We all know the saying ‘it takes money to make money’.
Often it also ‘takes money to save money’.
Looking back at previous DMWOM posts, there are several instances where my money-saving suggestions do require us to have extra money.
In the ‘Bulk Buying’ post, I talked about buying large quantities of consumables on sale.
I quoted Mark Cuban saying “ you’re better off buying two years’ worth of toothpaste when it’s on 50 percent discount. There’s an immediate return on your money.”1
But what you if just don’t have the money to buy more than one tube of toothpaste at a time?
If we can’t afford to buy more when there’s a good deal, or higher quality items that last longer, we often end up spending more money over the long term.
The ‘Boots’ Theory of Socioeconomic Unfairness
I think this Terry Pratchett quote from ‘Men at Arms: The Play’ describes it perfectly:
“The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. He earned $38 a month… A really good pair of leather boots cost $50. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell…cost about $10. Those were the kind of boots Vimes always bought and wore until the soles were so thin…
But the thing was that good boots lasted for years and years. A man who could afford $50 had a pair of books that’d still be keeping his feet dry in 10 years’ time, while the poor man who could only afford cheap boots would have spent $100 on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes ‘Boots’ theory of socioeconomic unfairness.”2
It’s the same with Mark Cuban’s tooth paste suggestion.
The person that can afford to buy two year’s worth of toothpaste when it’s on 50% discount will be able to save much more money than the person that can only afford to buy one tube at a time.
And there are a lot of people in tough financial positions even in countries as prosperous as Canada and the U.S.
Canadian unemployment has been at record highs this year due to the pandemic.
In August 2020, the unemployment rate was 10.2%.
Sure, it was a lot better than the highest on record3 which was only a few months ago in May at 13.7%, but it was still almost double January’s 5.5%!
To give you further perspective, the highest unemployment rate resulting from the 2008 financial crisis was 8.7%, in August 2009.
That looks pretty good in comparison to 2020, although I guess most things that looked bad in prior years look better when comparing to anything in 2020….
It now almost seems like George W. Bush was a good president!!!
Interestingly, the lowest unemployment rate recorded3 occurred in May 2019 at 5.4%.
That means, within a year, the unemployment rate went from a record low (5.4%) to a record high (13.7%).
I suspect that means a lot of Canadians haven’t been buying more than one tube of toothpaste at a time.
Knowing that some unemployed people are doing just fine, and many employed people aren’t earning living wages, let’s look at it from a different angle, Poverty.
Looking at Canada’s Official Poverty Dashboard (last updated February 2020), a few key stats jump out at me.
Each indicate the percentage of total Canadians:
- 4.6% are in Deep Income Poverty
- I.e. income below 75% of Canada’s Official Poverty Line
- 12.3% have Relative Low Income
- I.e. Annual income less than $30,7004
- 12.7% have Unmet Housing Needs
- 11.2% have Unmet Health Needs
- 8.7% (of households) have Food Insecurity
- 51.2% Asset Resilience
- This is the number of people who had enough savings to maintain well-being for three months
- That means that 48.8% DON’T have enough savings to do that!
At first glance, it may be easy to think the some of these numbers aren’t very big, when the percentages are single or low-double digits.
But when you factor in Canada’s population at about 37.5 Million, this means that Millions of Canadians are living in poverty.
When you factor in debt, the numbers get even scarier.
According to Equifax, ‘Average debt per Canadian consumer (including mortgages) reached $71,300’5 in early 2019.
Taking out mortgages, average debt was $23,496.5
It’s also important to note that all of those numbers were published BEFORE the Pandemic started affecting the economy in Canada as updated numbers weren’t available at the time of writing this post.
Hopefully all of the Government aid has helped prevent the numbers from getting worse.
What can you do if you are in poverty, low-income and/or high-debt?
I like the ideas in this article on self.inc by Lauren Bringle. She outlines ‘7 Tips for Breaking the Cycle of Poverty’6:
- Educate Yourself
- Change Your Mindset Towards Money
- Leverage Community Resources
- Avoid Predatory Payday Lending
- Ask Someone You Trust
- Focus on Your Credit
- Don’t Be Afraid to Walk Away
All of these tips apply not just to people in poverty, but really anyone that has low income and/or high debt.
Let’s expand a bit on her first four tips.
I believe this is the most important of all of them, and directly links to the others. The more you know and understand, the better you will be in many aspects of life, most definitely with your finances.
And in order to effectively accomplish tips 2-7, you need to ‘Educate Yourself’ about each of them.
Change Your Mindset Towards Money
In addition to her thoughts around understanding money habits you may have inherited from your family, your spending triggers, money beliefs, etc, keep reading Doing More with Our Money.
I will continue to post articles on topics to help us all better understand our relationship with money, purchasing and consumption like previous posts:
Leverage Community Resources
It’s important to educate yourself about the resources that may be available to you at the Federal, Provincial and Municipal Government level.
For example, in Canada, the Federal Government manages most of the programs that relate to tax credits, direct financial benefits like Employment Insurance, CERB (Covid-19 Financial benefit), etc.
The Province and City (or town) will typically manage programs that can provide services for free or lower cost, whether it’s Health Care, employment programs or other services.
For example, the Province of Ontario provides free dental care for low income seniors7 with the City of Toronto providing free dental care for children, some adults, and seniors.
There are also options for you to qualify at a low-cost dental facility if you don’t qualify for the free services.8
Your Tax Return
While Lauren Bringle briefly touches on it in her article, I believe it is crucial to do everything you can do fully understand all aspects of your annual tax returns.
How to do the returns, how to reduce your taxable income using available tax credits, RRSP contributions, self-employment expenses, etc. etc. and make sure to actually file them.
People have told me they didn’t file their tax return as they know they don’t owe any money. File it! Often you will get money back, especially if you are low-to-middle income!
So why am I sharing all of this info with you?
Besides recognizing that some of my money-saving suggestions do require having some extra money to take advantage of them, if you just don’t have that option, feel free to pick and choose which posts are relevant to you and which are not.
Looking back at all of the Doing More with Our Money posts so far, some of the posts that lower-income people can certainly take learnings from include:
I plan to cover more topics that can help people of any income level (including lower) in upcoming posts, such as coupons/discount codes and buying second-hand items.
Thanks for reading!
3 Since tracking of comparable statistics began in 1976
4 Canada’s Official Poverty Dashboard defines this as ‘Persons who had less than half the median after tax income’. Stats Can published the media after tax income as $61,400