6 Financial Benefits of a Low Income Earner

As a low income earner, you may think all the cards are stacked against you and you'll never get ahead financially. But what if I told you there are financial benefits as a low income earner and in order to take advantage of them, you must know them. Watch the video to find out what they all are. Number one, less taxes. This isn't necessarily a good thing, but the less money you make, the less taxes you pay. This means less withholding tax taken out of your paycheck, less federal and provincial tax, less EI and less CPP payments. For example, if someone living in Ontario made $30,000 in 2023, their average tax rate would only be 6.84% and would only pay around $2,000 as well as another $2,000 into CPP and EI. Now, if you made $100,000, your average tax rate would be 21.73% and pay $21,590 in taxes as well as $4,757 for CPP and EI premiums. This is because in Canada, we have a progressive tax system, meaning people with higher incomes are subject to higher tax rates. As someone who pays less taxes, more of your hard earned money goes into your pocket. Number two, tax benefits and credits. High income earners pay more taxes than some of these taxes are distributed to lower income families as benefits and credits. The most common one is the GHT-HST credit. This is a tax-free quarterly payment that helps low and modest income earners offset the GHT or HST they pay. How much you receive will depend on income, marital status and dependents. Other popular benefits and credits include the grocery rebate, Canada child benefit, Canada carbon rebate, Canada worker's benefit, as well as benefits for seniors and persons with disabilities. You may also be eligible for benefits and credits on the provincial level. For example, Newfoundland's Early Childhood Nutrition Supplement, Ontario's Trillium Benefit, BC's Climate Action Tax Credit, and Alberta's Child and Family Benefit. These benefits and credits either directly put money into your pocket or help reduce taxes owed to you when you go to file your taxes. Either way, it's a financial advantage that high income earners do not qualify for. Number three, you have less expenses. As a low income earner, you've learned to live on less. Not because you wanted to save money, but because you had to, to survive. You don't have an expensive car payment. You don't live in a massive house you can't afford. How in the world can you afford to live in a house like this, Simpson? I don't know. Don't ask me how the economy works. And you don't just buy whatever you want. Oh, but I do. Your income is limited, so you make smarter decisions with your money. You have all the strategies to reduce your grocery bills, and you're not wasteful. You know if you start spending carelessly, you will get yourself into debt. So you keep your expenses as low as possible and stay frugal and thrifty. The beauty of this is that these skills and strategies you acquired can stay with you as you grow your income and earn more money. The key is not to fall for lifestyle creep and not increase your expenses as your income increases. Just imagine if you started earning $100,000 annually, but had the same budget you did when you made $50,000. Your savings rate will quickly help you achieve your financial goals. Number four, you have less debt. The higher your annual income, the more credit lenders will give you. If you make $100,000 a year, you may be approved for a half a million dollar mortgage, $65,000 auto loan, $10,000 in credit cards, $30,000 line of credit, and a $20,000 personal loan. That's a lot of debt, a lot of interest, and a lot of spending money before you make it. But someone with a low income wouldn't be approved for all this debt. You may be forced to rent, buy a used car with cash, not have any student loan debt, and possibly a small maxed out credit card. This minimal debt may seem daunting at first, but in reality it's not that much and can be paid off quickly if you find yourself a higher paying job or other sources of income. Now that being said, low income earners tend to have the most debt relative to their income. This may be because the minimal standard lifestyle is more than their income can support, lack of financial literacy, or frivolous spending. Number five, social assistance programs. These types of programs offer financial assistance to those who are eligible, which are typically low to no income earners, especially individuals with children. All provinces offer this social assistance, but might be referred as income support, income assistance, or welfare. Also there are programs for seniors, old age security, and guaranteed income supplement, as well as CPP, but this is available to all levels of income earners. Then there are affordable housing programs offered by each province. There are several different programs like public housing, not-for-profit, and cooperative housing and rent supplement programs. As a low income earner, you may qualify for one of these programs. Then there's employment insurance, not only for low income earners, but for anyone who pays into EI and loses their job through no fault of their own. These EI payments can provide temporary financial assistance till you find another job. Number six, more free time. Contrary to popular belief, high income earners have less time than low income earners. This may be due to longer hours at work, networking, and social obligations, other commitments, and just work culture in general. For example, a high income earner that needs to make supper, clean the house, hit the gym, and try to catch up on some work. Then the weekend they got to mow the lawn and do other house chores, then bring the kids to basketball practice and meet with clients for dinner and a night out. Not much free time. But on the other hand, a low income earner doesn't live the same life. They make less money, but they only work eight hours a day and have a shorter commute to work. Then they get takeout food and live in a small apartment so they have a smaller place to clean and don't need to worry about yard maintenance and mowing their lawn. The big difference is that once a low income earner punches in their eight hours, they don't think about work again till the next day. While the high income earner is working as much as he can, including the weekends and also doing work at home, whether it's paperwork or answering emails. So if the low income earner can take advantage of their free time to get an education, work a part-time job, or work on a side hustle or small business, they can fix the low income problem they have. If your income isn't high, use these advantages to try to get the upper hand and try to get a level of financial freedom you wish to have. It's not all about the money. There is a balance you need to have with time. You can either be cash rich and time poor, or cash poor and time rich, or anything in between. Everyone's values and needs will be different, and just because you do have high income, it doesn't make you more financially secure. Watch one of these videos on the right of the screen to find out why.