$100K is a target salary that society portrays as “rich”. They put this number on a pedestal and glorify it with names such as “the sunshine list” and that you’ve made it if you make this much. But have you really made it?
Dating back a few decades, $100k could probably afford you a nice lifestyle.. back when bread was still 5 cents a loaf. Even though the monetary costs of goods and services haven’t stuck around, this term has. If we delve deeper, we will see why $100k won’t get you very far at all in today’s day and age.
A T4 employee’s biggest expense is likely tax. When I was earning a T4 income, I was paying $50k in taxes a year. That’s a pretty big incentive to stop working, no? Mind you, the taxes I paid was more than what people earn from their gross income. It doesn’t matter if you earn six figures if Uncle Sam takes a big chunk off of it before you do. With the highest marginal tax rate at 53.53%, you lose more than half your income for every dollar you earn after $200k. With a left-wing government running Canada, we’re likely to see this number go even higher. It’s not what you earn, it’s what you keep!
Adjusting for inflation, wages have more or less been stagnant over the past few decades while assets have continuously outpaced inflation. That’s why if you don’t invest your money, you’re going to be running on the hamster wheel and not getting anywhere. A few decades back, the price of a house was maybe 3-5x your income. Now its well over 10x your salary. Why this huge jump? A simple explanation is the gap between wages and assets keep getting bigger and bigger. Because of where asset prices are today, and will be in the future, we continue to buy hard assets that produce positive cashflow. Both the value of the asset and the income it produces is hedged to inflation and usually outpaces it, unlike employment income. Even though real estate can help you stay ahead of the curve, not all real estate is the same. You have to know which types of properties to buy, where to buy, and how to run it so it doesn’t become a nightmare. Enormous wealth is created in investing in real estate only if you know what you’re doing. Tons of people lose money in real estate because they don’t know what they’re doing. Either get educated through this blog and other books, or invest with experts who know how the game is played.
Which brings me to my last point: time is the most valuable asset we have and is the only thing that is scarce. At first, you may trade your time for money. But once you amass your initial capital, you need to keep investing and snowballing your wealth. Never spend your earned income. Instead, use that to invest in cashflow positive assets to fund your lifestyle and expenses with the passive income it generates. Time is precious. Spend it with loved ones instead of mindlessly trading time for money.