Simplicity by choice or financial independence?

In wealthy countries, people often consume more than they earn and many wonder how to slow down. In Canada, the savings rate has never been so low: on average, it is under 1%.

Savings is the portion of income that is not consumed or, whatever is left at the end of the month after paying all the bills. With the exception of economically disadvantaged people, this savings problem is mainly a consumption issue, not an income issue. This is why people who earn over $60,000 a year can't seem to make ends meet, while others manage to save money with a $25,000 income.

To understand the value of money and how it relates to your day-to-day life, calculate the total you earned in salary (or anything else that falls into this category) since the beginning of your working life. If, for example, you have been earning between $30,000 and $40,000 for the last 10 years, the total amount of your earnings could easily surpass one half-million dollars! What's left? A mortgaged home, a leased car, some furniture, some RRSPs? Surprising, isn't it?

The first step in curbing your spending begins with awareness. Calculate the value of one hour of work and then, you will be able to measure your real income and review your expenses with a new perspective. Joe Dominguez and Vicki Robin, the authors of Your Money or your Life, recommend this method.