Feeling strapped for cash? You’re not alone as 47 per cent of Canadians recently reported it would be difficult to meet their financial obligations if they missed a paycheque.
The study, released by the Canadian Payroll Association, surveyed more than 4,700 working Canadians across the country and found that many of us are financially stretched too thin.
A pulse on the financial wellbeing of the typical Canadian?
More than one in five Canadians (22 per cent) said if an emergency arose in the next month, they would unlikely be able to pull together $2,000 in a pinch; compared to the 74 per cent who said they’d be able to swing it.
Four in 10 respondents (42 per cent) said they save five per cent or less of their paycheque, much less than what many financial advisors typically recommend. About 27 per cent of respondents said they save six to 10 per cent of their paycheque, and almost one-third (31 per cent) save more than 10 per cent of their pay.
Debt, the common denominator
An overwhelming majority of us have some form of debt – 94 per cent to be exact. The most common types of debt are mortgage (28 per cent), car loan (18 per cent), credit card (17 per cent), and a line of credit (17 per cent).
While having debt is common, about 35 per cent of Canadians said they feel overwhelmed by their debt; and 31 per cent said their debt has increased from last year.
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Feeling pinched? Time to track your money
Whether you track and set your budget through your bank’s online tools, handy apps, or simply with pen and paper, knowing where your money goes is key to controlling your cash flow. Then, once you know where your money goes, the next step is to identify areas for improvement.
How much is too much? Not enough?
The following guidelines are generally accepted for how much you should be spending and where:
- Housing should account for no more than about 35 per cent of your budget. This includes your mortgage (or rent), property taxes, condo fees, utilities (gas, water, electricity), maintenance, and house insurance.
- Transportation should account for no more than 15-20 per cent. Included here would be car payments, auto insurance, licensing and registration renewals, gas, maintenance, repairs, public transportation, parking, etc.
- Your day-to-day living expenses shouldn’t take up more than 25 per cent of your budget. This means the money you spend on cable, telephone, Internet, childcare, groceries, clothing, gifts, hobbies and vacations.
- Debt repayment (e.g. credit cards) should not exceed 15 per cent. If you’re debt is eating up more of your budget than 15 per cent, you may find yourself saving less. Which brings us to our last point…
- Savings should account for about 10 per cent of your household budget. You’ll want to vigorously protect this part of your budget; setting aside savings should be viewed as a necessity and not an option.
These budget guidelines offer a well-balanced approach to how you may want to spend your money. It takes into account that you need to live a little, while also taking care of the necessities. If your budget is telling you it’s time to cut back, resist the urge to cut back on savings. Instead, look elsewhere. Could you pay less for your auto insurance? Home insurance? Chance are you can, and InsuranceHotline.com can help you find savings you may not have even realized existed.