start with.
Avoid being house poor. Do not buy the biggest house the bank will lend you money for. Buy a house that you can pay off in a reasonable amount of time. Personally, I don't consider 25 years, let alone 40 years, reasonable.
Finally, don't ignore your situation. It isn't going to get better on its own. It isn't going to just go away. The only way your financial mess will get better is if you do something about it. Better to start fixing today than tomorrow.
After all, I need someone to pay for my retirement.
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