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Paycheque to paycheque: a survival guide

Paycheque to paycheque: a survival guide

Close to half of Canadians spend their whole paycheque and wait impatiently for the next one. How can anyone save in this situation?

Do you have trouble making ends meet between paycheques? You’re not alone.

Canadians who have trouble making ends meet


Balancing the budget is clearly a tough go for many Canadians, especially when the electricity, Internet and credit card bills start coming in. Surprisingly, it would seem that this situation isn’t related to a person’s income; the culprit might really be a lack of planning.

Let’s take a closer look.

Suspect number 1: Debt

In the fourth quarter of 2016, the ratio of household debt to disposable income for Canadians reached a record level of 167.3%: for every dollar earned there’s $1.67 of debt. This means that a large number of households are carrying a seriously heavy debt load.

Studies show that it’s hard to get your head above water if you’re only repaying the minimum amount every month. For example, it would take almost 30 years to repay $5,000 of credit card debt, and it would cost thousands in interest.

Suspect number 2: Lifestyle

Canadian households often live beyond their means. Canadians in the 20-to-45 age group, in particular, could be justifying today’s expenses with the idea that they will be making more money later in their careers. People in this age group also aspire to home ownership, which adds to their debt load and makes them vulnerable to interest rate increases.

Long-term costs

A number of non-financial problems are associated with this situation, the most obvious being stress and family tensions. As for financial problems, they take three main forms:

  • No emergency fund
    What would you do if something unexpected happened, even something as simple as your car breaking down?
  • No retirement
    Someone with no savings might not be able to maintain their lifestyle during retirement, nor retire as early as they hoped. In fact, they might not be able to stop working at all;
  • Ever-increasing debt
    People who have trouble paying their living expenses sometimes turn to forms of debt that cost them even more.

Finding ways out

Fortunately, there are ways to get out of this situation.

  • Draw up a budget
    Do you know where every penny of your paycheque is going? Is the problem the five-dollar latte each morning? The car payment of $249 every two weeks? One way to find out for sure is to use an online service to analyze your spending. Your financial institution likely has one available.
  • Work out a financial plan
    A financial plan is generally comprised of seven components, including savings, credit and retirement. Your financial security advisor can help you with this.
  • Manage your debt
    A debt-management plan allows you to prioritize the repayment of less productive, more costly debt (e.g., credit cards) over more productive, less costly debt (e.g., student loans), and even to consolidate debt within a less expensive product, such as a line of credit.
  • Put savings first
    “Pay yourself first” is a principle well-known in personal finance. It means considering savings to be an expense like any other – but one that should be paid before any others. It might be desirable to open separate accounts for your savings.
  • Invest
    And while you’re saving, why not put that money to work? There are savings vehicles that can shelter investment returns from tax, such as the TFSA, or defer tax payment, such as the RRSP. Some, such as the RESP, even allow you to receive government grants.

Some other day-to-day suggestions:

  • find additional sources of income;
  • do your own home repairs;
  • don’t buy on impulse;
  • say no to temptation.

… And take another look at this interesting infographic published in Actualis a few months ago: yes, pinching pennies really can work!



The following sources were used in the preparation of this article.

Les Affaires,Qui devrait se mêler de vos affaires?,” November 30, 2015.
Canadian Business, “Financial stress takes heavy toll on couples,” February 13, 2013.
CBS News, “5 steps to stop living paycheck to paycheck,” September 14, 2016.
Le Devoir, “L’endettement moyen des Canadiens atteint un niveau record,” March 16, 2017.
The Financial Post, “Four out of 10 homeowners caught short without enough money to meet their expenses, new survey finds , May 24, 2016; “Nearly half of Canadians are living paycheque to paycheque – and that has big consequences for retirement security,” September 7, 2016.
GetSmarterAboutMoney.ca, “Investing.”
Gouvernement du Canada, “Making a plan to be debt-free,” March 30, 2017.
Myfinance.com, How To Save $1000 While Living Paycheck To Paycheck,” February 15, 2017.
Nasdaq, “Reasons You’re Still Living Paycheck to Paycheck ,” August 30, 2016.
The Nest, “How to Save Money When You Live Paycheck to Paycheck ,” 2017.
New York Post, “Why even half the middle class is living paycheck to paycheck ,” September 27, 2016.
Protégez-vous, “Endettement : plusieurs salariés pensent retarder leur départ à la retraite," September 8, 2016.
Le Soleil, “D’une paie à l’autre, September 6, 2016.
Time, “How to Break the Paycheck-to-Paycheck Cycle, June 17, 2016.