The countries richest CEOs earn 189 times what the average Canadian does. According to the Canadian Centre for Policy Alternatives the average annual salary in this group is $8.38 million. By the time you read this, Canada’s top-100 earners have been paid in two weeks what it will take most of us 10 years to make.
“The gap between Canada’s CEO elite 100 and the rest of us is growing at a fast and steady pace, with no signs of letting up,” says economist Hugh Mackenzie, who authored the report.
I promote saving for a rainy day and being financially fit, but admit I feel a little downtrodden when I hear the disparity of incomes in Canada. How can I tell someone who makes a decent living at $80,000 a year and supports their family, to diligently save for retirement and have an emergency fund, when there are people who might work in the same building as us making almost 200 times.
When it comes to saving, we just need to remember that our salary, like most other things in our life, is relative to our surroundings.
No Matter What You Earn: You Have To Save
We can never live beyond our means. If we make $3500 per month or in the case of Canada’s riches CEO’s Close to $700,000 per month the same principals apply. Save 10 per cent in your emergency fund, save 10-15 percent for retirement and have at least 3 months of surplus in your bank account to pay your month-to-month bills.
So, if the CEO of Bombardier lost his job today he could survive with the same lifestyle for 3 months as he looked for a new job.
Am I Too Rich to Save?
Recently I was invited to speak at a personal finance event held by ING Direct. The topic was the state of savings in Canada. After the event a well dressed older lady asked me, “when can I just stop saving and start spending?”
I had never thought about this sweet dilemma before. She went on to explain that she has assets worth a few million and another million in the bank and now she wants to spend without shame. I asked her if she wants to leave an inheritance to her children, she replied “no way,” my kids are financially secure they don’t need my money.
It had me pondering the idea if we’re ever too rich to save? The answer is no! Savings is part of our life – all our life.
Save In the Good Times… for the Bad Times
You only have to pick up the latest Hollywood Gossip magazine to find proof of what not saving can do to you. There’s always some story of one used to be rich and famous person who’s bankrupt. Imagine they had bought one less house in Beverley Hills or one less one-of-a-kind luxury car. Maybe giving all his friends Rolexes for Christmas was a bad idea. If they had been more careful when times were good, they would be much better off today.
We all have a responsibility to protect our future if we expect to live the same lifestyle, or even improve it in the future. We have to spend relative to what we make. It can be frustrating to hear about Canada’s richest making 200 times the average Canadian, but that doesn’t mean you should destroy your chances of being financially secure.
No Matter The Salary The Rules Are The Same
Here is my message to all Canadians even the richest CEOs. Always have enough money in your rainy day account to get you through 3 months of bills and living expenses. Save for retirement, even if you’re already retired. Never put anything on a credit card that you can’t afford to pay with cash. Only go into good debt, like a mortgage or education. Extras like vacations, clothes and going out for dinner with friends must always be paid in cash. Never spend money this month anticipating paying it off with money you’re making next month.
Simple rules no matter what your salary.