Many Canadians aren’t taking the right actions to improve their financial situations. That includes making and following a budget and working with a financial advisor.
The 2019 Sun Life Barometer takes the temperature of Canadians regarding their finances and health. Some of the survey’s results are startling. But there are supports in place to empower Canadians to stay on top of their finances. Taking action can help reduce stress.
How stressed out is the average Canadian?
Working Canadians are more stressed out – retirees, less so. Today, 77% of working Canadians admit to experiencing uncomfortable levels of stress. The sources of stress are from:
- Personal/household finances: 40% in 2019 (up from 35% in 2017)
- Trying to maintain a budget: 27% in 2019 (up from 24% in 2017)
- Saving enough for retirement: 25% in 2019 (up from 20% in 2017)
That compares to 60% of retired Canadians who feel stressed out. Stress generators for this group include:
- Personal/household finances (19%)
- Unexpected expenses (16%)
Serious health events continue to affect Canadians’ finances. A serious accident or health issue is more likely to create financial hardship for working Canadians than retired Canadians:
- Employed: 62% say health events affect their finances (up from 60% in 2017)
- Retired: 40% (up from 37% in 2017)
Some of the negative effects are reduced savings and digging into RRSPs. Others are increased use of personal lines of credit and credit cards, and borrowing money from friends.
- How to save for a debt-free retirement
- 6 tips for reducing debt
- Money mindfulness: How to reduce financial stress and reach your goals
How to reduce financial stress
- Pay yourself first. Save some money – even small amounts – off the top of your paycheque. That way, you’re taking care of your savings and setting aside money for your future. For example, set up automatic withdrawals from your pay that go directly into an RRSP.
- Reduce your spending. It might be hard at first, but live within your means. Only buy things on credit if you can clear the balance each month. Pay off your credit card debt first. Make payments every month.
- Pay your mortgage off faster. Use these three strategies to avoid carrying mortgage debt into retirement:
- Pay more than the minimum. Let’s say your mortgage is $1,500 a month, but you can comfortably afford to spend another $200. Raising your monthly payment to $1,700 will reduce the amount of interest you pay. You could also save years of mortgage payments.
- Make a large, one-time cash payment every year. You could use your tax refund, annual bonus or any windfall. Most mortgages let you make additional payments per year, usually between 10% and 25%. Over the long term, these lump-sum payments can reduce the amount of your mortgage payments and interest.
- Divide your monthly mortgage payment in half. Make that payment every two weeks (bi-weekly). With 26 half-payments in a year, you’ve generated one full additional monthly payment. This strategy works particularly well if you get paid every two weeks. You might even want to try weekly.
- Start now. Begin saving and investing as early as possible to set yourself up for success. A good starting point is to consider working with an advisor.
- Don't leave money on the table. Your employer may offer a pension plan that matches your contributions. Even if it’s a 50% match, try to contribute as much as you can.
- Invest wisely. You may not have access to a defined contribution plan. Instead, you could save for retirement with an RRSP. A TFSA also works for retirement savings.
- Have a plan and stick to it. It's never too late to build a financial strategy that will get you to where you want to be. Start by setting achievable goals.