According to the Fraser institute, June 4 was tax freedom day for Ontarians. To explain tax freedom day, let’s suppose that you had to pay all of your taxes first, before you could keep any income for yourself. In Canada, the average Canadian would have to work until June 6th this year, before he or she could keep any money. That means that all the income earned up to that date, goes to pay for taxes. Included in this calculation are the usual suspects, income tax and sales tax. But there are a lot of “hidden” taxes we pay that we often forget about. Things like EI, consumption taxes, fuel taxes, license fees, import duties, profit taxes etc, etc., etc..
That’s a lot of tax! Every year when the news comes out, people kvetch about how much tax they pay. My philosophy is… yeah, we pay a lot of taxes but we have a decent network of social supports that are funded from those very taxes. Could our tax dollars be used more efficiently? No doubt. Even so, taxes are an important tool to even the playing field and make things more equal for all Canadians. At least there is some social good coming from paying all those taxes. Can you say “Universal Health Care”? “Pension Plan”? “Disability Benefit? Those are things that most Canadians still believe in and support.
Let’s carry this a bit further. What if, in addition to paying all of our taxes up front, we had to pay all our debt payments including interest and fees up front? How many more days would you have to add to that tax freedom day before you would be working for yourself? Think about it. Add up all your debt and interest payments for one year and divide it by your daily after tax income. Go ahead, I dare ya!
How many days would have you to add to June 6 before you were free to spend your money on what you need and want?
I can hear it now. “If I didn’t have so much tax to pay, I could manage my debt!”
The thing about debt is; the interest you have to pay benefits no one except to enrich the person or institution that lent out the money. Somebody -other than you - gets rich off of your lack of planning or self-control. And you may have to work many more days each year to pay your creditors before your money is your own.
What would your year look like if you had Zero debt? How many days of financial freedom would you gain if you managed to pay off your debt? It’s not that hard, with a little focus and a good plan. Oh, and the desire to “work for yourself” instead of your creditors aka “da man”.