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Pattie Lovett-Reid: Pay yourself first to avoid living paycheque to paycheque

ANALYSIS: For seven years now I've been tracking the Canadian Payroll Association's national poll and the findings consistently disturb me.

The numbers don't lie and people are finding it tough to make ends meet. Nearly half of those surveyed are living paycheque to paycheque, fewer are able to save at all and over one-third are overwhelmed by debt. In fact, to illustrate just how strapped some employees are, 24 percent reported they probably could not come up with $2,000 if an emergency arose within the next month.

Let's break it down further:

Saving for retirement: 76 percent say they have put aside less than a quarter of what they will need in retirement and a disturbing 48% of those even closer to retirement (50 and older) are still less than a quarter of the way to their retirement goal. They don't have the luxury of time on their side. How much do you need in retirement? Compounding the fact that Canadians are finding it hard to save they believe they need to save more. Half think they will need $1M.

Clearly, savings levels are low even though there appears to be a noble attempt to do so with 71 percent trying to save yet only 62 percent are successful. Even when they are saving it isn't much, 47 percent are putting just 5 percent away of their pay when an ideal goal would be 10%. The challenge around savings is there simply isn't enough pay left over at the end of the month to tackle it. To make matters worse, 36 percent feel overwhelmed by debt and 12 percent believe they will never be able to pay their debt off.

The stock markets are a challenge and we have an upcoming election with a lot of discussion around the economy and how Canadians are faring financially. Only 33 percent expect the economy to improve over the next year, while 27 percent feel it will worsen. This is not an encouraging situation.

The bottom line? Given this is a poll from the Canadian Payroll Association it assumes you are working and getting a paycheque. They are encouraging you to set up automatic payroll deductions from your paycheque. In other words pay yourself first. If possible, I suggest you pay yourself first right off the top, the gross amount before you even pay your taxes. This suggests your goals matter as much and maybe even a little more than the government’s. Regionally, though, that too could be a challenge given the hot housing markets in both British Columbia and Ontario, where not so coincidentally, there is also the highest percentage of employees living pay cheque to pay cheque, 51% and 52% respectively.

As the Chief Financial Commentator for CTV News, Pattie Lovett-Reid gives viewers an informed opinion of the Canadian financial climate. Follow her on Twitter @PattieCTV
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