Do you wish you could figure out how well you’re doing financially but don’t know where to go to find benchmarks against which to measure yourself? Stats Canada has figures but they are very general but always seem to be on the old side. It’s okay to use them when we’re talking about what you spend on average, but not so much for measuring “progress.”
The problem with doing comparisons is that each of us wants something different from our lives. I’m quite content to garden, knit and travel occasionally. Other people want to party. Many use the stuff they buy as a kind of signal to the rest of the world: Look how well I’m doing.
Measuring depends on what you want from your life. It depends on how much you make. It depends on where you live since some places are more expensive than others. And it depends on how much you think is enough.
What do you want? If you want a simple life full of shared activities, the amount you’ll need is very different than the guy who wants to travel every year and drive a new car every two years. Are you happy doing what you’re doing, or are there other things you need or want to do?
How much do you make? The person who makes $50,000 a year can’t compare herself with the person who makes $120,000 a year in terms of lifestyle or accumulation of assets. One of the problems I have with benchmarks is that there ‘s no way to compare apples to apples realistically. What makes one person feels like soaring success will make another feel like a pathetic failure. So it’s not really about comparisons; it’s about following the rules. Are you doing the detail, keeping a budget, saving enough to make sure your future is comfortable, covered by the right kind of insurance, and paying your bills on time? If you are, then by any standard you should be fine.
Where do you live? If you’re in a big city, your costs will be different from a person living in a rural community. If you live in the far north, your expenses will be very different than the person who is close to everything. Yes, one person may spend more on food or daycare, while the other spends more to keep a roof over their head. It’s also important to think about where will you live when you plan to start using your retirement savings. Will you move so that your money will go further? If you plan to move for family or lifestyle reasons, are you familiar with the costs in your new community?
How much is ENOUGH? Saving is important. Very important. If you don’t save, you won’t have money for food, which will make retirement very short! But I’ve watched people sacrifice their Present to make sure they were “comfortable” in their Future. Saving for the future is a good thing, but not when it means that you have no joy in the present. The accumulation of assets as the only goal in life leaves one with a lot of money and not much in the way of anything else.
Look at how you’re doing today.
- Do a net worth statement so you can track your progress over time. Your assets should increase as your debt decreases. If things are going in another direction, you’re not measuring up.
- Live on a balanced budget. Keep track of where your money is going. Spend consciously. If you’re coming up short, going into overdraft or using credit to cover expenses, you’re not measuring up.
- Know how much debt you have — yes, add it up – what it’s costing you (in interest) and when will it be gone? If you don’t have a plan with an end date for being out of debt, you’re not measuring up.
- Finally, think about how much income do you think you’ll need later when you’re no longer working. Savings doesn’t happen magically. It’s a choice to not spend so there’s some money available later for things like food and shelter. Not saving means you’re not measuring up. It also means your future will suck!