Canadians are adapting their way of life as financial commitments increase even before their paychecks hit their bank accounts, the MNP Consumer Debt Index showed Monday.
Persistent cost pressures mean that for many Canadians, much of their income is liquidated before they receive a paycheck, according to a poll conducted by Ipsos for bankruptcy firm MNP Ltd.
Three in five Canadians (61 per cent) say at least half of their income is already put toward bills, debt payments and regular expenses before the funds arrive, while about a third (32 per cent) say most of their paycheck is paid off before it arrives.
However, for one in six (16 per cent) Canadians, the situation is worse as they say their entire salary has been paid or their expenses exceed future income payments.
These financial pressures are driving “lifestyle shrinkage,” said Grant Bazian, president of MNP Ltd.
“Lifestyle downsizing is people cutting back not on their necessities, but on luxury items, their wish lists, their events, their travel, their vacations, or their children’s activities,” he said.
Nearly two in five (37 per cent) said financial stress was hindering their financial progress, while more than one in three (35 per cent) cut back on family spending and personal enrichment, such as personal care, clothing and children’s activities.
Travel plans have also been impacted, with more than half (57 percent) saying they are reducing the number of trips.
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Four in 10 (40 percent) have also reduced attending events such as concerts, festivals, sports, films or other events, while more than half (56 percent) have reduced eating out.
The “shrinking lifestyle” also had an impact on public relations, as 28 percent reduced the number of gifts, weddings, birthdays or other celebrations, and 21 percent hosted fewer guests for family and friends.
A setback in your lifestyle doesn’t have to mean it’s all or nothing, says Stacy Yanchuk Oleksy, CEO of Alberta-based non-profit credit counseling agency Money Mentors.
“Instead of going to Europe, maybe you go on holiday to Canada. Or instead of going on vacation to Canada, you choose a staycation. You can see there are decisions that still allow consumers to reduce these costs,” he said.
It’s also a good idea to consider automatic payments set up on your credit cards for things like streaming services and consider which services you’re paying for but not using, he adds.
“They (streaming companies) are betting that consumers are lazy. If I subscribe, I myself have to go and physically unsubscribe. It’s a hassle. It takes time,” said Oleksy.
The MNP Consumer Debt Index takes into account all types of credit-related consumer debt, from credit cards and lines of credit to payday loans and ‘Buy Now Pay Later’ services.
On Monday, the consumer debt index for the last financial quarter rose from 87 points to 91 points, indicating that Canada’s debt situation has improved slightly.
“People generally feel a little better about their financial situation, but there is still a worry lurking in the background that payroll is being made,” Bazian said.
Use of Lay Later’s Buy Now service has more than doubled over the past year (a 109 per cent increase) as more Canadians turn to flexible payment fees to help manage grocery costs, according to data from Canadian fintech company KOHO.
“These findings make clear that grocery prices are rising faster than Canadians can adapt. People are changing where they shop, how often they go, and how often they pay, but spending continues to rise,” said Faye Lucas, head of consumer confidence at KOHO.
While seeing Canadians cutting back on expensive lifestyle choices may seem alarming, it also shows that Canadians are getting smarter about how they spend their money so as not to compromise on needs, Bazian said.
“They’re being proactive about this. You can interpret this as a very positive thing that Canadians are going to get. They understand their financial situation and they’re making changes to accommodate that,” he added.
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