GET OUT OF DEBT TODAY!
THE BUDGETING TOOL - $50 USD
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Tag Archives: Salary
So this year, I decided that I needed to start budgeting like a freelancer, rather than someone with a steady income.
Most people tend to look at their net income each month, set a budget based on that (rent, groceries, savings, debt repayment), and budget to have $0 left unaccounted for.
So if they make $2000 a month, they can spend about $700 on housing (35%).
My income as a freelancer, spikes and then drops to $0, as evidenced below in my net worth from 2006 until the end of 2012 with all of the spikes then slow drops.
(Click to biggify)
Now, I’d like to set a budget for living reasonably, disregarding what I actually make as an income, and then save all the rest of my income.
The slight twist is that I now look at the yearly totals each month rather than monthly totals, which is something I’ve heard a few people mention.
This makes more sense because my income is not monthly, and I’ve been ad hoc budgeting like this for a while now, without realizing it.
I’ve just been giving myself an allowance each month!
NO MATTER WHAT I MAKE, $30,000 NET WILL BE MY NEW BUDGET
I had originally written the post: What is an ideal household budget? a while back (sometime in October I believe), and set it to $40,000, based on the fact that I grossed about $70,000 a year (2 years working, 3 were relaxing..).
Between October and now, I’ve decided that $30,000 net is my new budget for spending rather than around $33,000.
It’s easier than thinking of in gross dollars, and I spend in net dollars anyway.
(I also say net because it’s after any kind of taxes, give or take a few thousand ($3000 or so).)
Every year, I seem to come up with a budget for the next year, based on how I’ve been spending in the last 2 years, and trying to account for what caused my outrageous spending in categories like Wardrobe or Fees in 2012 for example (think: lawyers of all kinds, in all shapes and sizes, who then send you holiday greeting cards and tell you how much they loved your business!!..).
It never works out perfectly, but in general with the exception of last year *cough*2012*cough*……I have been spending less than ~$33,000 net per year or $40,000 gross, which isn’t so bad.
Therefore I now think of my budget as what I feel are reasonable expenses for my current situation and preference for living, which does not include:
- living in a cheap cardboard box with paper thin walls with noisy & smelly neighbours
- wearing a neutral uniform of the same type of clothing to match all the other minimalists
- refusing to travel or buy something shiny (within reason) because my heart desires it
- eating as cheaply as possible to save money — it is NOT my thing, y’all, I just can’t do it
- pinching pennies by making my own toilet paper — err.. has any uber frugal-er done this yet?
- savings — that will be assumed as ‘all the rest of my income’ after spending
You get the idea.
SEE, I ASSUME I CAN ALWAYS GET A JOB FOR $40,000 GROSS
As mentioned in my earlier post, I can always get $40,000 gross at the very minimum as a job enough to survive a year until I get something better.
And by survive, I mean pay for my current, comfortable lifestyle, but to save $0 for the year (not a viable long-term option).
This is a very conservative assumption for me, and I plan on keeping it like that.
In actuality, I can get a job at $90,000 – $130,000 gross working for a company, but I don’t like those kinds of numbers when I think of spending.
I’d rather think of that as a bonus if I make that kind of money.
I like those numbers when I think of SAVING all of that, if I gave myself an ideal budget to follow.
Spending that makes my impulse nerve twitch, then I want pretty things, and it snowballs into me crying in the corner, clutching my receipts and feeling overwhelming waves of guilt at spending.
$40,000 gross looks like this after taxes in Canadia*:
*misspelling as a joke for Americans..
For thy viewing convenience, I’ve highlighted the only 2 provinces and territories I actually work in.
- Ontario gives me $34,038 net
- Quebec gives me $32,131 net
This does not include any tax breaks from charitable donations or fully funding my retirement funds, which lowers my taxable income as well.
It also has a few thousand more than my $30,000 budget, because I like having a cushion for spending.
As a freelancer, I do have a few perks in terms of being able to write off some expenses related to my business (which is my brain), and this usually helps a little in terms of having more to spend.
MY $30,000 NET PERSONAL BUDGET FOR 2013…
As mentioned before, my previous ideal budget (before I wrote this post), was just about the same amount of money — $33,000 net spending instead of $30,000 net, but I’ve since changed and tweaked it a bit.
I am feeling this estimated budget for 2013 which is a nice $30,000 net.
Click to biggify
I really will try and look at it from a yearly point of view, and I’ve pored over every number to see if I could make it, and if it sounds realistic considering how I want to live.
If I spend all my money early on, that means I have $0 left for the rest of the year.
*already feels imprisoned a little…*
At the end of the day, I think I’d rather put more money towards Travel rather than Wardrobe, and it’ll be a personal challenge for me to spend less than that on Wardrobe and put the money into investing instead.
Wardrobe will include not only buying things, but also having them fixed or tailored.
You will also notice that I don’t stick to prescribed PF budget percentages.
Transportation is not a big thing for me. 5% is more than enough, I don’t need 15%.
I also don’t have Debt in there (‘cuz I have none), and no specific Savings category because I save what I don’t spend.
(Most PF’ers will tell you to save FIRST, then spend. I go the other way around.)
Under Housing, I spend a LOT but that’s to be expected, living in a hotel. We don’t want to take a lease for a year (the only kind available in Canada), and that’s that.
The rest of my budget goes to Living around 50%, but that’s because I pilfered from Transportation, Debt and Savings.
Savings are a given for me. They’re above and beyond the $30,000 budget I give myself to live on.
My savings have to be at least $36,000 a year ($24,000 if I’m really pushed for a minimum).
So in reality, I’d need to be making at least about $66,000 a year (net) to live like this, where I am able to save more than half of my net income which is perfectly in line with how much I can make per year if I took a Jane Job at a $90,000 gross income (my lower income salary number).
The reason why I’ve been making $75,000 gross instead of $90,000 gross is I’ve been working 2 out of the 5 years of my career, rather than 100% of the time.
I saw it as a good deal — almost the same amount of salary, for less than half the hours spent.
I am hoping this year will be a full year of working, and I’mma about to hustle for those jobs.
Update: ALL THAT MONEY PER MONTH, REALLY?
Well those are averages per month, as contingencies mostly.
$120/year for electronics should be more than enough, even if it sounds like too much or too little to you.
This is just for personal electronics, because I know things like cables get broken/lost/stolen, and I want to be sure that I have a contingency in place just in case.
Why put $0 when I know it probably won’t stay at $0?
Why put $2000 when I know it won’t be $2000 for personal electronics?
All I’m even eying is a Kobo Glo as we speak, but I am not willing to shell out $130 (my budget is only $120!), and I have a gift card for $50, but I am still not liking the actual retail price. $100 sounds more reasonable to me, and I’m willing to wait for a deal.
Unlike what many might do, I also pay for software at full retail price so I don’t have to worry about whether or not it works, on what PC/Mac, bla bla bla.
My software costs around $15 per (like Pixelmator, which is absolutely AWESOME for the Mac). I also use Picasa (free), but Pixelmator is for the more advanced stuff.
I don’t like to be hassled or troubled for stupid things, and the right thing is to pay for the software anyway.
I probably won’t end up spending this budget, but I need it there just in case.
CAN I STICK TO THIS BUDGET?
I SHOULD DAMN WELL SHOULD BE ABLE TO.
$2500 is a lot of money per month.
In fact, I should be able to spend less than this, but I don’t want to make anything unrealistic and then blow it and cry in the corner berating myself.
Now that we are CERTAIN we are staying in Canada, I am also more certain of not having $10,000 moving overseas or moving abroad costs that will slap my net worth silly.
Regardless, I have about $5000 that I keep at the back of my mind for if I overspend, as a contingency for things that come up once-in-a-lifetime.
If I don’t spend all the money (IDEAL! IDEAL!), I’ll save it instead. I’m fairly sure that Rent amount for instance at $12,000 won’t be that high, especially if I’m working.
DOES THIS ABOVE BUDGET INCLUDE BUSINESS STUFF?
That’s where it gets tricky. My business is selling my brain, and I needs a place to stay, something to eat, etc when I am on site.
I also have to pay taxes, fees, licenses… those expenses will all be tracked on a monthly basis, in a single, communal budget.
I used to keep 2 even 3 separate budgets for business/personal, but then it became too confusing flipping back and forth.
I’m trying to now do it all in one budget, and it will become a massive communal sheet that will be a work in progress for this year.
Regardless, the main goal is to stay under $30,000 for PERSONAL spending only.
..and to save at least $36,000 net this year.
SO WHAT ELSE DO I SAVE, THEN?
…..ALL MY UNREALIZED INCOME OF COURSE!
All the rest of my income, and I keep track of it as assets tab in my budgeting tool.
As a freelancer I should also point out the advantage of having unrealized income:
Assuming I work about 3 months next year (on the low side), that’s about $60,000 gross.
- Realize $30,000 in income
- Leave about $24,000 in the company as retained earnings (savings) after taxes
- If I realized the income, I’d be out another $10,000 in taxes, leaving me $14,000 of savings
On the mid-side, if I work 6 months next year (an average), that’s about $120,000 gross.
- Realize $30,000 in income
- Leave about $66,000 in the company as retained earnings/savings after taxes.
- If I realized the income, I’d be out $25,000 in taxes, leaving me $41,000 of savings
On the high side, if I work 9 months next year, that’s $180,000 gross.
- Realize $30,000 in income
- Leave about $114,000 in the company as retained earnings/savings after taxes.
- If I realized the income, I’d be out $46,000 in taxes, leaving me $68,000 of savings
Notice a pattern?
All of the above helps me minimize my tax burden if I just don’t spend it.
All the more reason for me to NOT TO REALIZE MY INCOME AND SPEND IT.
I avoid a lot of taxes, especially when you consider how much an impact charitable contributions and my RRSP/TFSA maxing out contribution makes.
This is all not taking into account if I have to pay for business traveling (hotels, flights, train tickets, car rentals, gas… you name it), so my retained earnings may vary by about 25%.
It doesn’t take into account any overtime.
Some months I work, may be more profitable than others.
It also goes without saying that I’ll also be investing that money on behalf of my company to grow in the meantime, which will essentially become my nest egg for retirement.
My austere-for-me plan for 2013, and a rough overview of how I will be budgeting going forward.
How do you do it?
By a percentage of your net income?
In a book I really enjoyed The Paradox of Choice, it stated:
“In most cases, more than half of the respondents chose the options that gave them better relative position.
Better to be a big fish, earning $50,000, in a small pond than a small fish, earning $100,000, in a big one.”
TRUE: PEOPLE LIKE TO BE ‘THE JONESES’
Never mind if they really are or not, people LIKE feeling like they make double than their friends and family.
It makes them feel important and proud.
That, I can understand. We humans are a competitive bunch. We always want to one-up each other, and basically benchmark ourselves against how others are doing to make sure we’re meeting expectations.
…BUT IF WE ARE TALKING ABOUT CERTAIN AREAS…
This is an exception I thought of — cost of living varies a lot, and you can’t just take absolute earning power into account without the other factors.
It can make sense that if you earn $100,000 in NYC, you aren’t going to really feel like you earn $100,000, versus if you made that money in some small town in the middle of nowhere.
A great example of this is that my rent in a well-located, close-to-a-subway-line NYC area (Midtown), was $5000/month, which is $60,000 (net) a year, or a little over half of your gross income if you earned $100,000 a year.
That leaves you with a lot less money to live your New York dream, and in contrast, people around you may be pulling in $500,000 to a million a year, which understandably can make you jealous.
One can always make the argument that you should just bloody live somewhere cheaper like Brooklyn with your $100,000 salary, but my point about cost of living not being equal in every city, still stands.
BLUE-COLLAR JOBS CAN MAKE JUST AS MUCH, IF NOT, MORE MONEY
Anyway, let’s say the above finding took into account geographic areas.
I was told in high school by my sibling that most people liked to say they worked in white-collar jobs, because blue-collar jobs weren’t prestigious.
Who wants to say that they work on a construction site, when they can say they work at some fancy bank instead?
He told me: Don’t go for the $30,000/year white-collar office job if you can make bank by operating a crane for an excess of $100,000/year.
I replied back: If I had any viable aptitude for working a machine, I’d do it.
Unfortunately (or fortunately?) my skills lay more in the other direction. More mental than physical, but what he said has always stuck with me.
It’s also why I know when I am looking at a long-haul truck driver with a really nice custom rig, an electrician or plumber, or a guy who looks like he’s “just” a construction worker, I always tell myself that they could be making a lot more than you can imagine.
Those folks also tend to be more down-to-earth and less into spending for appearance’s sake, which helps them mount a great defense against lifestyle inflation and spending beyond their means.
I’m also pretty sure that if your family is as snobby as my extended one, they’d start comparing kids and say:
“Oh, so-your-so-and-so is only a __[insert blue collar job__? Well MY so-and-so is a __[insert a white collar job]__”
HOW MUCH EXTRA DO YOU NEED TO MAKE TO INCREASE YOUR STATUS?
From the book: Priceless – The Myth of Fair Value
“To double your social status, you need to earn about 2.6 times as much, according to one study by Stevens.”
Yep, pretty easy. Want to reach another level? 2.6 times more.
So if you earn $30,000 a year, then you need to earn $78,000.
If you earn $78,000, then you need to earn $202,800.
..and so on.
Of course, what the heck does ‘status’ really mean anyway?
That you can join a fancy country club?
I am not entirely sold on it having any value other than giving you a personal boost of confidence and pride, but if it floats your boat…!!
HOW TO MAKE MORE MONEY IN ANY JOB YOU DO
The main thing I’ve always kept in mind is to be sought after and to be the best you can be.
Back to those truckers — I saw a documentary on those truckers with custom rigs, and some of them made in excess of $100,000/year because they had serious skills in being able to haul special or delicate goods that were worth millions, like large delicate instruments, or glass.
They weren’t just driving a truck, they were able to drive at a decent speed while being able to minimize any damage done to the goods they were transporting.
They became well-known in the business for being “the guy to go to if you want your glass unbroken”, and they not only knew their job, they did it well and enjoyed it.
So even if you don’t think this it the career you’re meant to be in, or you hate it with a passion, try doing it to the best of your abilities and maybe it’ll open up doors to another career you didn’t even consider before.
IF YOU HAD TO CHOOSE, WHAT WOULD IT BE? MONEY OR STATUS?
(Obviously I’d choose money.)
Median. Not on average.
Via Planet Money
Note on Income and Benefits:
The income part of the data excludes dividends, capital gains and income from real estate, like rent payments.
The benefits part includes food stamps or subsidized housing. Many of these government subsidies are targeted at poorer households.
THE TOP 5 HIGHEST SALARIES BY STATE
- Maryland: $68, 854
- New Jersey: $67,681
- Alaska: $64,576
- Connecticut: $64,032
- Hawaii: $63,030
THE BOTTOM 5 LOWEST SALARIES BY STATE
- Mississippi: $36,851
- West Virginia: $38,218
- Arkansas: $38,307
- Kentucky: $40,062
- Alabama: $40,474
But really. All that glitters is not gold.
Not everyone who earns a big salary, looks like they earn a big salary.
“….a small but highly compensated blue collar occupational group, materials handlers, that is often misjudged and overlooked by marketers of a variety of affluent products and services. ” ( Read more )
Came across this great quote today by Bill Gates*.
(As I didn’t personally hear it, I am assuming the quote and the circumstances were true, but even if they weren’t, the quote still rings true for me and is something I believe.)
WE HAD THE SAME ATTITUDES ABOUT WOMEN NOT SO LONG AGO!
Before the World Wars, women stayed at home, cooked, cleaned and didn’t have careers.
It wasn’t until all the men went to war, that women had to step in, roll up their sleeves and work.
Some went back to what they were doing before, others decided they liked working and kept doing it, albeit in ‘safe’ jobs like being a secretary and fighting to be recognized as an equal in the workplace (as a young woman professional, I thank you!).
It made me wonder: If there weren’t any World Wars, would women have been given the opportunity to crack that barrier? How long would it have taken?
Maybe we would have been in the same position as in the countries we now think are ‘backwards’ and not as progressive.
Note: I absolutely acknowledge that tradition and religion plays a big part, so there’s no question that it’s not a matter of trying to preach, be bossy and educate the so-called uneducated to get them to change to what we think is the right way.
Those countries are full of extremely educated people who have a different mentality and outlook on the world.
It’s more that if the culture dictates certain rules and you want to stay in that culture with the rest of your family and friends, you have to follow those rules.
I understand that completely, having known many girls who have chosen that route, even if I would have never chosen that kind of life for myself.
Back to us in North America (and even parts of Europe).
WOMEN EARN LESS, PERIOD.
There is still a lingering, prevailing attitude that women are not as good as men in positions that require technical knowledge/skill and power:
- Any executive position
- Professional chefs
I am not saying that if you’re in Advertising or Human Resource management that you’re not useful or that you don’t have skills.
I am saying that as a society, we don’t seem to value those kinds of creative professions as highly as the ones that require technical know-how, and it shows in the salaries.
If as a society, we thought that young girls and women could be fantastic assets in those areas, why are women gravitating towards areas that don’t seem technically-inclined?
They’re being pushed towards those professions, unconsciously encouraged to take appropriate jobs and perhaps told from a young age that ‘girls are bad at math and science, so giggle a lot and ask for help from boys‘.
Check out this survey by Payscale – Do men really earn more than women:
Click on the image to enlarge
As a society, we believe that the money comes with the skill and difficulty of the job.
I am not going to get into a discussion of whether or not school teachers or nurses don’t help society (I DO NOT BELIEVE THAT), but this is just an example of why women earn less.
We gravitate towards jobs that don’t pay as much.
We aren’t encouraged to think and stand up for ourselves.
We aren’t taught that there is no ‘girls or boys’ in terms of abilities, there are just people.
We are unconsciously putting women down all the time (even as fellow women!) because of jealousy, pettiness and whatever else comes with women hating other women.
We (sometimes) assume a man is better in a job than a woman (sad, but true).
These are all factors in women earning less in the workplace. The good news is that we’re improving, but it has to change with the way we treat and talk to young girls and women.
What do you think?
I had initially asked for $100,000 as my bare minimum salary for the job that I would be doing, with the experience I had and my skills.
What ended up happening was a bidding war between 4 companies, which essentially bumped my salary offer up to $130,000 with the expectation that I would have $20,000 in bonuses each year.
Note: I don’t really count bonuses as part of any compensation package.
If I get it, great.
If I don’t, no tears shed.
I just focus on base salary, and that’s it.
How did I manage all of that?
I knew what my bare minimum ($100,000) was, which was below the average market rate of $115,000 for my role, and I knew I would be a candidate that none of the companies would turn down.
When asked what my salary expectations were, instead of playing that game where you try and get the other party to blink by offering a number first and then topping it, I said: My minimum base salary expectation is $100,000.
By saying that, companies should have understood the following:
- I had a minimum, and trying to lowball me below $100,000 wouldn’t fly
- I had done my research, and I knew I was worth more, but..how much more?
- They knew I would be saying the same thing to the other companies
- They knew they would have to go over my asking offer to be in the game
I finally did it.
I used a 25% coupon at m0851 and purchased my dream leather jacket — the Perfecto for $678, taxes included.
The original price was $830 before taxes, and I’ve been eying this baby since… I saw it about 3 years ago.
Then I tried to hunt down alternatives for cheaper, and kept coming back to this jacket because of its simplicity, perfect fit, cut and buttery soft leather.
I asked for them to make it for me in a brown (they only had black or ink blue, but neither one appealed to me), but until I get the jacket, I won’t be able to take pictures of it, so you’ll have to settle for this photo for now:
The more you wear it, the better it looks, and it’s SUPER LIGHT for a leather jacket.
Anyway, enough about my jacket. Let’s get to the point of this post.
HOW DO SHOP ATTENDANTS AFFORD SUPER EXPENSIVE STUFF ON THEIR SALARY?
I know I wrote shop GIRLS, but I wrote it thinking of that movie with Claire Danes and Steve Martin named ‘Shopgirl’…However I am well aware there are spendaholic shop GUYS too
As I was in the store, I was hemming and hawing over the DISCOUNTED price of the jacket, and I finally said: Okay. Well. It’s the only leather jacket I’ll probably ever buy or own, so it might as well be amazing since I’ll be wearing it to death.
This (college-age?) girl looks at me and says: REALLY? I own 3 Perfecto leather jackets from M0851 in various colours — one for spring, autumn and winter..
Me: .. uh… *brain explodes doing the math*….
$830 x 3 jackets = $2490 (before taxes)
Let’s assume they are super generous and give a 50% discount to employees.
That is STILL $1245 BEFORE TAXES!!!!
I was dying over the price of $678 in total for ONE jacket that was 25% off, and here she was, owning 3 Perfecto jackets.
It wouldn’t be so shocking, if she wasn’t working for what I am assuming is minimum wage.
Let’s face it, employees in stores make about $20,000 – $30,000 depending on their level (guessing here)….. which works out to be about $1552 a month.
They would have spent a whole month’s worth of a net paycheck on jackets. 0_O
..or two, if they don’t get a generous 50% employee discount.
Broke my PF mind, to be honest.
It makes me think of all those other people working in luxury retailers wearing luxury clothes on not-so-luxurious salaries — HOW!?
Update: So apparently “NYC’s Manhattan has the highest geographic concentration of household’s whose lifestyles are heavily supported by Other People’s Money.” (Read: Thomas J. Stanley).
There you go. Answered.