Half of working Canadians would be in financial trouble if their next paycheque was delayed.
That according to a new poll conducted by the Canadian Payroll Association (CPA). Living paycheque to paycheque is a reality for almost half of employed Canadians and it’s not okay. Living like this means living in a constant state of anxiety knowing how thin you have stretched your finances. A job loss, a death in the family, an expensive emergency, any of these events could leave you in financial trouble unable to pay your bills.
If you’re always waiting on payday to keep your lifestyle running, then you need to stop and make some changes. Here’s how to get out of the paycheque to paycheque rut.
Calculate the cost of your life
Many of us are cash strapped because we never sit down and figure out how much our life actually costs. This list should include your shelter costs (mortgage or rent) food costs, any utility bills you pay, insurance, car payments and entertainment. You should know how much you are spending every month to live the life you live. Then figure out how much household income is coming in monthly. Is there a negative balance when you subtract your living expenses from your income? Once you have that one big number you can start to narrow down where you can cut back — maybe less dinners out and more dinners in with friends. You could also look at making your house more energy efficient to save money on your household bills. The ways to save are endless once you find out you need to cut back.
Oh my have you heard that before? It’s hard when money is so cheap to actually think about spending less and saving more. But the number one way is to start sacrificing some of the extra things you’re doing now in order to get your finances in order later. The CPA survey reveals work life balance is a top priority for almost of half of Canadians. Even with finances being at the forefront for many working Canadians, only 28 per cent of those polled said a higher salary is their top priority compared with 48 per cent who said they value a better work-life balance and healthy work environment more. If that’s the case, in order to achieve that balance big spenders have to cut back. If you’re working just to live then it will be hard to ever find that balance, no matter how high your paycheque is.
Learn these words
“I can’t afford it.” It’s one of the most difficult phrases for working adults to say. Especially for young Canadians who spent years as students living on next to nothing. The thinking is, you now have a full time job that pays well, and you should be able to buy what you want. That may be what you’ve been taught, but working full time doesn’t mean you can afford everything. We often hear about lifestyle inflation. The idea is that we constantly keep inflating our expenses beyond our means; no matter what you are making you have to know what you can and cannot afford. If you’re making $1 million a year and spending $1 million a year, you’re less wealthy than the person who made $50,000 but managed to save $5000.
The survey findings by the CPA are nothing new; we’ve been hearing for years how Canadians are in record amounts of debt and becoming more financially insecure. The survey showed half of those polled said they are able to save five per cent or less from their earnings, with 39 per cent saying they’re “overwhelmed” by their debt. The most common type of debt cited by respondents was a mortgage. The most worrying, 11 per cent believe they will never be debt free. Regardless of how dire your financial situation may seem there is always room for improvement. Living paycheque to paycheque is not normal and it’s certainly financially very unsafe.
RUBINA AHMED-HAQ is the Finance Editor for HPG. You can read her musings in Condo Life and Active Life. She’s also the Family Finance Advisor for PC Financial. She regularly contributes on TV and radio including CBC Radio, CBC News Network and Global News Toronto. Follow her @alwaysavemoney