The following article reinforces the need for financial planning
Living Hand to Mouth
Dave Speiran has grown used to having only $10 in his pocket on the eve of every paycheque. The Toronto recruiter took a massive pay cut in March after business dried up. With it came cuts to his lifestyle. The 34-year-old renegotiated payments on his weekend trailer north of the city. He switched to a more affordable car insurance provider. He now walks to the local convenience store to save a few bucks on gas.
Keeping one eye on his bank account in anticipation of payday has become an exhausting routine for Mr. Speiran, who supports his 12-year-old son Christopher and wife Joanne. “It's been insane,” he says. “We're used to being able to put away some money here and there and coming down to your last $10 and you've got to manage to get milk, bread and still maintain your transportation costs is pretty difficult.”
Along with Mr. Speiran, more than half of Canadians are now living paycheque to paycheque, a new national survey has found. While the recession has thrust thousands onto wobbly financial ground, this is just the way many people live, experts say. The Canadian Payroll Association's survey, released yesterday, revealed 59 per cent of Canadians would really feel the squeeze if their pay was delayed by only a week. It also found 50 per cent of Canadian employees can't save more than 5 per cent of their pay for retirement, though the recommendation is 10 per cent.
"While it's common sense to try to squirrel away cash for retirement and emergencies, many of us are unwilling to give up our lattes, our big-screen TVs and our dinners out" marketing professor Dilip Soman, who studies behaviour economics at the University of Toronto's Rotman School of Management, says. “It's hard to keep track of how much you've been spending,” he says. “Before you know it, it's gone and you're back to square one waiting for the next paycheque.”
Even in a recession, the “keeping up with the Joneses” ideal persists, says Ken Hardy, professor emeritus of marketing at the University of Western Ontario's Richard Ivey School of Business. “We don't give up lifestyle easily,” he says. “There's so much social pressure.”
Many don't set aside a nest egg or an emergency fund until they realize they need it, says Patricia Lovett-Reid, senior vice-president at TD Waterhouse. A layoff can be quite the eye-opener to someone living paycheque to paycheque. “There can be a bit of denial in terms of what's going on,” she says. “People say that until it happens to you it's somebody else's problem.”
By the numbers
59 Percent of Canadians who said they'd be in financial trouble if their paycheque was delayed by even one week. By age group, 45 per cent of people between age 18-34 say it would be tough to get by. By household, 72 per cent of single parents say the delay would have a serious impact.
33 Percent of respondents who said they've been trying to save money during this recession, while 42 per cent said they haven't been saving at all.
70 Percent who said their first priority would be to pay off all existing personal debt if they won a $1-million lottery. Next pressing was saving for retirement, with 35 per cent saying they would contribute as much as they could.
Twenty-eight hundred employees from across Canada participated in the survey, which is considered consistent with a margin of error of 2.3 per cent, 19 times out of 20.
Source: The Canadian Payroll Association's 2009 National Payroll Week Employee Survey
Sharon Alderson CFP, FDS, sharon.alderson@gmail.com
