Life is hard. Between keeping your financial head above water, living in the moment, and simultaneously saving for the future, there are so many variables you have to manage. Do you buy that thing because it’d be nice to have? Do you stay in a lesser hotel to save a few dollars on your trip? For that show you’re seeing, do you spurge on orchestra seats or resolve to the upper mezzanine?
We deal with these dilemmas every day, and if you’re a saver, you probably pretty good at balancing the pros and cons of your spending options.
But despite your best efforts, there are still forces that work against you. They work against you no matter what your resolve is. And frankly, these forces suck.
Not too long ago, I used to work for minimum wage in my spare time lightwalking for the Canada Opera Company. What lightwalkers do is stand on the stage wearing some neutral colours as the lighting designer and crew adjust the lighting to make sure faces are lit and unintended shadows are mitigated. Reason: it’s cheaper than having the actual opera singer stand there doing nothing.
The gig was fun. I’d work a 4 hour shift one weekend and pocket $44 and get to hang out on the majestic stage of the Four Seasons Centre in Toronto and rekindle my love of theatre.
But one day I stopped altogether. Why? Because my marginal tax rate caught up to me. Let me explain.
I was talking to my parents and sister the other day about investments casually one weekend afternoon. They remain interested in how I’m doing and financial health is of obvious importance to them for themselves and their children.
“Make sure when you make a good enough gain, you sell it. Otherwise you haven’t made any money,” my mother confidently told me.
My sister agreed: “Yeah, I don’t hold anything really long term. Once I’ve made maybe a few grand, I’ll sell and then just buy it again later.”
At first blush, their strategy makes sense, right? Make your gain official, buy it again, rinse, repeat. But there are obvious problems with this approach, problems that would erode your long term gains.
So let’s talk about that in the context of a fictional case study.
Index investors have much to be pleased with, particularly those who bought American.
The S&P 500 has rocketed to all-time highs in recent weeks with NAFTA negotiations trending positive and solid corporate earnings. At the same time, journalists, investors, and regular people alike are all talking about how the bull market is on its last legs.
“Be careful. You should sell. I don’t think there’s much room left to grow,” said a colleague to me as we chatted personal finance. We were talking pensions casually when the conversation shifted to ETFs and index funds (he is all in on real estate, by the way…).
As he walked away, I smirked, but I had a second guess moment: what if he was right?
How I went from every day food court guru to weekend batch cooker.
Mm… Food. There’s nothing that makes me happier than eating a delicious meal that makes my taste buds happy, my stomach feel satisfied, and my energy levels feel replenished.
My favourite meal of the day: Lunch. Trust me, I got nothing against breakfast, brunch, dinner, or dessert. It’s just the timing of lunch is so perfect. It’s really the only meal you can look forward to consistently every single day of the week. Breakfast you’re probably super groggy when you make it, dinner you just want to get over with at the end of the long day, and dessert is fun, but just an indulgence.
But lunch. It’s the one that signals: “BREAK!” It’s the perfect excuse to go for a walk, sit in the sunshine, and recharge the brain and body. Plus, it’s also one of the few meals you might be able to cheat in your favourite fast food meal without anyone else really knowing.
The thing is: those things may appear bizarre to us, but it’s not bizarre to them. It’s a conscious choice they’ve made to become their best frugal selves. And for the record: we are all guilty of bizarre habits. Some people are crazy about folding clothing a certain way, or keeping their book collection meticulously alphabetized (in my youth, I also used to organize all my VHS tapes by production company. Suffice to say, no one could ever find anything but me) – and there’s honestly nothing wrong with that.
So really: we’re all a little weird. And that’s okay. I also do weird things, specifically around saving money and I welcome you to judge me because really, our oddities is what makes each of us special.
I want to start by saying I don’t feel rich. Yes, I know, a six figure salary technically puts me in the upper middle class, but with its high cost of living in the City of Toronto, it’s hard to feel that way. Just to define that relative to Ontario, upper middle class is any single income earner with an income over $108,000.
I also acknowledge the more I make, the more I’m expected to pay in terms of tax. I just didn’t think it would happen so quickly or be so progressively punishing across all other forms of income.
So let’s talk about that today: tax on the upper middle class. I think tax can be a good thing (after all, I am a public servant myself), but we should all still strive for a level of tax efficiency, just like we would when it comes to any other form of spending. Continue reading “Tax Lessons for the Canadian Upper Middle Class”