Eighteen days before my eighteenth birthday my, now Ex, Step-Father kicked me out of the house. Obviously this turned my world upside down, and I was presented with lots of choices that needed to be made. As mentioned in my first post, I moved around a lot when I was growing up, and I didn’t want to go to yet another school and start over again. My desire to hold onto my friends and continue living where I was overrode the logical decision to live with my Father. It is a decision that had a huge impact on my Personal Financial Journey.
Essentially I was on my own for the first time in my life, and in hindsight I took steps that I would live to regret. I dropped out of High School without completing my OACs (that is grade 13 for those of you who aren’t familiar with the term). After some misadventures I ended up renting a room in a house with a few friends, and in desperate need of a job…any job. My fear of returning to the years of not knowing where the next meal was coming from had become my reality. If I am being honest with myself, as much as my early childhood years were a bit lean financially, this was by far the worst financial situation I had ever been in.
Prior to being kicked out of the house I hadn’t had much work experience: a flyer delivery route; some data entry for my Mother’s bookkeeping company; and a summer working in a factory making Christmas lights. Not the best set-up for success in the “Real World”. And at the time I was looking for my first real job the Ontario Government had instituted fair hiring quotas as a way to try and legislate against racism and sexism. Needless to say nobody needed a White Male 18-24 to complete their hiring quota.
I eventually landed a minimum wage job working at a bulk food store. This job taught me a lot of lessons, both life lessons and financial lessons. Some of the more important ones were:
- When you are working for minimum wage you can afford rent, food, and public transit if you are lucky;
- Hard work and dedication will get you more responsibility, more hours, and promoted;
- When you don’t have enough money you don’t have the luxury of choices; and
- Companies will make take advantage of you if you let them.
When you are living hand-to-mouth you don’t have choices. People will tell you that you always have a choice, and though they are technically correct, the choice of eat or starve isn’t much of a choice. And when you are in that position you survive. But you need to do more than just survive. You need to find the way out of that subsistence level existence.
This is when you need, more than ever, to focus on Living Within Your Means (LWYM). Control the choices you make so you can make the most out of what you have…and strive to change your situation for the better.
Can you control your Income? Absolutely. There are many options open to you, but the first thing you need to do is make sure you are maximizing your current income. Start where you are.
Many companies have compensation packages that go beyond base salary. It is these extras that you need to take advantage of. For example many employers have an RRSP Matching Program. This program will look something like one of the following:
- Employee contributes 3% of their salary and Employer contributes 3%, both are deposited into a Registered Retirement Account – This is known as 100% Matching Plan; or
- Employee contributes 6% of their salary and Employer contributes 3%, both are deposited into a Registered Retirement Account – This is known as 50% Matching Plan.
This means if you don’t take advantage of this you are missing out on a 3% increase to your salary. Don’t leave money on the table! So find out what your current employer offers and see what you need to do to maximize their contributions while minimizing yours.
Some companies will also pay for your continuing education. Some pay the whole amount; some only pay part; and others will only re-pay you for the costs once you have successfully completed the course / program. Especially in your early career years your continuing education is an investment in yourself and your earning potential. Find out the details and plan to maximize investing in yourself. Focus on skills that can be leveraged in more than just your current role / industry. Make yourself recession proof by building skills that are valued in many industries. And later in your career becoming a specialist can also become very lucrative.
Once you have maximized your current situation you can start looking to improve or change your employment. Adding part-time gigs or side hustles can add much needed cash flow to help you make ends meet. These additional employment options should also provide you with skills that can be taken with you to future opportunities. Nobody I have met has ever regretted learning how to use Excel. And as an Excel Addict I can’t promote improving your Excel skills enough.
In the book “Your Money or Your Life” they define work as trading Your Life Energy for Money, where Your Life Energy is a limited commodity. For me the story of Joe Dominguez, one of the authors of the book, drives home the importance of that definition. Joe retired from his Wall Street job at the age of 31, and never accepted any money for his work from that day forward. He died of cancer when he was 58. If he had followed the standard work model, 9 to 5 until 65, he would have died before he could retire and pursue the things he really enjoyed. We don’t know just how much Life Energy we are going to have, so we need to make the most of it.
If you have a minimum wage job in Ontario right now, how much Money are you trading Your Life Energy for? Most people would say $14 an hour. But is this number correct? Nope. It is what you are being paid per hour of work, but there are other factors to consider. These factors fall into two categories: work related expenses and work related time.
To get to and from your minimum wage job you need to take TTC (Toronto Public Transit) for $3.00 each way. You probably won’t have dry cleaning costs for a minimum wage job, but you might have a work uniform you need to purchase and maintain. These are a few examples of the cost of working and should be considered when calculating the true amount of money you are making for an hour of Your Life Energy.
Also, your trip on the TTC is 30 minutes each way, or an hour of unpaid work expense. And your job is so mind numbing it takes you an hour once you get home of gazing mindlessly at the wall before you are human again. If the job is particularly bad you might need some alcohol to take the edge off of the day.
For the purposes of this example we will factor in $6.00 of transportation cost, and 2 hours of time getting to and from an 8 hour work shift and unwinding afterwards.
8 Hours * $14.00 = $112.00
$112.00 – $6.00 = $106.00
$106.00 / 10 Hours = $10.60
Your real hourly rate is closer to $10.60 per hour. Don’t forget the following deductions: CPP, EI and Income Tax. At this level of income those won’t have a huge impact on your hourly rate, so we won’t worry about them for this example.
Everybody will have a different combination of time and money expenses that wouldn’t exist if they didn’t have that specific job. You can work out your own calculation on your own, and I highly suggest that you do so. This approach allows you to truly compare jobs, gigs, and hustles to see if what seems like a “promotion” is actually a step forward or backward financially. Some factors that would quickly change that “promotion” into a cut to your real hourly rate would be: More expensive transportation (ie. Go Transit or owning a car); longer commute times; and business clothing and dry cleaning costs.
With this calculation you can start making active and informed decisions that will have a direct impact on your Income. Remember, if you don’t value yourself nobody else will.