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The True Costs of Everyday Expenses

ON July 9, 2020

Everyday Expenses

When making everyday purchases, most of us approach them in a straightforward manner. We look at the price tag and compare it to whatever standards we think of as expensive or affordable, boiling everything down to a simple dollar value. To really get a handle on our personal finances however, we can take a moment to consider the other factors that determine the true cost.

The Additional Cost of Taxes

As much as we might sometimes wish otherwise, taxes are unavoidable. Virtually anything we buy will be taxed and depending on your province, that extra cost can be as high as an additional 15% in combined taxes. On inexpensive items, that might seem negligible, but once your purchase passes three digits, you are going to notice it. Making a purchase of $1000 for example, means that in certain provinces you will be shelling out an additional $150 just in taxes.

Fortunately, some expenses are exempt from taxes, such as prescription drugs, basic groceries, and select others. In most cases, however, you can expect to pay taxes, though we often fail to include them when thinking of the cost of items.

Everyday Expenses and Their Cost in Time

Another way of considering the cost of purchases is to think of their cost in time. Time is money as the saying goes, and you work hard for your salary. Whether you are paid an hourly rate or not, your salary can still be broken down to a certain amount for every hour of work.

A purchase that seems perfectly reasonable when thinking in terms of dollars and cents might seem considerably less attractive when counting the cost in time.

Imagine bringing a date to dinner and a movie. Between the cost of the meal, the movie tickets, snacks, and drinks, you can easily pay about $100. With the average hourly wage in Canada being approximately $27, that means that your evening out will cost you nearly 4 hours of work. You might decide that it is better to watch a movie at home and order a pizza. If your hourly rate is below average, then it might become increasingly difficult to justify the expense of going out.

What Else Affects Your Hourly Wage?

This is admittedly a rather basic example that doesn’t factor in such things as your daily commute. Why should it? Well, your trip to and from work is technically part of your workday, even if it is not time spent working, and consequently, it lowers your actual hourly rate.

On average, Canadians will spend 24 minutes on their commute, though 1 in 5 spend an hour or more commuting to work daily. This, added to one hour each day for your morning routine, effectively adds 10 hours to your work week. With the average person working 40 hours, this brings their total to 50 hours per week. What does this mean for your pay rate?

Going from 40 hours to 50 means that your average of $27 per hour now drops to $22. Your night at the movies is now worth more than 4 hours of work, and Netflix is looking more attractive.

When making purchases, keep the cost in hours in mind. Every expense is equal to a certain number of hours from your life spent working. Make sure to get the best value possible for your time.

Time and Taxes

While considering the cost in hours of your expenses, take a moment to contemplate the following: the Fraser Institute’s annual study adds up the total taxes paid by the average Canadian family, including income tax, sales tax, property tax, payroll tax, and more. This number is compared to the average income to determine how much of the year is spent at work to pay taxes, and for the average family, it takes until June 14. That means that the entire first half of the year, every hour you work is simply to meet your tax obligations.

With only the earnings of the second half of the year available to you, it becomes even more important to be wise with your purchases. Factoring in the cost in time will hopefully give you a new perspective on what your everyday expenses are truly costing you.

Need help figuring out your everyday expenses? Contact BCJ Group today!



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