Most Canadians live on a financial precipice, going from paycheque to paycheque.
That’s the scary news from a recent poll by the Canadian Payroll Association (CPA), which found that nearly 60 per cent of Canadians would have trouble paying the bills if their paycheque was delayed by only one week.
Of those surveyed, the younger workforce felt the greatest pinch. The survey found that 45 per cent of people aged 18 to 34 would find it difficult or very difficult to make ends meet if a paycheque were delayed. Another 21 per cent in that age group said it would be somewhat difficult.
Not surprisingly, 72 per cent of single parents said missing a paycheque would cause a problem for meeting financial obligations.
“We were surprised that people were that close to the line,” said Patrick Culhane, president and CEO of the not-for-profit association, which has more than 14,000 member and 1.5 million professionals in organizations across Canada.
Culhane said Canadians are living close to the line despite the common advice from financial planners that they should set aside three months of expenses for such items as rent, groceries and monthly bills in case of an emergency.
Not only are the majority of Canadians living paycheque to paycheque, they’re having trouble putting away money for their retirement.
The survey found that 50 per cent of Canadian workers can’t save more than five per cent of their net pay for retirement -— half of what financial experts often recommend — even though they have a “guilt trip” at the start of every year before the RRSP contribution deadline.
“People know they have to do it,” Culhane said.
Culhane said recent volatility in financial markets has made it more difficult for Canadians to save for their retirement.
About 52 per cent of those surveyed believe they need between $750,000 and $3 million to live comfortably in retirement.
About one-third of Canadians report trying to save more money compared to last year due to the economic uncertainty, but can’t. Another 42 per cent say they aren’t trying to save more.
Reports from the United States indicate that country might not recover the 6.9 million jobs and U.S.$13.9 trillion in wealth lost during the recession until 2015.
The U.S. recovery may be the slowest since the Second World War to regain ground lost during the recession.
In Canada, many people are opting to become self-employed because they either can’t, or have given up trying to find full-time employment.
Statistics Canada reports that self-employment rose by 75,000 between October 2008 and July 2009, while employment declined in many other sectors of the economy during the same period.
Some financial experts in Canada believe the new tax-free savings account can be a great source for an emergency fund because any earnings are tax-free, and if you have to take money out of the account, you can replace it in the following year.
If you do lose your job, there are some financial actions to consider, such as reviewing the household budget for the six to 12 months it might take to find another job.
Identify which expenses are essential — such as rent and mortgage payments — and which are discretionary, like a new car or vacation.
If you’re lucky enough to be employed but fear that you might be laid off, negotiate a line of credit with your bank or financial institution in case you have to draw on it if your job disappears.
If you are unemployed and don’t have a line of credit, consider consolidating your debts under one umbrella loan. You may be able to reduce your monthly payments.
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. He can be contacted at boggsyourmoney@rogers.com.