The article below was a bit of an eye opener to me, give it a read & post your commentary.
Are you earning the paycheque you should? Is your net worth on target? We've peeked into wallets across the country to reveal the surprising answers.
Ian McGugan and Phil Froats, (Canadian Business)
Our personal balance sheets are closely guarded secrets. We rarely discuss how much we make or how much we're worth even with our closest friends. When it comes to acquaintances or strangers, personal finances are a radioactive zone, entry verboten. No matter how much we might like to know about our neighbors' financial status, we would never think about leaning over the backyard fence and asking them for a glimpse inside their wallets.
Instead, we watch and we worry. We learn that our 28-year-old cousin just bought a sprawling suburban mansion, we hear that a co-worker is taking a four-week vacation in a place we've only seen on the Discovery Channel, and we begin to think that maybe, just maybe, we're falling behind other people in the race to get rich.
If that sums up your state of mind, help is at hand. For the past few months we at MoneySense have been drilling into government documents, manhandling spreadsheets and pounding numbers to build a detailed model of personal finances across the country. Our goal is to help you see how your income, your net worth and your retirement savings compare to those of other Canadians.
Some of our results will put your mind at ease. For instance, despite all the reports you read of multi-million-dollar salaries, average paycheques aren't as imposing as you might fear. If you worry that you're not earning as much as your brother-in-law, you may be pleasantly surprised to discover that you're doing just fine.
There's some other good news, too. As it turns out, the last four years have been fat years for many Canadians. When we last presented our All-Canadian Wealth Report in our November 2003 issue, we divided all Canadians into five equal groups, ranging from the poorest to the wealthiest, and showed you how much net worth each group possessed. To be considered middle class - in other words, to be among the 20% of Canadians smack in the middle of the wealth distribution - you had to possess $65,900 to $169,000 in net worth. To qualify for the top group - to be among the richest 20% of Canadians - you had to be worth more than $380,600.
Fast forward to 2007 and the numbers have shot up, up, up. The middle class now spans those with $92,400 to $244,300 in net worth. To be admitted to the top tier of net worth, you need more than $656,700 - nearly $300,000 more than was required four years ago. For many Canadians, prosperity abounds.
But not all the news is so cheery. If you probe the numbers it's clear that Canadians are taking on more debt than ever before. Furthermore, the bulk of the gains in wealth have gone to our richest citizens. The middle class has enjoyed a far smaller boom, while the poorest Canadians have little to show for the past several years. Perhaps because of those factors, most Canadians are ill prepared for retirement.
How big is yours? Comparing incomes
Before we start discussing how wealth is distributed, we need to figure out what we mean by wealth - and that's trickier than you may think. For starters, you have to distinguish between income and net worth. Income is what you take in during a year; net worth is what you would be left with if you sold all your assets and paid off all your debts.
Income and net worth are usually related, but they don't always go together hand-in-hand. A 30-year-old doctor who just completed qualifying as a surgeon may be making $250,000 a year - but have nothing more to her name than a car, a bunch of textbooks, and a fistful of student debts. On the other hand, a retired auto mechanic who bought a four-bedroom home in the right neighborhood of Vancouver 40 years ago may today be sitting on property worth $2 million - but might also be struggling to get by on a pension of only $30,000 a year.
Is the high-income, zero-net-worth surgeon wealthier than the low-income, high-net-worth retiree? You could argue it either way. The important thing to keep in mind is that wealth is more than a single number. You have to look at a person's age, income, and net worth to get a full picture of where they stand.
Are you paid enough?
Your total income (line 150 on your income tax return) is one indicator of how well you're doing financially. The median annual paycheque in Canada is $26,300.
INCOME RANK . . . . . . . . . . . . . . . .TOTAL INCOME IN 2006
Lowest paid 20% . . . . . . . . . . . . . .Less than $9,600
Next 20% . . . . . . . . . . . . . . . . . . $9,600 to $19,100
Middle 20% . . . . . . . . . . . . . . . . . $19,100 to $33,300
Next 20% . . . . . . . . . . . . . . . . . . $33,300 to $56,500
Best paid 20% . . . . . . . . . . . . . . More than $56,500
Source: Canada Revenue Agency and MoneySense calculations
The easiest place to begin assessing your own wealth is with the size of your paycheque. In Are you paid enough? (left), we've divided Canadians into five groups of equal size, known as quintiles, based upon their total incomes. The numbers may surprise you, especially if you live in a large city where big incomes are common, or if you're a member of a well-paid profession. It turns out that the median Canadian income ticks in at $26,300. If you made more than $53,400 this past year, you are in the top 20% of all income earners in Canada. If you made more than $95,000, you are in the top 5% of all income earners.
Measuring people solely by the size of their individual paycheques does have some limitations. For instance, the figures we've cited above include the paycheques of teenagers who make $3,000 a year working weekends at Tim Hortons. Their relatively low earnings pull down the overall figures. To provide a slightly different perspective on incomes, we've broken down the income numbers by individuals living alone and by total family income. You can see the results in The income outcome (right). We figure that the median person living alone hauled in $27,500 over the course of the past year, while the median family took in $62,600.
The income outcome
We've broken down the income numbers to show you what's typical for individuals living alone and for families. The median Canadian family had a total income of $62,600 in 2006; the typical individual living alone had an income of $27,500.
INCOME RANK . . . . . . . . . . INDIVIDUALS LIVING ALONE . . . . . . . FAMILIES
Lowest paid 20% . . . . . . . . . . . $10,700 . . . . . . . . . . . . . . . . . . . . $36,600
Next 20% . . . . . . . . . . . Between $10,700 and $20,300 . . . . . . . . Between $36,600 and $58,600
Middle 20% . . . . . . . . . . Between $20,300 and $33,100 . . . . . . . . Between $58,600 and $82,200
Next 20% . . . . . . . . . . . Between $33,100 and $53,400 . . . . . . . . Between $82,200 and $115,600
Best paid 20% . . . . . . . . . . . . . More than $53,400 . . . . . . . . . . . More than $115,600
Source: 2001 Census, September 2007 Statistics Canada issue of Perspectives: High-Income Canadians and MoneySense calculations
Our data may provide you with a new sense of what constitutes a big income. We read about hockey players signing million-dollar contracts and corporate executives pulling down seven-figure paydays, but the reality is a lot more down to earth. If you're a single person living alone and you want to place among the top quintile of similar income earners in Canada, you have to make... drumroll, please...$53,400 or more a year. If you're married, you and your spouse have to take in at least $115,600 between the two of you to achieve the same distinction. On the basis of those numbers, a single nurse probably qualifies as a member of Canada's financial elite; ditto for a pair of married high school teachers.
Continued here:
The all-Canadian wealth test
What do you think?
Are you earning the paycheque you should? Is your net worth on target? We've peeked into wallets across the country to reveal the surprising answers.
Ian McGugan and Phil Froats, (Canadian Business)
Our personal balance sheets are closely guarded secrets. We rarely discuss how much we make or how much we're worth even with our closest friends. When it comes to acquaintances or strangers, personal finances are a radioactive zone, entry verboten. No matter how much we might like to know about our neighbors' financial status, we would never think about leaning over the backyard fence and asking them for a glimpse inside their wallets.
Instead, we watch and we worry. We learn that our 28-year-old cousin just bought a sprawling suburban mansion, we hear that a co-worker is taking a four-week vacation in a place we've only seen on the Discovery Channel, and we begin to think that maybe, just maybe, we're falling behind other people in the race to get rich.
If that sums up your state of mind, help is at hand. For the past few months we at MoneySense have been drilling into government documents, manhandling spreadsheets and pounding numbers to build a detailed model of personal finances across the country. Our goal is to help you see how your income, your net worth and your retirement savings compare to those of other Canadians.
Some of our results will put your mind at ease. For instance, despite all the reports you read of multi-million-dollar salaries, average paycheques aren't as imposing as you might fear. If you worry that you're not earning as much as your brother-in-law, you may be pleasantly surprised to discover that you're doing just fine.
There's some other good news, too. As it turns out, the last four years have been fat years for many Canadians. When we last presented our All-Canadian Wealth Report in our November 2003 issue, we divided all Canadians into five equal groups, ranging from the poorest to the wealthiest, and showed you how much net worth each group possessed. To be considered middle class - in other words, to be among the 20% of Canadians smack in the middle of the wealth distribution - you had to possess $65,900 to $169,000 in net worth. To qualify for the top group - to be among the richest 20% of Canadians - you had to be worth more than $380,600.
Fast forward to 2007 and the numbers have shot up, up, up. The middle class now spans those with $92,400 to $244,300 in net worth. To be admitted to the top tier of net worth, you need more than $656,700 - nearly $300,000 more than was required four years ago. For many Canadians, prosperity abounds.
But not all the news is so cheery. If you probe the numbers it's clear that Canadians are taking on more debt than ever before. Furthermore, the bulk of the gains in wealth have gone to our richest citizens. The middle class has enjoyed a far smaller boom, while the poorest Canadians have little to show for the past several years. Perhaps because of those factors, most Canadians are ill prepared for retirement.
How big is yours? Comparing incomes
Before we start discussing how wealth is distributed, we need to figure out what we mean by wealth - and that's trickier than you may think. For starters, you have to distinguish between income and net worth. Income is what you take in during a year; net worth is what you would be left with if you sold all your assets and paid off all your debts.
Income and net worth are usually related, but they don't always go together hand-in-hand. A 30-year-old doctor who just completed qualifying as a surgeon may be making $250,000 a year - but have nothing more to her name than a car, a bunch of textbooks, and a fistful of student debts. On the other hand, a retired auto mechanic who bought a four-bedroom home in the right neighborhood of Vancouver 40 years ago may today be sitting on property worth $2 million - but might also be struggling to get by on a pension of only $30,000 a year.
Is the high-income, zero-net-worth surgeon wealthier than the low-income, high-net-worth retiree? You could argue it either way. The important thing to keep in mind is that wealth is more than a single number. You have to look at a person's age, income, and net worth to get a full picture of where they stand.
Are you paid enough?
Your total income (line 150 on your income tax return) is one indicator of how well you're doing financially. The median annual paycheque in Canada is $26,300.
INCOME RANK . . . . . . . . . . . . . . . .TOTAL INCOME IN 2006
Lowest paid 20% . . . . . . . . . . . . . .Less than $9,600
Next 20% . . . . . . . . . . . . . . . . . . $9,600 to $19,100
Middle 20% . . . . . . . . . . . . . . . . . $19,100 to $33,300
Next 20% . . . . . . . . . . . . . . . . . . $33,300 to $56,500
Best paid 20% . . . . . . . . . . . . . . More than $56,500
Source: Canada Revenue Agency and MoneySense calculations
The easiest place to begin assessing your own wealth is with the size of your paycheque. In Are you paid enough? (left), we've divided Canadians into five groups of equal size, known as quintiles, based upon their total incomes. The numbers may surprise you, especially if you live in a large city where big incomes are common, or if you're a member of a well-paid profession. It turns out that the median Canadian income ticks in at $26,300. If you made more than $53,400 this past year, you are in the top 20% of all income earners in Canada. If you made more than $95,000, you are in the top 5% of all income earners.
Measuring people solely by the size of their individual paycheques does have some limitations. For instance, the figures we've cited above include the paycheques of teenagers who make $3,000 a year working weekends at Tim Hortons. Their relatively low earnings pull down the overall figures. To provide a slightly different perspective on incomes, we've broken down the income numbers by individuals living alone and by total family income. You can see the results in The income outcome (right). We figure that the median person living alone hauled in $27,500 over the course of the past year, while the median family took in $62,600.
The income outcome
We've broken down the income numbers to show you what's typical for individuals living alone and for families. The median Canadian family had a total income of $62,600 in 2006; the typical individual living alone had an income of $27,500.
INCOME RANK . . . . . . . . . . INDIVIDUALS LIVING ALONE . . . . . . . FAMILIES
Lowest paid 20% . . . . . . . . . . . $10,700 . . . . . . . . . . . . . . . . . . . . $36,600
Next 20% . . . . . . . . . . . Between $10,700 and $20,300 . . . . . . . . Between $36,600 and $58,600
Middle 20% . . . . . . . . . . Between $20,300 and $33,100 . . . . . . . . Between $58,600 and $82,200
Next 20% . . . . . . . . . . . Between $33,100 and $53,400 . . . . . . . . Between $82,200 and $115,600
Best paid 20% . . . . . . . . . . . . . More than $53,400 . . . . . . . . . . . More than $115,600
Source: 2001 Census, September 2007 Statistics Canada issue of Perspectives: High-Income Canadians and MoneySense calculations
Our data may provide you with a new sense of what constitutes a big income. We read about hockey players signing million-dollar contracts and corporate executives pulling down seven-figure paydays, but the reality is a lot more down to earth. If you're a single person living alone and you want to place among the top quintile of similar income earners in Canada, you have to make... drumroll, please...$53,400 or more a year. If you're married, you and your spouse have to take in at least $115,600 between the two of you to achieve the same distinction. On the basis of those numbers, a single nurse probably qualifies as a member of Canada's financial elite; ditto for a pair of married high school teachers.
Continued here:
The all-Canadian wealth test
What do you think?
