HBO’s Bill Maher was on-point in the New Rules segment of this past weekend’s season premiere. “To me,” he said, “the real lesson of this government shutdown is that we found out that federal workers – quintessential middle-class jobs – can’t afford to miss one paycheque.”
No doubt that line resonated with more than a few Canadians. New data from the MNP Consumer Debt Index, a quarterly study conducted by Ipsos, shows that almost half (46%) of adult Canadians are $200 or less from insolvency at the end of the month. Almost a third (31%) say they can’t pay their bills.
Both results are up significantly over the September report. At that time, 40% said they were that close to going broke at month-end and 24% reported having difficulties paying their bills.
“Many have so little wiggle room that any increase in living costs or interest payments can tip them over the edge,” says MNP Ltd.’s president Grant Bazian. “For most, the cause of trouble appears to be long-term accumulated debt. … They just can’t carry it any longer at higher interest rates.”
Much has been written about the value of an emergency fund. Recommendations vary, but it’s not uncommon to hear professionals suggest three to six months in savings for a rainy day. What’s most important is that you make decisions based on your own ability to save and your current financial situation.
If you might lose your job this year, factor that in. How much severance are you likely to receive? The standard benchmark is one month of pay for every year you’ve been with the company, but you can’t count on that.
How much money do you need to get through the month and how long do you think it will take you to find a new job. It’s not uncommon for middle-managers and executives to be out of work for six months, a year or even more.
If consumer debt is piling up, pay that down as quickly as you can. Identify the rate of interest you’re being charged by each of your lenders, and pay down the highest interest rate debt first.