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Ask the Readers: Living Paycheque to Paycheque?

I read a disturbing article in the Globe and Mail recently about how 59% of employed Canadians are living paycheque to paycheque.  What does that actually mean?  Simply that 6 out of 10 Canadians would be in financial trouble if their pay cheque was delayed by a week.  Yes… a week.

Here is an excerpt from the article:

Fifty-nine per cent of Canadian workers say they would be in financial trouble if their paycheque was delayed by just a week – the same proportion as last year when the economy was still mired in a downturn, according to a poll of 2,766 people by the Canadian Payroll Association.

Almost half, or 47 per cent, are saving 5 per cent or less of their net pay. Sixty per cent of workers have been trying to save more than a year ago, though over half of them have been unsuccessful in doing so. Forty per cent say they’re not even trying to save.

I can see new grads living paycheque to paycheque as pay is generally lower, student debt can be high, and starting out on your own is expensive.  However, as pay increases and bills stabilize, savings and investments ideally should start to grow.  At the minimum, a fall back plan should be initiated (ie. an emergency fund or emergency line of credit).  Unfortunately, the truth for most is that more money earned simply results in greater expenses.

I’ll be the first to admit that we lived paycheque to paycheque when we first started our financial journey after graduation a little over 7 years ago.  But we dug ourselves out of what seemed like a never ending cycle by keeping our expenses as low as possible and saving any extra income (ways to save money).  Today, although our family income is higher as we are well into our careers while running a side business, we still aim to keep our expenses under control while investing our excess cash flow.

What do you think of the statistic?  Does it surprise you that 60% of employees live paycheque to paycheque?

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FT About the author: FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 63 comments… add one }
  • J September 17, 2010, 10:10 am

    It doesn’t suprise me at all. I am living in toronto and everywhere I turn I see people living a materialistic lifestyle… their paycheque is only a means to support this life style and to buy the status symbols that they crave. If that’s the way they choose to life their life, that is fine by me. It’s their life after all; however, it’s not a lifestyle that I will choose to emulate.

    “If you should go skating, on the thin ice of modern life”
    “Don’t be suprised, if a crack in the ice, appears under your feet”

    Roger Waters.

    I am sorry for the Pink Floyd reference, I am on my way to the “The Wall Live ” show this weekend and I am very excited about it.

  • Echo September 17, 2010, 10:23 am

    It’s not a surprise to me at all. Look at all of the payday loan offices around the country. When I worked in the hospitality industry, it wasn’t just the part time students or recent grads who were struggling, it was 40 something men and women who were making between $28k – $35k that were constantly asking for advances from their pay cheque or complaining about being broke.

    I think Michael James had a good point on his site, which was how people understood the question may have skewed the results. For me, having my pay delayed by a week would cause me some headaches (I get paid monthly) for automatic monthly payment coming out of my account, but I could survive…

  • ZeFrench September 17, 2010, 10:33 am

    Well. I messed my automatic deposit change a few months ago and did not break a sweat. The reason being that even if we have lot on the go including a toddler, daycare expenses and expensive renovations, we put aside 10% of every paycheck to ensure that we have between 3 to 6 months of safety funds available.

    By the way, banks don’t like that. How do you sell lines of credit and overdraft protection if people are reasonable with money?

  • FT FrugalTrader September 17, 2010, 11:01 am

    As most employees would qualify for EI should they lose their job, at the minimum, there should be some money available to cover the time gap before the first EI cheque arrives which can take 4-6 weeks.

  • SavingMentor September 17, 2010, 11:11 am

    The statistic does surprise me a little bit, but not all that much. I still have no idea why proper money management is required learning in high school. It makes so much sense, but it just doesn’t happen.

    I’m currently on parental leave myself and my wife isn’t working right now either. I didn’t get a cheque from the government for 3 months and we were just fine during that time. My wife has also been going to school for the past few years so there has been tuition, new baby expenses, plus our regular expenses. The family doesn’t have a very high income either.

    It’ll be nice when we’re both working full time again, but if you manage your finances properly there is no need to sacrifice a good lifestyle or have to live paycheck to paycheck either.

  • Jerry September 17, 2010, 11:44 am

    I work at a credit union and we see people of all income levels living from paycheque to paycheque. While it may seem understandable for people of lower incomes, we regularly see it with people of incomes of over $100,000/yr. What’s worse is the higher income people lock themselves into long term debt that is difficult to get out of: for example – very large home, RV loan, snowmobile loan, SUV loan. So if their overtime is reduced or they lose their job, it is very difficult to reduce expenses because they have all of these payments they are locked into.

    It seems whatever the income, people tend to rise to its level of spending.

  • Ron September 17, 2010, 11:54 am

    My wife and I started out on our own in early 2008. We had some savings, bought a house and kept working hard. We didn’t have a lot of assets then, I had about 20k in RRSP’s and maybe 20k in cash. Just over half of that cash went to the house. We live a bit frugally. We both have good incomes for where we live. Not in the 90% percentile or even close, but good nonetheless. I have to commute ‘very’ far to work but it’s enabled us to earn more than most would at our ages (27 & 28). My wife keeps a good balance in her bank account but it’s not invested. Luckily she is contributing to the Ontario Teachers Pension Plan so I give her some slack in this regard ;) Myself, I have a Defined Contribution Plan through my work that enables me to save 10% of gross (5% contributed by me, matched by 5% from the company). This is great however it’s likely I will face a layoff in the coming months. Including our home equity, we have a net worth of approximately 110k. Fortunately, home equity makes up only 25-30% of this. The vast majority is in RRSP’s, TFSA’s and savings accounts. Rest is the pensions and our cars. Both are used and barely cost us anything outside of gas (hundreds a month in my case) and insurance, maintenance, etc.

    Speaking to the point of the article – we do not live paycheque to paycheque. I could not imagine living such a lifestyle and I would do whatever work I had to in order to get out of that rut should I ever get stuck in it. I would take 2 or 3 jobs if need be (I did 2 and went full-time to university for 4 years). My wife and I are very happy, expecting our first child; a boy, in December, and do not stress over money. I save rougly 35% of gross. We live very well below our means but I think most people would be surprised. We do have a nice car ($7200 during the February 2009 depths of the recession, thats right $7200, not $20,000), a beautiful home ($218,000 in March 08, with Prime – 0.7%. We were approved for $300k at that time) and everything we need. We got to that point by living below our means, working very hard, attaining our degree’s and being smart with our choices. A little help from our family didn’t hurt, but it was never financial. We have also been together 11 years next month. We have fairly different attitutes on money, I’m an aggressive saver and investor, she’s more of a ‘don’t spend too much, but leave it in the bank’ type. At the end of the day we have a good balance and a great relationship. I think its the cornerstone of any financial foundation.

    I honestly think ‘most’ people can achieve this sort of balance in life, but it’s a commitment you have to renew each and every day. Set a goal and do your best to get to it. I fully realize that many will read this and think, sure, thats easy for you to say. I can’t do that because of X,Y, and Z. I might agree in most regards. Some people have a disadvantage from the start: Chronic Illness, lower education, life situation, etc. My point is to try and improve your situation. Don’t try and chase what others might have. You’ll only end up bitter and jealous in the end. I started at 16 with $200 and no job. I loved cars at the time and got that feeling everytime I passed a Corvette. I thought, maybe someday I’ll have one, but not today and surely not tomorrow. Maybe in 30 years. It gives you something to work towards.

    We both do the best we can to keep this lifestyle. Should something happen to change it im sure we’ll pull together and dig ourselves out of it, even though the solution might be difficult.

    For anyone living paycheque to paycheque, my advice is this:

    Simply STOP. Actually doing so is the hard part. If your living at your means, STOP. Sell the house, cut back spending, live frugally, do away with the ‘image’. Even just for 1 year. Pay off your debt, or at the very least, start to. I can tell you first hand, the $15 or $20 jeans at Walmart feel just as great and last just as long as the $40 or $50 dollar pair from The Bay or “The Mall”. Likewise the $10 in meat and produce that you transform into a dinner for 2 tastes just as good as the $30 or $40 or even $50 dinner out. That being said we eat out too, at least once a week. I try to keep it under $40.

    Dont keep up with the Jones’s. In fact, its possible they’re broke so pretend they dont even exist. Focus on yourself and your family, that is all that matters. Make the hard choices and act on them.

    You only have one shot at life. Don’t waste it on crap and don’t screw it up.

    Ron

  • SavingMentor September 17, 2010, 12:14 pm

    @Ron That was an interesting read and a lot of what you talked about I have in common with you!

  • Bill September 17, 2010, 12:14 pm

    I guess this depends on how you define the pacheque-to-paycheque. I have, foolishly, a significant amount of debt from student days. I didn’t qualify for government loans because of my father’s income, which was unfortunately not a factor in my paying for school. Thankfully I did qualify for a bank student line of credit. It sucks that I have a LOC with $15K on it, but I don’t sweat it because that’s my education, and the reason for my pacheque. So I’m hammering away at the LOC, to the tune of $1500/month, and not having anything left for saving. I have a few hundred in a savings account, an automatic RSP contribution, and one of the few remaining defined benefit pensions, so I don’t feel like I’m morgaging my future.

    So I guess I would qualify: I don’t have much savings to cover expenses if the pay didn’t come in. That said, over the past year I’ve bought a house and paid $10K off a LOC that I can easily readvance in an emergency. Step 1 is close out the LOC. Step 2 is emergency fund, and until then the LOC will have to suffice in an emergency.

  • Rachelle September 17, 2010, 12:20 pm

    Maybe this is because I deal with lots of tenants in my business, but this does not surprise me at all.

    It also occurs to me that in Toronto there is a base cost of living, housing is expensive, you need food etc. So anyone making just that amount of money is going to find it very difficult to accumulate anything. There’s a lot more people working at minimum wage, part-time in service jobs with kids and rent to pay than we all like to think about.

    Unemployment, divorce, illness can all contribute to the problem. And lets face it we can’t all be financial geniuses and there are lots of businesses out there that have sprung up just to take advantage of these people.

  • Ron September 17, 2010, 12:24 pm

    @Bill – I think your on the right track and doing just what you should be. Keep it going!

    @SavingMentor – Great minds think a like, so they say! :)

  • steve September 17, 2010, 12:43 pm

    Let’s not forget that 0% of the 59% of the population who is living pay to pay is NOT reading this article. They just don’t want to hear that they are doing something wrong and will pay for it in the future.

    It’s like climate change – you just can’t warn people about what’s going to happen – you have to show them. The good times will last forever, won’t they?

    My favorite example is family – most of my wife’s family is around Toronto and Montreal. They are all around 60 and have no plans for retiring, because they cannot afford to and maintain their standard of living. They live well, but I can see this is not sustainable because there is no pension and no savings. My RSP contributions are justified because I don’t want to be in that position at 60 – I want to be retired will before that, and comfortable.

    My side of the family worked in an industrial town, where the pension was the norm. So they were fine – still had $0 in the RSP, but the pension was sufficient. I think they got lucky – forced savings.

    This is a hard argument to make when the relative drives a fancy new car and brags about it. The statement “we’ll see who’s laughing 30 years from now” doesn’t hold much weight.

  • FT FrugalTrader September 17, 2010, 12:44 pm

    @Ron, we have very similar stories as well!

  • FT FrugalTrader September 17, 2010, 12:49 pm

    @steve, good point, most of MDJ/pf blog readers are financially conscious. I’m not one to judge the life style choice of others, I just don’t like to hear complaining/excuses when things don’t work out. I’m a big believer that people are responsible for the outcomes in their own lives.

  • Ron September 17, 2010, 12:56 pm

    @FrugalTrader, I read your blog everyday and have always considered you the Jones’s. I’m trying to keep up LOL.

    In all honesty my wife and I have a financial plan that is going very well so far. It’s not quite as aggressive or fruitful as what you have accomplished so far but if things go as planned – it won’t be too far behind. I can live with that no problem! Kudo’s on what you’ve been able to accomplish. If I recall correctly you recently had a child? (my apologies if I’m mistaken). How is it going? Parenting wise and financially. My wife and I are expecting in December as I mentioned above. She will be off for a year, I will keep working. Might be a layoff for me in there somewhere but we roll with the punches ;)

    Cheers,
    Ron

  • Ron September 17, 2010, 1:01 pm

    @steve – I agree that yes, most people who strive to get to that magic number aren’t reading this blog. In life I try and educate those I meet who may be, or even aren’t in a financial predicament. Sometimes I feel like a preacher who hasn’t ‘walked a path yet’ but I think its good advice nonetheless.

    All we can do is try to enlighten and lead by example :/

    Ron

  • FT FrugalTrader September 17, 2010, 1:14 pm

    @Ron, LOL, thanks for the kind feedback! Comments from readers, like you, about how MDJ is a motivator keeps me going.

    Our child is over 2 years old now and it’s been a blast thus far. Financially, capital costs are heavy at the beginning with the crib, stroller, high chair toys, playpen, car seats etc. However, operating expenses, up to this age hasn’t been too bad. Most of it was diapers (potty trained now), and clothing (2nd hand stores). However, most working parents put their child in daycare after the 1st year, which can be quite expensive (besides Quebec). Here in NL, daycre for under age 1 is at least $1200/mo but after age 2, it drops to around $700/mo For us, my wife decided to go part time with the grand parents picking up the rest.

    Did you like how I compared baby expenses to a financial statements? :)

    However, there are financial benefits as well. You may qualify for CCTB, you’ll get UCCB ($100/month), there’s a tax deduction for child care (up to $7k per year).

    Other articles that may help:

    Newborn expenses
    Shopping for a Newborn

    child care benefits

  • sco September 17, 2010, 1:15 pm

    Idiots in a rat race

  • bob September 17, 2010, 1:16 pm

    Oh give me a break.

    What is even meant by the poll question? It is a classic push poll.

    What does “in trouble” mean? I have everything automatically come out of my account on the first of the month, including debt such as mortgage payments, but also all of my investments & savings withdrawals.

    So, yeah, if my cheque didn’t come through when it was supposed to at the end of the month it would suck, and I would be “in trouble” in the sense that I would probably have to use a LoC to cover everything until withdrawals from investments could be done (not ideal, since they are in RRSP accounts) or until the cheque comes through.

    Does this mean I have no money or I’m irresponsible with my money? Of course not. It simply means that rather than having my “emergency” money sitting in a low interest savings account, I actually invest it monthly into RRSP accounts to take advantage of dollar cost averaging, tax credits, etc.

    Be very careful when interpreting the results of polls like this.

  • saveddijon September 17, 2010, 1:35 pm

    Bill:

    You’re putting $1500/month into a 15K LOC which you plan to have paid off in 10 months, and no savings?

    Think about it like this: what’s the interest rate on your LOC? Mine is 2.75%. Every $1500 you put in will “earn” 2.75% in terms of interest saved.

    But wait. It gets better. Although you get taxed on interest you EARN, you don’t get taxed on interest you SAVE. So that 2.75% return is equivalent to earning 4.5% pre-tax on a GIC. Not bad.

    Oh. That wasn’t a HELOC? You’re really paying 6%? Well, your pre-tax “return” is closer to 10%. And it’s 100% guaranteed! Wow!

    Once you’re paid off, you may find getting an equivalent net worth increase from that $1500 to be much more difficult.

    Keep up the good work!

  • GoodSmith September 17, 2010, 2:12 pm

    Question: If my cheque was delayed for a week and I had to dig into my saving account, would I be considered to have lived from paycheque to paycheue for that month?

  • Pedro September 17, 2010, 2:30 pm

    I would also add depending who you ask? Why, they interviewed new immigrants? I’m in that group, and let me tell it is really, we live paycheque-to-paycheque, and not because we choose to do so but when you arrive to Canada (specially from Lain-America) we are not use to pay income tax (due to oil income, etc.) so you arrive to Toronto, for example, find your university career credentials get you no where in the Canadian labor market (only if you have a background on IT you have a real opportunity to find job on your area) the you take a low paying job, plus paying rent, plus income taxes, a VAT as high as my country and to add to all previous factors you basically start from scratch to buy a car (used or new) , house, put aside money for your kids’ education, your retirement, well you get the picture.

  • Trevor September 17, 2010, 3:10 pm

    I have to agree with Bob and GoodSmith. It’s too broad a question what does “in trouble” mean? If My cheque was delayed a week I’d be in trouble, I’d have to pause moving money into my kids RESP, and moving money into my TFSA would have to be on hold.

    But I’d have no problem coverin bills.

  • Steve Zussino September 17, 2010, 3:11 pm

    Not really surprised. I am in this hockey league and I can’t believe the organizer had such trouble getting dues from people.

    Honestly it was $200 for the whole season and people were avoiding the captain to not pay him.

    Unbelievable.

    Yet people won’t get rid of their iphones or stop smoking or drinking or going to restaurants.

  • Ron September 17, 2010, 3:19 pm

    @FrugalTrader – Haha I was thinking the same thing about the Baby Costs vs a Financial Statement, even before I read that line. Hilarious.

    My wife will likely return to work after 1 year. She is a teacher so the salary is worth it. We will have to put the child into daycare though seeing as our family is a bit too far to coordinate with everyday. So, that may put a small dent in our plans but I’m sure it will all work out. Sounds like Newfoundland has a decent program set up. I wish Ontario would sort out some of its mess and give us taxpayers more effective programs.

    Thanks for the links and the information. Keep up the great work on the blog!

  • Ron September 17, 2010, 3:22 pm

    @GoodSmith – My personal definition of Paycheque to Paycheque is.

    X is your monthly income and Y is your monthly expense.

    If at the beginning of the month, you cannot pay Y without an X, then yes its paycheque to paycheque.

    In other words: are you able to absorb a lost income for a certain period of time? That period of time being a week or a month is up to each of us to consider I suppose.

  • SavingMentor September 17, 2010, 3:56 pm

    @bob

    I have to say I was wondering the same thing about how the poll was conducted and what exactly was meant by trouble. You never do know with these things. However, I’m sure a good portion of that 60% is the kind of trouble we are talking about here.

  • Oliver September 17, 2010, 4:16 pm

    I used to be terrible with money when I was younger. If I had known the things I know now at 30 when I was 20, my net worth would be significantly higher.

    For a long time, I lived paycheque to paycheque. At first, it was out of choice. I didn’t see the immediate need for long-term savings. Then I got into debt, and with a low paying job I had no choice. It sucked.

    At first, I thought I needed to make a lot of money to get out of that hole. That wasn’t really true – I just had to be more disciplined. Luckily, I started making more money recently. In the past four months, I got a new job with a 23% salary increase. This week I started another new job with a 29% increase. I’m actually very glad that my debt (house and car) reflects my much lower income, as it leaves more money for retirement savings, paying down debt more quickly, and short term savings. For example, I’m planning on paying off my 54 month car loan in just 21 months, and at the same time putting 12% of gross pay into RRSPs, on top of other savings. It feels great to see my net worth increasing fairly rapidly.

  • David September 17, 2010, 5:36 pm

    Advertising and our need to keep up with the neighbours is a big part of what drives this situation

    A lot of our media tells us, directly or indirectly, that we won’t be happy until we are rich, possibly famous, and own the newest and biggest versions of X, Y and, Z.

    This peeks the competitive side of our nature as well as our fear of being left behind.

    Yes I know this makes us sound like a large herd of animals roving the landscape in search of greener grass, but that is how many people seem to live and often our incomes don’t match up with our expectations of how we should be living.

  • khai September 17, 2010, 5:44 pm

    It’s true that frugal living can be practiced at any income level and that a lot of people really “waste” they earned money.
    On the other hand you also need certain income to be able to live & save. In another article I read that minimum income for “happy life” in Northern America is around 70k USD/year. (for a family) That’s like two people each earning at least double the amount of the minimum wage here in ON.
    There’s a lot of things in life which you cannot simply save at- mortgage (no houses <300k and condos <200k in Toronto), public transport, car, childcare expenses…

  • Blogging About Money September 17, 2010, 7:11 pm

    Considering the current debt to income ratio in Canada is now at 145%, I’m surprised the number isn’t higher!

    I wonder how Canadians would respond to the question, “if interest rates rose 1%, how severely would your life be impacted?”.

  • Financial Cents September 17, 2010, 7:46 pm

    No surprises from me. 6/10 is probably pretty accurate, scary as that may seem! Interest rates will rise, and people will suffer, unfortunately. I would never assume any debt I couldn’t pay off.

    @Steve Z – sad “Honestly it was $200 for the whole season and people were avoiding the captain to not pay him. Yet people won’t get rid of their iphones or stop smoking or drinking or going to restaurants.” How true.

    Good post FT.

  • Sandra September 17, 2010, 8:36 pm

    I agree with Rachelle; there are factors other than “keeping up with the Jones” that can decimate your finances.
    My husband was diagnosed with an illness last year that costs $40,000 in drugs to treat. We live in Toronto and OHIP does not cover this treament. The only way to get funded drugs is to apply to participate in a study (and hope you get selected) or be on welfare and apply for government funding and again, hope for the best.
    Fortunately, my husband has a platinum benefits plan that has unlimited drug coverage and even if he did not have a drug plan, we could comfortably write a cheque for that amount. This treatment is not only costly but debilitating. Again, my husband is lucky enough to work when he wants and how much he wants (family firm) during this treatment.
    What about those who face this kind of situation but don’t have an unlimited benefits plan? Don’t have flexible work hours? Can’t afford to take a 1.5 year leave of absence?
    Yes, there is a great deal of materialistic silliness out there but there are also the people I see at my husband’s clinic. The ones that through, no fault of their own, will probably never recover from the financial devastation of an unexpected illness like this and are living pay cheque to pay cheque.

  • robb_stark September 17, 2010, 9:51 pm

    Scary… my wife and I are on the opposite end of the spectrum. We currently have a cash emergency fund that would last us about 5.5 years if we suddenly were both without an income for this amount of time. Yes, our yearly expenses are about $36000 (and we could pare this down even more if we had to) and we have cash savings of about 200k. Extreme, yes, but we sleep bloody well at night.

  • SI2K September 17, 2010, 10:48 pm

    Family of four in Toronto on one income (the second wouldn’t begin to cover daycare): We’re “just starting out” as far as home and car ownership are concerned anyway and live pretty much paycheque to paycheque. Not materialistic in the least, though we’d save more if we cut out all sundry extracurriculars and summer camps for two bright kids and weren’t prepaying the mortgage. Cutting their activities is pretty much our ’emergency fund’. Our grocery bill, trying to eat mainly fresh unprocessed foods, is massive in and of itself. These articles are everywhere and annoy me. Right. Where’s my Iphone? Maybe Loblaws will buy me one? ;)

  • Peter September 18, 2010, 2:10 am

    Keeping up with the Jones is buying stuff you don’t need, with money you don’t have, to impress people you don’t like. I got that from a frugal friend at work.

    My wife and I just had our first child 7 months ago. Even though it was a significant drop in income when mat leave started we are still saving 41% of our net income (RRSP / TFSA / RESP and down payment). Most of that is going into our down payment fund as we rent a small two bedroom apartment in Vancouver area to keep costs down. While I would love to have the feeling of owing something a two bedroom condo down the street just a bit larger would cost $400K, our rent is under $900 and no condo fees, maintenance, property tax or special assessments.

    To relate this to the article, I would suspect that a fair amount of people who purchased these condo’s would be living check to check, and I have no plans of joining them anytime soon. Doing so means NO RRSP / RESP / TFSA or other savings at least until our incomes increase. We plan on having another child soon so to jump into a mortgage even at these great rates would cause undo stress and financial hardship on our household especially if we had to factor in child care at $1000/mth.

    We are very proud that in the four years since moving here we have paid off our student loans, paid off a car loan, I completed a professional designation, and we have managed to save $171K in cash and investments not including our defined benefit pension plans.

    Now the big question for us is how much is too much for a down payment before it gets too hard to actually spend it?

  • sco September 18, 2010, 2:29 am

    “Family of four on one income” – maybe you should have thought about the fact that you can’t afford to be a family of four on one income in Toronto. Maybe you should have waited until you would afford the children.

    Keeping up with the Jones is also having too many children too early.

  • teddu September 18, 2010, 10:28 am

    Oh look everybody. Our family is so much better that these dumb people who responded to that poll. Heck we’re better than you! We have combined incomes of 7 million dollars per year, but we live only $11,000 and keep the rest in a savings account in case of an emergency. We made sure to not have children until we each had $995,000 in each of our RRSPs. But Last year, when my wife went on Mat Leave, we cut expenses even further so that we only lived on $2500/year. Clearly we are not only more intelligent than you, but we are morally better than you too.

    This site used to draw interesting comments from people trying to help each other along on their financial journeys. But recently, the commenter here have developed the tendency to become a “Keeping up with the Jonses” Frugality contest.

    Every little bit of evidence that some people in the world have financial difficulties (even lame polls like this one in which the results are highly suspect) is used as an excuse by commenters to crow about how they would never live like that, and how they have $xx saved, etc.

    First — consider that for many people living cheque to cheque is not a matter of irresponsibility but of living in pretty tough circumstances. New immigrants. Family deaths. Family illnesses, Recent Divorces, Our pathetically low minimum wage, Going back to school while working, etc. Are some of these preventable? Sure. But some are tough to anticipate, and some are simply reality of the kind where you just have to bit the bullet and pay now for future rewards and stability.

    Second — if you are living frugally and within your means, congratulations! Why do you feel the need to announce it to the world with smug condescending overtones of morality. Why not use your experience to provide ideas, tips, etc. After all, it seems to me that’s what the site was designed for, and that’s what commenters here used to provide.

  • FT FrugalTrader September 18, 2010, 12:33 pm

    @teddu, that is an interesting thought, I wonder what percentage of the 60% is from people with financial hardship, and the percentage of those who are simply spending above their means. Most of my friends/co-workers make pretty good salaries, and I would say that most would fall within that 60%.

  • teddu September 18, 2010, 12:53 pm

    My point was two fold:

    1) We have no clue what that 60% means. “Trouble”, according to this poll, probably ranges from simply having to divert money that is usually automatically debited to investments, RESP, savings, RRSP, etc., to having your house taken away. That’s such a broad range, that it becomes almost meaningless.

    2) Why, for many, has financial trouble in others turned into an intellectual and even moral failing?

    Sure, there are people out there who spend far more than they earn (insert anecdotal evidence here about some family member or friend), but what is the true scope of the problem? Home arrears are still unbelievably low in the grand scheme of things. Bankruptcies are rare. We don’t, actually, have armies of retirees living on cat food. By and large, Canadians are doing pretty well.

    There are an awful lot of structural reasons why not everyone is rich. It doesn’t all come down to “poor people are stupid, lazy, and have no foresight”.

    Alas, that seems, increasingly, to be the tone of many of the comments on financial blogs.

  • DAvid September 18, 2010, 2:22 pm

    As a follow-up to teddu, another challenge people face is that real incomes have not increased in many years, while regular expenses have. Thus, even if you had a manageable financial situation a decade ago, even without trying to ‘keep up with the Joneses”, without adding new items to your expenditure list, you are in a more fragile situation today than then.

    DAvid

  • SomeRandomCityPerson September 18, 2010, 4:17 pm

    I have to agree with teddu on this one. I am also getting a vibe of moral superiority from some of these frugal posters….

    When I read between the lines of some of these posters I find that they live in smaller communities where you can buy a house for $200,000 and they have either a good union government job like a Teacher or are engineers working for an industry outside of a major city….

    A monkey living in this kind of situation (low cost of living combined with high income) could be a financial success and have no debt.

    The reality is that a large percentage of Canadians live in very large cosmopolitan and very expensive cities (combined populations of Toronto, Montreal and Vancouver is about 11,000,000 people or 30% of the population)….

    Why do they live in these expensive cities than? Why don’t they live in the town of Perfectville in the Middle of Ontario where you can buy a house for $180,000. The same reasons why people choose to live in smaller provinces or smaller towns….Their family is there, there support network is there…Also people live in larger communities because of the extra amenities like hospitals and cultural centres, and direct flights to there home countries are there. Most importantly…most of the jobs are there. It would be very hard for someone who grew up in a large city to move to a smaller town or province with less diversity, choice and amenities….even if it was better for the bank account….

    In Toronto and Vancouver houses are expensive and wages barely keep up with the cost of living, but large amounts of people will continue to live there and barely get by….does this make them inferior or less intelligent than the moral frugal superiors….No! I believe that most of them are not keeping up with the Jones’s they are just living….

    Finally some of us want to enjoy life now and not 30 years from now….Live and let live….not all of us want to live in a small town, eat out at the same restaurant and save 30% of our incomes for some future time….just my 2 cents….

  • robb_stark September 18, 2010, 4:20 pm

    I honestly feel for those who, through no fault of their own, find themselves in dire financial circumstances. I have much less sympathy for those who buy monster houses, cars, rvs, jetskis, etc that they really don’t need and really can’t afford yet must have anyway. Don’t know how much of the “60%” this group constitutes, but I know of many in my own circles that CHOOSE to live this way. I don’t feel any particular “smugness” that my wife and I have chosen not to live in this manner…

  • Doctor Stock September 19, 2010, 12:07 am

    No, not shocking… but disappointing. We’ve learned to spend first, account for it later. And the example is set by our governments… so, it’s hard to blame individuals when the leaders of the people can’t control their own spending. It’s time to simplify…

  • Arjun @ InvestingThesis.com September 19, 2010, 1:05 am

    Unfortunately, those statistics are not surprising in the least, Frugal Trader. Though I think many of the people who find themselves in such a situation would not have a problem if they learned to live within their means, rather than always purchasing bigger/better and getting in over their head.

  • Financial Cents September 19, 2010, 10:41 am

    Well said Doctor Stock.

  • PittyPat September 19, 2010, 11:46 am

    I totally agree that circumstances can make living week to week the reality, I lived that life years ago and it wasn’t a good place for me. For some though they have the means but could lack financial know-how, lack good financial role models, and be reluctant to take control. This past year I started travelling a couple times a month with a young co-worker. She is intelligent, educated and makes a decent salary. A few months ago she confessed she lives paycheque to paycheque as do her parents, and all of her friends who are mostly university educated. She thinks it will take 15 years to pay off her student loans but really isn’t sure of the amounts and terms she has. In the meantime, she is seriously considering looking for a job up north for a few years to try to pay it down quicker. Based on a bit more information, I was able to give her some practical advice that could cut years off her estimated loan without even a small lifestyle change. With a few more financial management and tax strategies, I bet it could come down to 5 years – or even less as she makes more money in the years to come. As a first step I suggested she write down all her income and expenses for a month and make a budget. I offered to show her how without knowing her actual numbers, and to give her some more strategies to consider. She seemed pretty stoked about it and was going to start when she got home, though she did say she knew she wouldn’t like what she saw. She also said no one had ever taught her or her friends anything about money management and they all needed to know this stuff. But, it has been two months now and I’m not going to be the one to bring it up. Shame.

  • lisa schamess September 19, 2010, 2:49 pm

    we in the u.s. are well known for this. and although a lady never reveals her age, let’s just say i am old enough to know better. your blog and the affinity blogs you feature are helping me fix that. i just survived 2 months without a paycheck and i think i will be much more ready next summer.

    i started blogging about my progress in May, and i post my progress reports each Sunday, warts and all. it is helping me stay on it and stay honest. thank you.

  • Future Money-Bags September 19, 2010, 6:03 pm

    The reason for this article by MDJ was not to insult anyone that is living paycheck-to-paycheck and can’t help it.
    I know many many immigrants, or people living in canada on work visa’s. They work 40-70 hours a week making very very little. Not only do they have rent and food to pay for like all the rest of us, but they send every dollar left back home to support their wives/husbands, kids, parents, uncles, neices, their entire family.
    But you know what, you can pick anyone side and say they don’t have the opportunities as the rest of us, or they have to spend money on certain things. OR, you can realize that no matter what financial situation you are in, you can always improve your expenses and saving techniques and debt-load.
    If you can’t put away $500/month, try $50/month! It all adds up significanyly as the years go by. Also since I have a p/t business in the financial industry, I see many low/medium-income families paying way too much for life insurance or faulty savings plans that others have set them up with.

    With the proper knowledge and education, no matter what situation you are currently in, there is room for positive growth.

    Me? Since highschool I have not lived paycheck to paycheck. what does this even mean? I always have at least 1 paycheck sitting in my drawer, sometimes 2-3. I live well below my means. Bought my first car at age 24. Pay rent of under $500/m with a room-mate and I live in Vancouver. Save on average of 50-60% of my income each month. Try to increase my income by 10% each year. I have no post-secondary education that I had to pay for.

    No I don’t have 3 kids, a baby on the way, a wife in mat-leave, a huge mortgage to pay every month, car loans to pay down, student loans to pay down, or any debt at all…Because I CHOOSE not to.

    Am I bragging? Certainly not, but it may seem that way to some. I am still very young and learning more about money every day; And try to pass on all the knowledge I have to the ones around me.

    Now with that being said, the 60% of canadians living pay-check to paycheck is a very real reality! And the average debt-to-income ratio certainly is well above 120%. Are some of these immigrants, or raising large families with 1 income, or living in high-cost cities in canada? Of course!
    But let me say that 95% of people that I know around the age of 19-40, are living paycheck to paycheck.( This means if they were to miss 1 paycheck, they would gain more debt and pay more interest and have at least some hardships until the next paycheck were to come in)
    30% are students, 5% are new immigrants, 5% have families to support…the rest? they choose to live that way. (Guess what Percent that is?)

  • teddyu September 19, 2010, 7:52 pm

    “But let me say that 95% of people that I know around the age of 19-40, are living paycheck to paycheck.( This means if they were to miss 1 paycheck, they would gain more debt and pay more interest and have at least some hardships until the next paycheck were to come in)”.

    First, I’d like to see some actual data supporting this assertion. Because if we judge by statistics on home arrears, bankruptcies, food bank use, etc., I just don’t see that 95% of people are living so far above their means that we need to treat these folks as pariahs.

    Second, so what? Perhaps between 19-40 this is how people want to live their life, and after 40 they start to save. There is absolutely nothing morally wrong with living pay cheque to pay cheque. There are needs and wants. Saving lots of money now means you are putting priority on an early or rich retirement at the cost of not being able to do certain things that you might want to now. You have apparently chosen, partly at least for financial reasons, to not to own a home, have children, go on vacations, etc., Good for you — but why do you feel you have the right the need to tell everyone to live their life the same way?

    Spending money now means you are putting priority on doing certain things now (like having children, owning a home) at the cost of having to work later in life to pay off debt & fill savings, or having a less active retirement. The choice is individual, and it is awfully presumptions of people to say that those who choose to spend money now instead of saving it are, somehow, shameful (see PittyPat’s ‘shame’ comment above).

    • FT FrugalTrader September 19, 2010, 8:16 pm

      “Second, so what? Perhaps between 19-40 this is how people want to live their life, and after 40 they start to save. There is absolutely nothing morally wrong with living pay cheque to pay cheque. There are needs and wants. Saving lots of money now means you are putting priority on an early or rich retirement at the cost of not being able to do certain things that you might want to now. You have apparently chosen, partly at least for financial reasons, to not to own a home, have children, go on vacations, etc., Good for you — but why do you feel you have the right the need to tell everyone to live their life the same way?

      Spending money now means you are putting priority on doing certain things now (like having children, owning a home) at the cost of having to work later in life to pay off debt & fill savings, or having a less active retirement. The choice is individual, and it is awfully presumptions of people to say that those who choose to spend money now instead of saving it are, somehow, shameful (see PittyPat’s ’shame’ comment above).”

      Although I respect your opinion, I do not agree. Why do you need to have one or the other? Why can’t you have both? What about having balance? You can live now AND put a bit away for savings.

  • Future Money-Bags September 19, 2010, 8:45 pm

    I choose not to do those things, yet. You can probably imagine I have a nice savings built up and a nest egg started for retirement.
    I travel more than most people and do love to do it, but I do it as cheap as possible.

    I have been looking to buy a place for the past year, and since I have not done so yet, I have instead continued to save up for a larger Down Payment. Thus resulting in paying less interest on the mortgage when I get it for a rental property.
    I am focusing more on my career as I am closing in on 25 soon, and need to start making more money for my family in the future. I Grew up very poor and this is the main reason I have always worked so hard to not live that life anymore. If being frugal is the way I need to go to reach that goal, than its easy!

    “Work hard and party hard” Is what I believe in. Not necessarily ‘partying’ but just having fun. I may work 6-7 days every week, but in no way is it not worth it. I just went to vegas in august for a week, and just returned from Mexico with my GF. But I will make up for it in the coming months to make sure I am still able to save every month.

    Like Frugal said, Balance is key.

  • Multiple Egg Baskets September 19, 2010, 9:55 pm

    I fully agree that the materialism plague is one of the major causes of the problem.

  • teddyu September 19, 2010, 9:57 pm

    Although I respect your opinion, I do not agree. Why do you need to have one or the other? Why can’t you have both? What about having balance? You can live now AND put a bit away for savings.

    I didn’t say you had to have one or the other. But what constitutes “balance” for one person, isn’t the same as for others. Everyone ranks the costs and benefits differently. There is no one right way to do it.

    Look — I think we all agree that some people spend more than they earn, and that ultimately this probably isn’t the wisest way to live.

    But when I start to see comment threads that turn into ridiculous moral judgements of people’s choices in how to spend their own money, it is a bit galling. It is all the more so, when it is triggered by media polls that are poorly designed and exaggerate the scale of the problem.

  • chad September 20, 2010, 1:42 am

    I just quit my job the other day. I’m young have a wife and 2 kids.

    enough money saved for a few months so i guess i’m not the average

    Although not many people would quit a job and not have another one

    On the other hand i can make more money by making less lets see how many people can figure that one out.

  • Emily September 20, 2010, 9:33 am

    @FT I have a soon to be 2 year old and am currently driving an 05 Mazda 6.We bought it used and it is a great car however, after owning it for a while, and as my daughter grows, it becomes quite the strain on my back to get her in the car. Everyday I put her in the car (far more than once) and I curse the car wishing I had an brand new shiny SUV. About a month ago I joined two friends at the park so all the kids could play. And my little silver Mazda was wedged in between a 07 Ford Escape and I think an 07 Dodge Nitro. In that moment I was envious of my friends but when I really thought about it, both of those families struggle each pay and one of them is in the process of selling their house because they can’t afford it. For some it is easy to get wrapped up in “Keeping up with the Jones'” and being able to otherwise justify those decisions (my back hurts in my case). But really I am just fine and would rather have my Mazda, when it means overall security for my family and future goals.

  • Justin September 20, 2010, 3:37 pm

    Although perhaps they could have worded it more clearly, the intent of the poll is obviously that living paycheque-to-paycheque means that you would be unable to pay your bills, not that you might be inconvenienced by having to make transfers from other accounts.

    Yes there are people with legitmate hardships that are part of that 60% and it may not be quite so high due to poor phrasing of the question, however, I think it is still a troubling statistic. I respect that different people have different views on money management. People can spend their money however they want, hopefully with some conscious thought. However, I don’t respect people using the bank’s money (credit cards, LOCs, etc) for their wants and then feeling hard done by.

  • Ben September 20, 2010, 3:49 pm

    Boy, pretty hard to pin down exactly what the pollsters meant by “financial trouble”, and what the respondents meant by “financial trouble”.

    This poll got way more publicity than it deserved, and there is precious little that can be inferred with confidence from the results.

  • DAvid September 21, 2010, 4:21 pm

    This quote from the article makes it pretty clear to me:
    Younger workers are having the greatest trouble meeting their current expenses, with two thirds of those aged 18-34 saying it would be very difficult, difficult or somewhat difficult for them to meet their current financial obligations if they missed even one paycheque.

    DAvid

  • Lina Zussino September 21, 2010, 6:41 pm

    Sadly, it does not surprise me that nearly 60% of Canadians live pay cheque to pay cheque. My brother in law is a math teacher and he teaches financial education to high school students. I’ve seen some of his strategies and I often wish I was taught that in school. Perhaps I too, would have a few extra dollars in the bank! Financial education is desperately needed. It’s not that people are ignorant to it, it’s simply that they are not educated with finances and the media encourages spending – it would be nice to see some of those old school teachings brought back to our young children. Canadian statistics shows that there about 68 million bank credit cards in circulation more then three cards for every adult and this doesn’t include department store and other retail charge cards!

  • 123cruncher September 21, 2010, 11:17 pm

    If these 60% of people know they are living pay to pay, why not learn and do something about it?

    If I know I am doing something fundamentally wrong and would like to correct it ……. I would make every effort to do so and stop making excuses. (except for those forced into the situtation)

    I have many friends that are financially well off, but are tight on cash flow due to too big a house, too fancy a car, or too busy showing off.
    The Jones’ can take a hike!
    I am way too lazy and too interested in having more free time to care about them and their houses, cars and clothes.
    I am in the ultra-early retirement group(or semi-retirement group) and the way I did is the old fashion way of paying ourselves first and living way below our means.

    I never thought about….. should I pay my RRSP first or…. pay down my mortgage? It was always pay into both them and make a concession somewhere else. Like my 20 year old sports car with two babyseats and a double stroller in the back. Or my 14 year old fishing boat. Who cares what everyone else thinks or says. A bunch of my friends have mini vans with power sliding doors or SUV’s with enough space for a 4X8 sheet of drywall, and all the other toys,cel phones, HDTV, on demand, etc.
    Now there asking me how we can retire so early? It’s because we didn’t give into every want that entered our eyes.

    P.S. I am new to your site, previously on moneysense discussion forum, great job and some very interesting reading, good luck on your journey and maybe we can exchange some ideas.

    123cruncher

  • 123cruncher September 21, 2010, 11:21 pm

    P.S. I am new to your site, previously on moneysense discussion forum, great job and some very interesting reading, good luck on your journey and maybe we can exchange some ideas.

    123cruncher

  • E December 16, 2010, 8:39 am

    I am in my early thirties and I have learned to save money the hard way. By that I mean screwing up earlier in my twenties. Spending to keep up with friends and family. Clothes, going out to eat and spending money on going out on the town. I learned from my mistakes, paid off my debt and am currently saving an emergency fund and a down payment on a house. Is it hard? Yes. Can I live the way I used to? No, I can not if I want to feel secure in my future. I see too many people (many the same people from my 20’s) who even though I did not realize it at the time, are living paycheque to paycheque. Sure they have more things than I do, yes they wear all brand name clothes, as do their babies or children. I know people who have had illness in their family or have lost their jobs. Sometimes bad things happen, and yes it takes a while to get back on your feet. But, when you have friends who are complaining about not having any money and finding things hard as they than show you their new $400 purses and their babies new $50 t-shirts than you can’t really be all that sympathic for them. We all screw up in life at times, things happen that we can’t control, but keeping up with the neighbours is not something that can be sustained in the long term without getting yourself in trouble.

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