Wealth Inequality in Canada

WE NOW LIVE IN A WOLRD OF HAVES AND HAVE NOTS

  • Canada is in the bottom quartile of peer countries in terms of wealth disparity.

 

WE ARE ENTERING A NEW ERA OF MASSIVE INEQUALITY

  • Wealth inequality in Canada has increased over the past 20 years.
  • Each year the Canadian middle-class loses its’ share of total income while wealthier income groups increase its’ share.

 

THE 3 BIGGEST COSTS FOR CANADIANS: 1) TAXES, 2) HOUSING AND 3) LABOUR

 

THE AVERAGE MIDDLE-CLASS CANADIAN PAYS 27% INCOME TAX

THE WEALTHY PAY PAY ON AVERAGE 15% INCOME TAX

 

THE MIDDLE-CLASS IS OBSESSED WITH CUTTING COSTS BUT THE TRUTH IS THAT ONLY THREE MATTER: 1) TAXES 2) HOUSING AND 3) LABOUR

THE ONLY WAY TO ESCAPE BEING A HAVE NOT IS TO REDUCE THE ONLY THREE COSTS THAT MATTER.

THE MIDDLE-CLASS SHRINKS BECAUSE IT HAS NO PRIORITIES AND WASTES ATTENTION (DECISION FATIGUE) ON DECISIONS THAT MAKE LESS THAN A 10% CHANGE IN THEIR TOTAL INCOME.

Priorities

  1. Sell something worth buying, with a story worth telling
  2. Target it for small groups of people (you can not compete with Coca-Cola)
  3. Tell a story (like above) that matches the delight of those small groups
  4. Promote the word
  5. Produce at an elite level, in terms of both quality and speed to build up the brand (personal and business) and inspire confidence and trust.
  6. Plot the worst possible outcome and reverse engineer the opposite outcome.
  7. Get paid by project but pay others by the hour

Qualitative > Quantitative

$3 million earned through investments (real estate, stock, crypto) will never have the same value as $3 million earned through the diligent execution of your craft because of the uncertainty in the former.  Therefore, the only investment that matters is the money you spend into turning your craft into a business.

 

 

 

 

 

 

 

 

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3 reasons why I started a business in Edmonton

I run an Accounting Sofware-as-a-Service business based in Edmonton. Accountants are all about cost-cutting, but the truth is that it’s all worthless compared to the big 3: taxes, housing, and payroll. Our mission is to reduce costs by 15-25% for businesses with recurring revenue. Please reach out to us at help@christianthut.com

1. Taxes

Combined, the corporate and personal taxes in Alberta amount to only 15% of earnings for $300,000 in income (compared to 20% in Switzerland and 45% in Germany). In Alberta, you can earn more than $20,000 per month after-taxes and become a multi-millionaire within a short time. Making more money has a bigger impact on your financials than reducing your spending since there is a ceiling to cutting costs, you can not go below 0 while there is no ceiling to earning.

2. Housing

Until you have the cash to optimize your taxes and your mortgage interest you should be keeping your cash flow down by renting. It is a common mistake to think that buying a house saves you money. Buying an asset with debt is merely renting money you don’t have.  In addition to the interest, buying a house has more costs:  property taxes, home maintenance, repairs, upgrades.  A $700,000 house can be rented for $2,550 CAD, so the price-to-rent (P/R ratio) is 23 (700k/ (2550*12)). You should only buy if the P/R ratio is less than 15  unless you are optimizing your opportunity cost of other assets (a scalable business).  Focus on delivering value, and you’ll see the priorities in building a scalable business since real estate does not normally add comparable value except in gentrification during times of shortage.

3. Conflict

Conflict is the raw material of natural selection and pushes evolution forward toughness, heroism, and social utility. Canada is big enough and diverse enough that without learning to scale on an international scale, there is enough opportunity to inject small amounts of stress in your life to push yourself to self-improvement all the while avoiding stress from real problems like feeding yourself.

Only through conflict do humans force themselves to be the best version of themselves.  As the Roman statesman said, “Comfort leads to waste.” Hostile and diverse surroundings (both climate and humans) challenge us both physically and mentally every day, forcing us to get stronger and smarter.

1 Thing Switzerland does better than Canada

In Canada, we have a socialist system where the cost of health care is built into our taxes and dependant on our income and not on our risk optimization like in Switzerland.

In Switzerland, you can pay out of pocket for everything under your deductible. Costs above your deductible are taken care of by your insurance policy to which you pay a monthly premium.  You can reduce your monthly premiums by reducing your deductible.  The Swiss system is more sustainable since there is less asymmetry (where the largest cost to the Canadian health care system is also the smallest contributor).

If you want to maximize your life, read on. I run an Accounting Software-as-a-Service (SaaS) company based in Edmonton.  Accountants are all about cost-cutting, but the truth is that it’s all worthless compared to the big 3: taxes, housing, and payroll. Our mission is to reduce costs by 15-25% for businesses with recurring revenue. Please reach out to us at help@christianthut.com If you like this article, you might like:

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We are focused on the following 3 customer groups:

  1. E-commerce
  2. Fast food
  3. Nail salons

Man’s best friend: Dog Not Wolf (Employees vs contractors)

“If one holds his state based on mercenaries, he will be neither secure nor peaceful; for they are divided, disloyal, ambitious and without discipline… they have neither fear of God nor are loyal to fellow men.” – Niccolò Machiavelli

Substitute state with company and mercenaries with contractors as you see that there is a misalignment of goals when you use contractors.  As with all decisions in life when in doubt choose the path that is more difficult in the short-term vs the path of least resistance.

  • Hire employees in your main revenue generating activity that you know best. 
  • Hire contractors for supporting activities that require a specialized targeted skill set and economies of scale (robo-accounting, plumbing etc).

After analyzing the CRA’s definition of employee vs. contractor, it is clear that contractors are independent tools you use to do a specific task, but in order to run a scalable business, you will need employees as gears in your machine, not just free-standing tools.

Life is about discipline or regret. You need the discipline to hire employees, discipline to manage your workflow as you have to pay employees even if you don’t have work for them.  This means you may need to sacrifice your short-term income/cash flow if there is not enough work for you plus your employees.   You will need to make the required payroll source deductions every time you pay them and remit these deductions in addition to your company portion contributions to the CRA in a timely manner.

50% of your costs (money/time) should be incurred in taking your product from conception to your customer.  Simplify your business into a process (see our 3-step robo-accounting system).  Be clear what your customers can expect and say no to anything that falls outside your process.

No one has ever gotten rich doing everything for everyone:

  • In 2016, we cancelled our #1 most popular category because the customers in that category (half of our total customers) was responsible for only 10% of our revenue.
  • In 2017, we went further to give up another category because we can save 37% of our costs (time/money) by giving up 14.67% of our revenue.  When you are dealing with high-value multi-year accounts of recurring revenue you must account for Dunbar’s #.
  • Today, 95% of our revenue comes from companies that are in the sweet spot of revenue: $300,000 to $6 million per year. Anything less does not scale and can not compete with the “working at Weatherford”, or the like. Anything more, as we have learned the hard way during our oil crash, is less anti-fragile.

Train disciplined people to handle the process. Hire 2, work them like 4 and pay them like 3.  The best employees have families (read: responsibilities including mortgage and SUV payments).  The 8 hour day was a product of the 18 century, so construction trades which remain fundamentally the same can continue with the 8 hour day, but knowledge workers should use the focused 5 hour day.  We had the focused 5 hour work day from 2010-2013 and started it again with one employee in March 2017. We have seen first hand that our focused 5 hour work day reduces absences, stress and increases efficiency.

Shifts under 5 hours, employees are not entitled to any breaks.  Lunch and breaks during the typical workday are not used to re-energize or restore attention.  In our office’s case, they are spent eating lunch late at our desks in front of the computer, while other workplaces time is lost strolling in late after getting caught in line at Tim Hortons. Back in 2010-2013, as owners, we worked 10+ hour days and we were much more efficient running two employees on separate 5-hour shifts (8am-1pm and the second person from 1pm-6pm).

Calculating the wage. If you pay someone $20 per hour, the employee should also “pay you” at least $40 per hour ($20/hour to pay for themselves and $20/hour for your).  You have to account for the payouts you are responsible for when you have staff: statutory holidays, 4% vacation and eventually termination pay.  Profit-per-employee is an important metric to keep your business on the right path.

Retention. A bonus, x should be paid contingent on a job well done. At the end of the year and an amount equal to x is put into a reserve which you invest risk-free.  After y-years of building the reserve, the employee is allowed to withdraw 1/yth of the reserve.  If they leave they could be walking away from y-years worth of bonuses sitting in the reserve.

Industry examples. 

  1. Fast food (dozen+ of our customers were awarded Golden Fork awards)- should hire employees and contract out hood fan/duct cleaning (every 6-months), Robo-Accounting.
  2. Salons– hire employees and if they pay exclusively commission they can contract out the cleaning to ensure the tools, equipment and furniture and cleaned and sanitized properly.
  3. Manufacturing/Engineering/Construction should hire employees for everything except the specialized trade work (plumbers, electricians etc.)

Các Bước để Thanh Toán PD7A Online

Bạn phải thanh toán báo cáo PD7A của mình vào ngày 15 của tháng tiếp theo. Ví dụ: báo cáo PD7A cho tháng 2 phải được thanh toán trước ngày 15 tháng 3.

Chúng tôi khuyên bạn nên thanh toán PD7A ngay sau khi bạn nhận được nó từ văn phòng của chúng tôi, do đó bạn không cần nhớ phải trả tiền sau.

Bạn cũng có thể đăng ký để nhận được một email nhắc nhở để thanh toán PD7A của bạn đúng giờ. Bấm vào đây.


 

Đây là một lời giải thích về lý do tại sao bạn phải trả PD7A mỗi tháng cho nhân viên của bạn.  Ví dụ công ty lớncông ty nhỏ

 


To pay your Payroll Source Deductions (PD7A) Các hướng dẫn để thanh toán PD7A Online

  1. Click the link CRA My Payment System
  2. Click “PAY NOW” button
  3. Click “PAYROLL SOURCE DEDUCTIONS” under the “Businesses” heading
  4. Click “REGULAR REMITTANCE”
  5. Enter account number EXAMPLE: 123456789RP0001 (Không có dấu cách hoặc dấu gạch ngang)
  6. Enter all of the required information from your PD7A report you received from our office (Nhập tất cả thông tin bắt buộc từ báo cáo PD7A bạn nhận được từ văn phòng của chúng tôi)
  7. Click “NEXT”
  8. Confirm the account numbers and amounts are correct
  9. Click “CONFIRM AND PROCEED TO PAY” or select the radio button to modify payment.
  10. Click “PAY NOW”
  11. Choose your bank and enter in your banking login information and proceed to pay/confirm

Alberta versus BC

Many clients tell us they plan to move BC because of the warmer weather but there are some things that they should keep in mind. Although Alberta and BC have equal small business corporate tax rates of 12%,  Alberta is still the rational choice for your headquarters.

Alberta’s differences over BC:

  1. Higher GDP with an economy size comparable to Finland vs. BC’s economy which is comparable to Romania. In 2017 Alberta grew at twice the rate of BC
  2. More than twice the exports as BC
  3. Alberta is less dependant on oil (a real resource) than BC is dependent on real estate (over-valued)
  4. While there is money to made from the bigger population of BC, it isn’t worth the headache compared to dealing with a demographic with higher disposable incomes. With higher incomes + housing more affordable in Alberta vs. Vancouver, there is more disposable income to capture from Alberta’s affluent consumers.
  5. No provincial sales tax, no provincial health-care premiums (BC’s monthly premium rate), least expensive motor vehicle licenses and permits, which all mean that in addition to higher incomes and lower cost of living, Albertans have more disposable income to spend on your business.
  6. Personal tax advantages to earning non-eligible dividends at $60,000 in a family.
  7. Alberta has no probate fee. However, in BC, where the gross value of all your real and personal property in BC subject to probate doesn’t exceed $25,000, there is no probate fee and where the gross value DOES exceed $25,000, the probate fees are:

    0.6% of the portion of gross value over $25,000 up to $50,000 and 1.4% for the portion of gross value over $50,000 (Example: $8,900 total probate fees if your gross value is $650,000)

  8. There is a property transfer tax (PTT) in BC. You are charged this transfer tax when you make changes to a property’s title. This tax is based on the fair market value of the land and improvements the tax is: 1% on the first $200,000, 2% from $200,000 up to $2,000,000 and 3% on the value greater than $2,000,000.  (Example: Fair market value of $650,000 property = $11,000 PTT payable)

Edmonton’s advantages over Calgary

  1. Edmonton is a global leader in the artificial intelligence (AI), machine learning (ML), and Nanotechnology. The University of Alberta houses the National Institute for Nanotechnology and is ranked #2 in the world for AI and ML and top’s Calgary’s schools in every field.
  2. Edmonton has a well-balanced economy: Petrochemical industries (reserves second only to Saudi Arabia), financial centre (Canadian Western Bank, ATB, Servus, TD, Manulife), retail: The Brick, Katz Group, AutoCanada, Boston Pizza, Pizza 73, Liquor Stores GP, Shaw Communications, Booster Juice, Earl’s, Fountain Tire
  3. Closer proximity to Duvernay and Montney shale formations which rival the entire US reserves, Gold mines which could see a 10x valuation over the next 10 years, and Uranium mines which could see a 3-5x valuation over the next 10 years.

Second Home Base

Live in Edmonton for 6-9 months of the year. For many people, it means spending the winter in a warmer place, but for us, it means summers (June – August 31) in Switzerland.

Other home bases include:

  1. Nha Trang, Vietnam
  2. Las Vegas, Nevada (no state tax)
  3. Austin, Texas (no state tax)
  4. Fort Lauderdale, Florida (no state tax)
  5. Washington state (no state tax and close to Vancouver)
  6. Italy
  7. Barbados

 

 

 

How many hours should you work?

Age 40 and up:

  1. 10 hours/day: If you want to increase your net-worth by 14% each year worked.
  2. 7 hours/day: If you want to increase your net-worth by 11% each year worked.
  3. 5 hours/day: If you only want to increase your net-worth by 7% each year worked.

Age 30-39:

  1. 10 hours/day: If you want to increase your net-worth by 10% each year worked.
  2. 5 hours/day: If you only want to increase your net-worth by 7% each year worked.

Age 29 and under :

  1. 10 hours/day: If you want to increase your net-worth by 7% each year worked.
  2. However, if they learn how to scale, a good engineer could possibly double the aforementioned percentages since an engineer can do the work of 10-100 accountants.

Its an inefficient use of time to advance your wealth beyond a certain point since money eventually becomes perpetual.  Earning pre-tax $70/hour does not make sense when one earns a guaranteed 3% post-tax on $3 million.  As we get older, health, attention, and time are the priorities.

  1. Health: prioritize good sleep, quality food, physical fitness, outdoor activities, research a quality doctor and get regular blood work done.
  2. Attention:  spending 1 hour QUALITY time in the gym and later with your kids, interacting with them and reading to them is much better than spending 2 hours with them fatigued in front of the television.
  3. Time: outsource everything where you don’t have the greatest competitive advantage, use robots whenever possible and get your groceries delivered on weekly and biweekly schedules.

Solution: Reduced Hour Workday

The derivative shows with each additional minute over 5-7 hours (depending on the work being done), your productivity will not increase pro rata with the time.

NEW OFFICE HOURS & PICK-UP OPTION

Our new office hours are Monday to Friday 8am to 1pm. If it is inconvenient for you to drop by during our office hours you can also arrange a time for someone to pick-up your documents after 1pm. (Edmonton area only)

After 12+ years our blog is still the least influential financial blog on the internet, and our 135 subscribers is a tiny fraction of millions of small business corporations in Canada.  We are not driven by money and popularity, rather we driven by legacy, greatness, and hyper-focused on adding value.

We are focused on the following 3 customer groups:

  1. E-Commerce
  2. Fast Food
  3. Salons

To protect our clients from ever-increasing fraud and audits, we have redundant security elements in place including the same encryption technology used by Swiss Banks and the most secure layer (SSL) Certificate Authority.  However, with over 40,000 employees, the CRA will be the reason your information is compromised.  What ultimately protects our clients is the fact there are only 3 humans working in our office (all family), so we build genuine relationships with our clients which keeps them safe.

 

Actionable Self-Improvement Books

  1. Antifragile: Things that Gain from Disorder – by Nassim Nicholas Taleb
  2. How an Economy Grows and Crashes – by Peter D. Schiff
  3. A Guide to Good Life: The Ancient Art of Stoic Joy – by William B Irvine

  4. A Guide To Rational Living


Books for Parenting

  1. Your Competent Child: Toward a New Paradigm in Parenting and Education – by Jesper Juul
  2. Way of the Warrior Kid: From Wimpy to Warrior the Navy SEAL Way
  3. The Little Prince – by Antoine De Saint-Exupery

  4. The Whole-Brain Child: 12 Revolutionary Strategies to Nurture Your Child’s Developing Mind
  5. The Conscious Parent: Transforming Ourselves, Empowering our Children– by Shefali Tsabary

  6. Out of Control: Why disciplining your child doesn’t work and what will – by Shefali Tsabary

  7. How to Talk so Kids will Listen & Listen so Kids will Talk – by Adele Faber & Elaine Mazlish

(Disclosure: Links to products are affiliate links. If you make a purchase after clicking a link, we may receive a commission. This commission comes at no charge to you. Thanks for supporting SwissBooks & Anja’s Plate to get some good information out to people like you!)