A third-plus Canadians can’t afford their lifestyle

For good or bad, some things never seem to change.

For good or bad, some things never seem to change.

Take Canadians and their finances for example. In a survey conducted 10 years ago 37 per cent of Canadians said thought they would not be able to afford their lifestyle in 2017.

They were right. Today, a follow-up survey shows that 36 per cent of Canadians feel have had to cut back on some of their purchases, proving they were correct in their prediction a decade ago.

Canadians’ pessimism about their finances also extends out into the future, with 39 per cent saying they feel they will have to cut back on spending and their lifestyle 10 years in the future.

“While we’ve seen a lot of changes in the past 10 years, if Canadians are making accurate predictions about their future lifestyle it’s a sign they have a realistic understanding of their finances,” says Carol Bezaire, vice president of tax, estate and strategic philanthropy for Mackenzie Investments.

Pessimism appears to be greatest in the Atlantic Provinces, where more than half of residents believe they will not be able to afford the same lifestyle in 10 years, a big leap from 27 per cent who gave the same response 10 years ago.

In general Canadians pessimism about the future comes from their fears about the impact inflation could have on their money, they haven’t saved enough money for their retirement and low salary expectations. Most expect a salary increase of only one to five per cent over the next 10 years, the same range that salaries have increased in the last decade.

The report also found that Canadians who are closer to retirement are even less secure about their financial future.

Of those in the 55 to 64 and over 65 age categories, less than 35 per cent believe they are on track to meet their financial goals.

Canadians also aren’t contributing to their RRSPs and they are not overly confident about their investment options for retirement savings.

Thirty five per cent don’t contribute to an RRSP while 29 per cent feel indifferent, 23 per cent feel overwhelmed and 20 per cent are confused about their retirement saving investment options.

“With all that is happening in the economy and in the markets, people really need a financial plan and an adviser,” Bezaire said in an interview. “More and more people today are self-employed, working part-time or are consulting and may not have employer-sponsored pension plans. As well there is a lot of volatility in the markets these days. The goal should be to create a sound financial strategy to ensure you don’t have to give up any of the things you enjoy today.”

The lack of financial planning by Canadians may be correlated with a deficiency in seeking out financial advice. The survey found that 58 of Canadians do not use the services of a financial adviser.

However, those who do use an adviser tend to be more knowledgeable about financial products than those who don’t. Almost 70 per cent of people who use an adviser knew that mutual funds could be held in an RRSP compared to 35 per cent of those who don’t have an adviser.

“People seemed to be confused about what to invest in,” Bezaire says. “You need to get an adviser to help you with that. People who worry about their financial future but don’t have a plan are like people who worry about getting lost but don’t use a map. Both a plan and a map are easily available, both reduce a lot of stress and both typically help you reach your desired destination.”

Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.

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