Peter Boys, Boys Financial Services

Are you living paycheque to paycheque?

Empty Pockets1

A recent survey taken of thousands of Canadian employees found that just over half would have difficulty paying their monthly bills if their paycheques were delayed by just a week. The same survey highlighted that things are getting tougher for many working Canadians, as those who are living paycheque to paycheque are saving less than they should be. This is resulting in even more people falling behind, and fewer having any hope of saving enough for their retirement needs.

This percentage has been slowly creeping upward over time. Even worse, the survey found that two thirds of 18 to 29 year olds said they were living paycheque to paycheque. And over 25% of the people who were surveyed said they would have great difficulty coming up with $2,000 to cover an emergency expense.

When asked about savings, more than half said they were saving 5% or less of their pay compared to the 10% that is recommend to build a comfortable retirement nest egg. The result is that the majority felt they would have to delay retiring beyond age 65.

The survey found that there is a significant gap between what many believe they need and what they have saved. Over two thirds felt that they will need to have retirement savings of between $500,000 and $2 million to fund their retirement, especially with all of us living longer. The number one reason for having to delay their retirement was not being able to save enough money.

Debt was a major concern for many, with over 30% feeling overwhelmed by the amount of debt they were carrying and that it was growing. Over 10% felt they would never be debt free.

Most of us are aware that personal debt is at an all-time high in Canada, made ever more so with easy credit and low interest rates. For example, new car payments can now be stretched out up to eight years to make the monthly payments seem affordable.

Here are some thoughts on how to get out of debt. Track where all your money is going for a few months, then sit down with a financial professional and work out a budget. It’s hard to talk about debt, but you can’t get it under control without help. For some, weaning one’s self off of credit and debit cards and only paying cash is the only way to get control.

Canadians have evolved from the frugal habits of their parents or grandparents to the free spending habits of many today, and the need for instant gratification.

That’s why there’s a pressing need to change spending habits and delay major purchases until the money has been saved.

On reviewing clients’ assets and liabilities, I often find that there are several opportunities to save interest expenses and better manage cash flow. Just paying credit card bills in full every month can mean 18% or more in interest savings. Planning meals at home and making brown bag lunches rather going out for fast food or restaurant meals can result in huge savings. There are usually plenty of opportunities to save. Gail Vaz-Oxlade has an excellent book out called Debt-Free Forever that is well worth the read to get yourself on track.

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