I logged into my old employee portal and took a screenshot of a random paystub from last year. Here it is below:
I don’t mind sharing this info with you right now because, firstly, I don’t work there anymore, but secondly because the University of Alberta is ultra transparent with salaries so if any of you had ever really wanted to know what I was bringing in when I was working there, you could have simply visited this link and taken a peek.
This is why nothing is a secret on the internet, it just sometimes takes a little digging.
Now the reason I’m sharing one of my paycheques with you — which is something I’ve never, ever, ever done before — is because a lot of commenters and tweeters balked at my 5 Steps To Increase Your Net Worth By $25,000+ Per Year.
They complained about taxes (as you can see from my paycheque I was giving up nearly $1,000 a month to taxes, employment insurance and the Canadian pension plan) and regular expenses (as if I didn’t have my own rent to pay or groceries to buy). If this plan looks to difficult, by all means, make up whatever excuses you need to in order to justify not doing it, but if you do actually want to increase your net worth by $25K per year and you make a normal salary, it comes with a bit of pain and sacrifice.
If you want increasing your net worth by $25K per year to be simple and painless, then go earn $125,000 per year. It’s up to you if you find banking $25K on a $50K salary more or less difficult than earning $125K, it’s totally your preference, but there isn’t a net worth fairy that’s going to deposit $25K in your bank account every year for nothing.
Now let’s have some fun with math!
- Gross income: $4,463.56 per month
- Automatic pre-tax savings into retirement plan: $454 per month (net worth increase: +$5,449 per year)
- Taxes and other deductions: $964.22 per month or $11,570.64 per year (net worth increase: $0)
Net Monthly Income: $3,021.22 per month
Regular expenses: Rent $750, Laundry $50, Electricity $25, Internet $50, Cellphone $75, Netflix $8, Groceries $200
Total regular expenses = $1,158 per month
Money remaining for miscellaneous expenses, entertainment, savings, investing, and debt repayment after paying regular expenses: $1,863 per month
- Average student loan payment*: $1,000 per month (net worth increase: +$12,000 per year)
- Average income from dividends and interest**: $500 per year (net worth increase: +$500 per year)
- Automatic savings to brokerage account: $250 per month (net worth increase: +$3,000 per year)
- Automatic savings to personal RRSP: $250 per month (net worth increase: +$3,000 per year)
- Automatic savings to TFSA savings account: $100 per month (net worth increase: +$1,200 per year)
Total Net Worth Increase: $25,149 per year
Money remaining for entertainment and miscellaneous spending: $263 per month or $3,156 per year.
Now, the fact that the remainder is in excess of $3,000 net income is important because I’m sure a handful of people are going to whine that my salary was over $53,000 and therefore not relevant to those bringing in only $50,000. Clearly if this plan of action I outlined above allows for a net leftover of $3,000, it’s under budget for the $3,000 gross difference in my salary from the suggestion of at least $50,000 base salary.
I realize I had a bit of a leg up by being able to save over $5,000 of my income for retirement before taxes. This is an advantage I had through my employer. If you don’t have access to the same perk then you will simply contribute to retirement with your after-tax income and get a bigger income tax refund when you file your taxes at the end of the year. Bank your income tax refund instead of spending it on stuff. Bam! Net worth increase. Are you getting the hang of this yet?
One of the things I really, really, REALLY want to emphasize is this:
If you can’t increase your net worth by $25,000 per year, increasing it by $20,000 per year instead is still awesome. As long as your net worth is going UP not DOWN, you’re doing things right.
I understand that there is a myriad of circumstances contributing to different expenses that swallow your money before you get a chance to use it the way you want to. You have to keep in mind that the way things are are not necessarily the way they will always be. You still have time to get a raise at work, start a side business, make a killing on a good investment. It also means there’s still time to face an expensive personal emergency, get laid off, or suffer the consequences of a poor investment decision.
I increased my net worth by $25,000 two years in a row. Next year I won’t. The year after I probably will, but that’s still uncertain. No matter what, I’m not going to kick myself for only saving $24,000 one year or over celebrate saving $30,000 the next.
How much you can increase your net worth by is largely circumstantial — but an even larger part of the equation is your attitude.
No, you can’t have a car. No, you can’t go out for dinner every day of the week. If you want a ballin’ lifestyle while banking $25K/year, then EARN MORE MONEY — don’t whine that the laws of mathematics are restrictive! This is life, kids, this is how money works: you can’t spend more of it than there actually is (at least not indefinitely).
So there you have it: the real numbers of increasing your net worth by $25,000 per year on a salary of $50,000.
*note: I paid off over $21,000 of student loans in 22 months for an average of about $1,000 per month. If you don’t have debt, use this $1,000 per month for savings and investments instead.
**note: I realize you have to actually accumulate assets in the first place before you can glean any monetary payout from them. I started saving when I was still in school, before any of my student loan payments came due, so I had a small boost in this department. It’s ok to start from zero in this category — as you keep saving and investing, it will gradually stop being zero so there’s no cause for panic.