Archive for the ‘Money’ Category
You know…when I was a boy…
When I was a child (1964) my father had a good job making in the neighbourhood of $6000 per year. My parents had just bought their first home at the average price of $13,000. From what I have researched my parents were typical middle class for the day.
Where most items have increased in price approximately 10x in the last 45 years the noticeable exception is the average price of a home. The $13050 average price in 1964 would equate to $130,500 for today if it followed the same formula whereas the truth is in 2007 in Toronto the average house price was $380,000. Even in the small town where my parents bought their first home, that same house would sell for around $200,000 today. Even if we say that the average income today is close to $60,000 (10x what it was in 1964) that is now typically earned by 2 persons in the family not one as was the case 45 years ago. All things being equal today’s average 2 income family should be bringing in $120,000 per annum.
Assuming that wages are actually half of what they statistically should be and housing prices are close to 4x where they should be, what else is dragging down our standard of living? Inflation. If you look at the rate of inflation from 1964 to 2007 as a whole, something that cost $1.00 in 1964 would cost $10.01 today. This is in keeping with most of the statistics shown.
So if I look at a typical family today they are spending 10 times more for every item they buy compared to 1964. They are also on average making 10 times more BUT it requires 2 incomes to make this work. Since mom is now working to pay the mortgage they are incurring somewhere between $300-$800 PER child for daycare. Add to that the fact that most do not live and work within walking distance of one another so a second car is typically the order of the day as well as the expense of the commute. The other fly in the ointment is taxes. Since 1964 the day which is considered to be tax freedom day, the day in which the typical taxpayer will have met all of their tax obligations on a federal, provincial and municipal level has increased by approximately 40 days. That is to say that the average taxpayer will pay taxes for 40 more days than in 1964.
This means that dad had $4125 of his annual income to spend after taxes. Mom stayed at home watching the kids and the daily commute was less than half a mile.
Their budget looked something like this:
Mortgage: $78 per month
Car Payment (including gas and insurance): $60 per month
Groceries: $120 per month
There were not a lot of ways to spend money frivolously, fast food restaurants, video games, consumer electronics, cell phones, the internet, disposable diapers and all of the gadgets and toys that are prevalent today simply did not exist. The net family income (after ALL taxes) was $344 per month less the expenses above left $86 per month to spend/save.
Today my wife and I both work and we have $34700 of our annual income to spend after taxes.
Our budget looks something like this:
Mortgage: $1400 per month
Car Payments (2) (including gas & insurance) $900 per month
Groceries: $400 per month
Daycare: $400 per month
The net family income (after ALL taxes) is $2891 per month less the expenses above leaving (negative) $209 per month to spend/save.
The above are representations only, obviously some spend more or less in different areas. The point of the comparison was to show that today we are definitely not as well off as our parents were under the same circumstances. Add to the above the constant desire by all involved to keep up with technology which comes with a (high) monthly cost.
In 1964:
Yearly Inflation Rate USA 1.28%
Year End Close Dow Jones Industrial Average 874
Average Cost of new house $13,050.00
Average Monthly Rent: $115.00
Average Income per year: $6,000.00
Minimum wage: $1.15 per hour
Gas per (US) Gallon: $.30 cents
Federal Income Tax Rate: 23.5%
Average Cost of a new car: $2,400.00 (Ford Mustang)
Loaf of bread: $.21 cents
Postage Stamp: $.05 cents
Ticket to the movies $1.25
Hershey chocolate bar: $.05
McDonald’s hamburger: $.15
Slice of pizza: $.15
Hot dog: $.15
Cup of coffee: $.10
Scott tissues (two boxes of 400 each): $.49
Crest toothpaste (extra large): $.44
GE washing machine: $169
American Airlines, first class, New York to Los Angeles: $160.90
Motel room: single, $7.50; double, $9.50
Bulova President wristwatch: from $39.95
De Beers one-carat diamond: $500–$1,800
Pack of Camel cigarettes: $.50
Zippo chrome cigarette lighter: $3.95
Year’s tuition at Davidson College, Davidson, North Carolina: $1,815
