A Prescription for Pay-cheque to pay-cheque syndrome

Pay-cheque to pay-cheque

There’s a disease that’s sweeping the nation, and people seem powerless to stop it. Symptoms include feelings of stress and hopelessness. It affects people of all ages but seems to target young Canadians aged 18 to 29. Atlantic Canada and Manitoba appear to be worst-hit.

It’s called Pay-cheque to pay-cheque syndrome, and it’s on the rise, affecting 51 per cent of employed Canadians.

A recent survey by the Canadian Payroll Association (CPA) shows that Canadians are feeling overwhelmed by debt, postponing retirement, saving less, and living pay cheque to pay cheque. More than half of employees (51 per cent) fear that they would experience financial difficulty if their pay cheque was delayed by a single week. This is up from an average of 49 per cent over the past three years.

Canadians need to inoculate themselves against this growing epidemic,” says Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada. “It’s time Canadians take the necessary steps to build up immunity.

But it may be easier said than done. Half of all employees are putting away just 5 per cent or less of their pay, compared to the early 1980s, when the savings rate was above 15 per cent.CPA found that a main reason for decreased saving is that 44 per cent of employees are spending all of, or more than, their pay. The survey cites children, home renovations, and education as the main causes of increased spending.

The number one step that employees believe they can take to improve their financial situation is to earn more (27 per cent) – but that is not always possible. Consoldiated Credit has written up a prescription to help you soothe the symptoms of Pay-cheque-to-pay-cheque-itis:

  • Budget – If your spending exceeds your income, it’s time to do a reality check. Assess your spending from a needs vs. wants viewpoint. This is where you will find the biggest savings. Do you really need those 700 cable channels? Or can you downgrade your cable and phone package? You can use a debt-to-income ratio calculator to make sure your debt is manageable, and you can also download our free iPhone app to help you keep track of spending.
  • Build an emergency fund – Even if you start small, it’s incredibly important to put away money in the event of an unexpected job loss or a reduction in your income. Aim to put away 3-6 months of your normal living expenses into an emergency savings account.
  • Consider downsizing – Take a look at your assets like your home or car. Decide if you can continue to sustainably pay for them, and also decide just how vital they are to your life. If you have a second vehicle, maybe it’s time to sell it. Or if your children recently moved out, perhaps you should sell your house and move into something smaller.
  • Pay down debt – A heavy debt load is probably one of the main reasons you cannot get ahead. Interest sucks a lot of your money and slows down your ability to pay the principal. Make a plan (even a long-term plan) to focus on eliminating debt. With any success, you’ll soon be paying yourself instead of your creditors.
  • Seek help – The minute you smell financial trouble, you should not delay in seeking professional help. Non-profit credit counselling services offer free budget assessment and credit counselling. Some of these programs may be able to help you eliminate your debt in short order so that you can focus on rebuilding your finances.

A lot of working Canadians are feeling helpless,” says Schwartz. “Professional help is out there, but they can also take some important steps on their own to break the cycle and get ahead.”

 

If you want to learn more about making responsible financial decisions, check out Consolidated Credit’s free Personal Finance educational section. If you’re struggling with debt, call one of our trained counsellors today at for a free debt analysis.

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