Ever sat down and wondered “where does my money go?” The answer is simple. Taxes. It’s no surprise to many Canadians that taxes take a large chunk of their paycheque – but they might be surprised at the exact amount. A recent report from the Fraser Institute stated that the average Canadian pays a whopping 42% of their income to the government in one form or another.
Stunningly, the 42% figure is more than what is spent on food, shelter and clothing combined – and this ratio appears to be getting worse. The report pointed out that this percentage of income going to taxes has increased from 33.5% in 1961 as the average family’s tax bill rose over 1,800% in the last 50 years.
Charles Lammam, co-author of the report, points out that the current situation limits what families can spend their money on –
“With more money going to the government, families have less to spend on things they care about, to save for education and retirement, and to pay down household debt,” says Lammam.
Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada, says the tax burden placed on Canadians may be a cause of rising household debt –
“Is it a surprise that we have record level of household debt in this country?” asks Schwartz. “Canadians are finding it hard to pay off their debts and a rising tax burden may be a contributor.”
According to the report, when combing taxes, food, shelter and clothing together, the average family has about 22% of their income left over. Even though that doesn’t leave much for savings and debt payments, Consolidated Credit offers the following tips:
- Tax yourself (in a good way!) – start siphoning off a portion of your paycheque directly into savings or debt payments. By authorizing your bank to do automatic deductions, you will take the thought process out of this task. Before you know it, you will have accumulated a tidy emergency fund and eliminated a solid chunk of your debts. Making it easy and automatic will decrease your stress, and decrease your debt.
- Cut back where you can – With food, shelter and clothing taking over a third of our income, those are the areas you should look for savings in. Visit supermarkets late at night to find marked down products, shop for clothing at used or vintage stores, and consider moving to a smaller home or apartment. Taking these small steps will create big savings.
- Make a plan, Stan! – Few successes in life come without a solid plan behind them and the same can be said for your personal finances. Utilize budget tools (some of which can be found on this website) to get you on the right track to financial success. Be ruthless in achieving your savings goals each month and challenge yourself and your family to save wherever possible. When saving becomes a habit, you will be well on your way to a lifetime of financial success – regardless of how much you pay in taxes!
If you want to learn more about making responsible financial decisions, check out Consolidated Credit’s free Personal Finance educational section. If you’re struggling with debt, call one of our trained counsellors today at for a free debt analysis.