Saturday, September 13, 2014

Savings Rate

I've read a couple interesting articles lately about the low savings rates of Canadians (apparently only 3.9% on average) and how 51% of us live pay cheque to pay cheque. I find these types of articles depressing and frustrating. One of the great values my parents instilled in me was that you should spend less than you earn and save/invest the surplus. That said, I was curious to calculate my own savings rate. Below is a rough estimation based on my revenues and expenses over the last 30-days. Since I'm the shy type, all numbers are presented in percentages.

Work Income - 85%
Investment Income - 15%
Total Income - 100%

Payroll deductions (EI & CPP) = 5%
Bus pass = 1%
Charitable donations = 1.8%
Mortgage payment = 18.3%
Household joint expenses = 9.1%
Property taxes = 2.2%
Cottage expenses = 1.8%
Car = 1.8%
Cable and internet = 1.3%
Insurance = 1.8%
Miscellaneous (dining out, gifts, travel, clothes, frisbee, etc.) = 7.3%
Vacation = 1.8%
Total expenses = ~ 52.7%

After doing the above calculations, which are obviously laced with estimates (notice the 1.8% coming up relatively frequently), I'm not terribly surprised to see that I have about 50% of my income available for savings. A couple interesting points are included below to further explain my actual savings rate.
- Work deducts the equivalent of 10.3% of my total monthly income off of my pay cheques to fund my contribution to the work pension plan. This sounds like a lot, but having never received the money, I don't miss it.
- Every three months, I aim to invest 30.3% of my total income in stocks.
- I get a yearly bonus at work in February, and the great majority of that is usually invested in my TFSA and RRSP.
- Since moving to Quebec, I usually end up paying in the equivalent of 6% of my total monthly income in taxes at the end of the year. This might sound horrible, but I look at it as an interest-free loan from the government of Quebec.
- After the end of November, my largest monthly expense, the mortgage payment, should be history!
- Getting paid every two weeks, I receive two extra pays each years which aren't factored into the above breakdown.
- Although my work income is almost 6-times as much as my investment income, I'm much more proud of the latter.

Any of my readers open to calculating and discussing their savings rates? As long as it's positive, I think you're on the right track.

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