Worried about your cashflow? You’re not alone…

Your Money:  Living Hand to Mouth

Sarah Boesveld

Monday, Sep. 14, 2009 05:41PM EDT

Dave Speiran has grown used to having only $10 in his pocket on the eve of every paycheque.

The Toronto recruiter took a massive pay cut in March after business dried up. With it came cuts to his lifestyle. The 34-year-old renegotiated payments on his weekend trailer north of the city. He switched to a more affordable car insurance provider. He now walks to the local convenience store to save a few bucks on gas.

Keeping one eye on his bank account in anticipation of payday has become an exhausting routine for Mr. Speiran, who supports his 12-year-old son Christopher and wife Joanne. “It’s been insane,” he says. “We’re used to being able to put away some money here and there and coming down to your last $10 and you’ve got to manage to get milk, bread and still maintain your transportation costs is pretty difficult.”

Along with Mr. Speiran, more than half of Canadians are now living paycheque to paycheque, a new national survey has found. While the recession has thrust thousands onto wobbly financial ground, this is just the way many people live, experts say.

The Canadian Payroll Association’s survey, released yesterday, revealed 59 per cent of Canadians would really feel the squeeze if their pay was delayed by only a week. It also found 50 per cent of Canadian employees can’t save more than 5 per cent of their pay for retirement, though the recommendation is 10 per cent.

While it’s common sense to try to squirrel away cash for retirement and emergencies, many of us are unwilling to give up our lattes, our big-screen TVs and our dinners out, marketing professor Dilip Soman says.

“A lot of people will tell you they want to save and they’re trying hard but they can’t,” says Prof. Soman, who studies behaviour economics at the University of Toronto’s Rotman School of Management.

“I think the big issue is they adapt very quickly to a lifestyle,” he says, stressing that there are always ways to save a few bucks. “People are creatures of habit and once you’re used to whatever that might be – getting a cappuccino every day in the morning – then not having that is a loss.”

Young people have the most difficulty saving money, he says. They start earning at age 18 or 19, a time when retirement seems a long way off. After, or even before, paying student debts, they get used to spending every penny they make.

The mass movement to direct payroll deposit has also made it hard for spendthrift Canadians to become savers, Prof. Soman says. People are more likely to treat money automatically transferred to their account as spending money than they would a cheque they have to physically cash.

“It’s hard to keep track of how much you’ve been spending,” he says. “Before you know it, it’s gone and you’re back to square one waiting for the next paycheque.” He suggests setting up automatic payment transfers to your savings account after each payroll deposit.

Even in a recession, the “keeping up with the Joneses” ideal persists, says Ken Hardy, professor emeritus of marketing at the University of Western Ontario’s Richard Ivey School of Business.

“We don’t give up lifestyle easily,” he says. “There’s so much social pressure.”

Many don’t set aside a nest egg or an emergency fund until they realize they need it, says Patricia Lovett-Reid, senior vice-president at TD Waterhouse. A layoff can be quite the eye-opener to someone living paycheque to paycheque.

“There can be a bit of denial in terms of what’s going on,” she says. “People say that until it happens to you it’s somebody else’s problem.”

Even those hit by the recession say there are places they could trim.

Felicia Dewar, a 34-year-old marketing manager in Edmonton, has lived paycheque to paycheque since landing a job after a nine-month hunt. The paycheque coasting lifestyle was great in her early 20s, but since starting a family, it’s certainly not as easy. Now she has credit to deal with and often taps into her overdraft protection. Ms. Dewar allows that she could save a little by eating out less than 20 times a month, but it would throw a wrench into her baby’s bedtime schedule since dinner would always be served late.

For Toronto’s Mr. Speiran, there’s a plus side to living paycheque to paycheque. It’s a good chance for his son to learn the value of a dollar and he’s found ways to have fun without spending a lot of cash.

“I’ve still got a smile on my face and I still have a job, which is more than a lot of people [can say].”

By the numbers

59: Percentage of Canadians who said they’d be in financial trouble if their paycheque was delayed by even one week. By age group, 45 per cent of people between age 18-34 say it would be tough to get by. By household, 72 per cent of single parents say the delay would have a serious impact.

33 Percentage of respondents who said they’ve been trying to save money during this recession, while 42 per cent said they haven’t been saving at all.

70 Percentage who said their first priority would be to pay off all existing personal debt if they won a $1-million lottery. Next pressing was saving for retirement, with 35 per cent saying they would contribute as much as they could.

Twenty-eight hundred employees from across Canada participated in the survey, which is considered consistent with a margin of error of 2.3 per cent, 19 times out of 20.

Source: The Canadian Payroll Association’s 2009 National Payroll Week Employee Survey

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