Do you need a Financial Health checkup?

How are Canadians doing financially?

 

A recent survey by the Canadian Payroll Association indicated that more than 51% of employed Canadians would find themselves in difficulty if their paycheque were delayed by only one week.  In other words, more people are living paycheque to paycheque than ever before.  

Have you been listening to the advertisements on the radio lately?  Debt solution companies seem to be multiplying at an alarming rate.  Why is this?  Times have changed and our thinking hasn’t quite caught up.

Most of our parents and grandparents lived in the same home and had the same jobs all of their lives; today, most adults will change jobs at least 7 times in their career and move many times as well.  Pensions used to be a standard benefit with long-term employment, now they are virtually a thing of the past.  So how is one to survive in this tumultuous economy?  Simple – change your way of thinking.  Changing times call for changing attitudes.

Today, the average family earns on $500 more per year than they did in 1985, yet the price of vehicles, homes, groceries and other necessities has skyrocketed.  Savings for the average family are almost non-existent and most will have to try to retire with only the Canada Pension Plan to support them.  

Institutions and the retail sector have created the easy payment plan, and unfortunately, most Canadians have fallen for this simplicity; you can own just about anything for just one small monthly payment!  If you were to take a hard look at what you are really paying for that item though, you likely wouldn’t buy it. A $1,000 television can be purchased for only $39 per month for 36 months; at 28.8% per annum though, you end up paying a whopping $1,504 for that TV.  Had you merely saved $20 per week for a year, you would have been able to pay cash for that TV and saved $500.

 

What about RRSP's?

 

 

RRSP’s are also another problem for Canadians; sure, they are a great vehicle for saving for retirement, however, in many instances investing in RRSP’s is a bad idea.  If you have significant credit card debt (most cards carry interest in excess of 20% per year) and you are contributing to RRSP’s (earning 5% per annum) you are losing a great deal of money!  

 

Have you considered your disposable income?

 

Another significant area of change has to come from how we manage our disposable income; are you one of those commuters that stop at the corner for a coffee on the way to work each day?  That $5 per day adds up to about $1,250 per year.   

What about going out for lunch?  At $15 per meal, twice per week adds up to more than $1,500 per year.

 

Home Refinancing

 

How about re-financing your home to pay down high interest credit card debt?  Sure it looks like a great idea at face-value, but if you do not have the discipline to throw away those credit cards, you will certainly end up in the same position a few years down the road, and in addition to having the credit card debt back, you will have a higher mortgage balance too.

Re-financing your home is not always a bad idea though.  Interest rates are still very low; if you can save 1% on your interest rate by refinancing, you will generally save a lot more than it costs you (by way of penalties) to break your current mortgage.

It is time to change our way of thinking or the average Canadian Family is in for some serious financial trouble. Are you ready for a check-up?

Date published Feb 28, 2024 | Last updated Feb 28, 2024

This article contains general information only and should not be relied upon for accuracy or completeness. You should seek appropriate tax or accounting advice from a qualified accountant before you take, or refrain from taking, any steps based upon this article. This article should not be construed as tax, accounting or other professional advice and QX Franchise Limited (Master Franchisee for TaxAssist in Canada) disclaims liability for any loss, howsoever caused, arising directly or indirectly from reliance on the information in this article.