Toronto: As holiday bills come due, resolutions to ‘save more’ are forgotten and Blue Monday — the most depressing day of the year — arrives.
Research shows that Blue Monday is much more than a marketing gimmick, says Peter Tzanetakis, President of the Canadian Payroll Association. “Whether it’s in the spirit of the season or not, when we spend beyond our means, financial stress follows.”
New research from Canadian Payroll Association and the Western-Laurier Financial Data Analytics Laboratory (The Western-Laurier Lab) reveals that, for working Canadians, financial wellness is a result of more than the size of their pay cheque.
Despite what may seem obvious or logical, how much one earns does not necessarily correlate to financial wellness. The study, published as Learning about Financial Well-Being in Canada, found that 20 per cent of those with a household income of at least $150,000 were still financially stressed. By comparison, roughly 50 per cent of those with household incomes below $50,000 were found to be financially stressed.
Similarly, preconceptions about millennials struggling to make their way in the world and feeling financial stress as a consequence proved to be inaccurate. Fifty per cent of those who are financially stressed are over the age of 40 — 25 per cent of whom have reached the half-century mark.
What the research does in fact reveal is that, more than age or income, it’s actually the ability of working Canadians to deal with brief financial setbacks— like missing a pay cheque — and their savings habits that most affect financial stress.
The disconnect between income and financial stress was uncovered by the Western-Laurier Lab using 11-years of Canadian Payroll Association National Payroll Week Survey data — totaling more than 35,000 unique responses.
What the research found is that working Canadians belong to one of three groups:
- Financially stressed
- Financially coping
- Financially comfortable
Approximately one-third of all respondents fall into each cluster.
Those in the financially comfortable cluster are characterized by their shared ability to manage missing a pay cheque, their tendency to save money, and prioritization of work-life balance over salary.
Working Canadians who are financially stressed, on the other hand, tend to exhibit a combination of the following characteristics:
- Find it difficult to manage a brief financial setback;
- Save little to none of their income;
- Place greater emphasis on salary;
- Spend as much or more than their net pay;
- Are the most heavily indebted – with the highest likelihood to have car loans, student loans, outstanding balances on their line of credit, and credit card debt; and
- Report that their debt load increased over the previous year.
Working Canadians who are financially coping fall directly between the binary opposed groups described above.