Canadians are facing a ‘financial storm,’ and experts say it’s time to plan ahead

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Canadians are facing a ‘financial storm,’ and experts say it’s time to plan ahead
WATCH ABOVE: Why Canadians are facing a 'financial storm' – Oct 3, 2023

Canadians are continuing to feel the pinch on their wallets with inflation, interest rates and cost of living creating an “intensifying financial stress storm,” according to a survey by the National Payroll Institute.

The survey of 1,500 working Canadians, including 81 per cent who are full-time workers, found the number who considered themselves financially stressed has jumped by 20 per cent in the past year to 37 per cent overall.

According to NPI president Peter Tzanetakis, the organization has done surveys since 2014 and found reducing debt, saving more, and spending less are what helps determine if individuals are either financially “comfortable, coping or stressed.”

“There’s a financial storm that’s brewing and it’s really gained a lot of strength in the past year,” he said in an interview.

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The NPI report suggests saving money is more difficult now than at any point in the past 10 years and 63 per cent surveyed said they are spending their entire net pay to “keep their heads above rising waters,” with another 30 per cent spending even more than that — meaning they’re taking on debt or dipping into savings each pay cycle.

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The survey goes further, finding that 66 per cent of those who consider themselves “financially stressed” are living paycheque to paycheque and 50 per cent are feeling “overwhelmed” by their debt.

With Canadians facing such strain, personal finance expert Rubina Ahmed-Haq says people can consider various options including consolidating debt but also looking at what costs can be cut, including delaying a home renovation or family vacation.

“You can feel a little bit better about your cash flow and you’re not going into more debt because oftentimes when you take on big projects that can become a lot more expensive,” said Ahmed-Haq, host of the personal finance show For What It’s Worth on the Corus Entertainment radio network.

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Corus is the parent company of Global News.

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For some Canadians, the added worry over their finances is having an isolating social impact. Of those Canadians identifying as part of the financially stressed group, 55 per cent say they feel more isolated due to rising costs of living and that is impacting those close to them.

One in two say their stress has been “felt by the ones they love.”

For some, that stress is impacting work performance, with 40 per cent saying it’s having a negative impact and, according to NPI, one in five admitting they need a sick day to cope with the rising levels of stress and one in 10 having left their job.

“They’re feeling it in the household, but they’re also bringing it to work with them. And they’re spending, on average, 30 minutes a day worrying or thinking about or dealing with their financial situation,” Tzanetakis said. “That has created a situation where productivity at the workplace has gone down.”

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Meanwhile, new research from employment agency Robert Half shows among managers wanting to hire, 92 per cent surveyed say they’re facing challenges finding and attracting skilled talent.

The survey took into account the responses of more than 1,300 hiring managers and 1,700 workers earlier this year.

According to the agency, the demand for skilled talent still outpaces the supply of candidates and as hiring managers face difficulty both in finding employees and retaining them, they’re trying to be knowledgeable about trends in salaries, benefits and preference for flexible work arrangements.

The survey found half of job candidates expect companies to disclose salary ranges in a job posting, with 63 per cent saying they would take themselves out of the hiring process if an employer would not provide salary information on request.

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This is contrasted, however, by 80 per cent of managers surveyed reporting they include salary ranges with about half saying it helps attract the skilled candidates they want.

As Canadians continue to apply for new jobs or even second jobs to supplement their income, many are expressing frustration over the hiring process, including a lack of pay transparency and the long time that it takes to hire. Managers also note the length of time it takes is a problem, but so is poor suitability for company culture and inadequate communication.

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The NPI report notes that while earning more money either through a salary increase or taking on a second job could help financial wellness, the survey suggests that may not in fact be the solution.

Chuck Grace, managing director of Canada’s Financial Wellness Lab, said in a statement that 35 per cent of the “stressed cluster” actually earned more than $100,000 per year.

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He said a solution that could work as stress relief would be reducing reliance on debt and consolidating its sources to pay it off more efficiently.

“Using more and more debt compounds the problem,” he said.

Employers, however, can also step up, with the NPI suggesting employees be encouraged to direct a portion of their pay into a savings account, and the companies investing in “payroll professionalism” to prevent unintentional payroll delays.

While Canada currently is at a low unemployment rate of 5.5 per cent, and Tzanetakis adds wages are rising, he said people should still make preparations for potential futures, such as if unemployment rises or if they were to lose their job.

“So if they can’t handle their household finances in a way that’s going to help them move out of there, there could be more turbulent times ahead,” he said. “If the economy takes a turn, if unemployment starts going up again and, you know, heaven forbid, people actually lose their jobs or one of the household members does lose their job, then the financial situation could get even more difficult.”

Ahmed-Haq said when people are trying to find ways to help decrease their stress, it can help to write down expenses each month.

“There are always places where you can save,” she said.

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