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Paycheque-to-paycheque living up 26% in Canada since 2021: report

·3-min read
Research from the National Payroll Institute and the Financial Wellness Lab of Canada showed “several signs that the state of our financial health is worsening.”
Research from the National Payroll Institute and the Financial Wellness Lab of Canada showed “several signs that the state of our financial health is worsening.”

The financial well-being of Canadians has "declined steeply" over the past year as inflation soars and a reopening economy revives travel and other expenses that eased for many workers during the pandemic.

That's according to research from the National Payroll Institute and the Financial Wellness Lab of Canada suggesting living paycheque to paycheque has jumped 26 per cent since 2021.

"Many Canadians feel stretched thin, and that the ability to change their financial position remains out of their control," Matt Davison, director of the Financial Wellness Lab and dean of science at Western University, stated in a news release on Tuesday.

The National Payroll Institute's annual survey of working Canadians reached 3,033 mainly full-time workers between June 7 and July 15. The Financial Wellness Lab broke down those responses into three clusters - financially comfortable, coping or stressed.

With rising interest rates and persistent inflation still an issue, it’s likely that this trend will continue.Peter Tzanetakis, president of the National Payroll Institute

The research showed "several signs that the state of our financial health is worsening," according to its authors.

In 2021, the "comfortable" cluster represented 46 per cent of respondents. That category fell 10 per cent this year, boosting the "coping" and "stressed" clusters by eight and two per cent, respectively.

"While the growth of the coping and stressed clusters shows that more Canadians are struggling financially as we emerge from the pandemic economy, the data indicates that things are likely to become even more difficult for more people in the near future," Peter Tzanetakis, president of the National Payroll Institute, added in the release.

"Savings and spending habits, along with reliance on debt, have consistently determined the cluster an individual belongs to, and each one is moving in the wrong direction. With rising interest rates and persistent inflation still an issue, it's likely that this trend will continue."

The research also revealed a widening gap between the "coping" and "stressed" clusters. The report says this shows a growing level of distress among those who are struggling the most financially.

Inflation and the rising cost of living were found to be the top economic concerns (85 per cent) among those surveyed, with many worried about spending on food and transportation. Eighteen per cent say they used debt to pay for essentials in 2022, rising to 61 per cent in the financially "stressed" cluster.

The number of Canadians spending more than their net pay hit 11 per cent, the highest level ever recorded by this survey. For those in the "stressed" cluster, 91 per cent say they spent more than their net pay, up from 82 per cent in 2021.

At the same time, the number of respondents who say they save just one to five per cent of their pay jumped to 34 per cent, from 27 per cent last year. Nine per cent say they do not save anything, and 84 per cent of "stressed" individuals say they save less than five per cent of their pay, up from 76 per cent in 2021.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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