More than half of Canadians are living paycheque to paycheque as debt continues to overwhelm

The annual BDO Canada Affordability Index, which examines how affordable life is in Canada, reveals that as Canadians struggle to make ends meet and manage growing debt, future financial plans, like retirement, are increasingly put on the backburner. Over half (53%) of Canadians continue to live paycheque to paycheque and debt remains overwhelming for 25%. Over a quarter (27%) of Canadians still don’t have enough for their needs and less than half (42%) have enough money to spend on their wants.

The poll of 2,047 Canadians, conducted by Angus Reid in partnership with BDO Canada Limited, shows that more Canadians (57% compared to 53% in 2018) are carrying the burden of credit card debt and for 31%, debt is increasing due to income constraints. This suggests that many Canadians will be forced to carry debt into their later years. Three-in-10 (31%) Canadians have delayed paying off their credit card balances because they can’t afford it and four-in-10 have a non-mortgage debt load of over $20,000.

Retirement top of mind, yet increasingly on the backburner

The study also reveals that a growing number of Canadians are not well prepared for retirement, even those approaching their retirement years. More Canadians (39% compared to 31% in 2018) admit to having no retirement savings, including one third (32%) of boomers and seniors.

Meanwhile, the retirement outlook for Gen Xers (aged 35-54) is worsening. Among the almost four-in-10 (38%) Gen Xers who have no retirement savings (compared to 33% in 2018), almost half (47%) say they can’t afford to save for retirement, and 19% say they need to pay debts off first.  

A potential reason for Gen Xers’ lack of savings can be attributed to their debt load. Gen Xers continue to be the most indebted generation. Among the 75% of Gen Xers with debt, six-in-10 (59%) carry a credit card balance and over half (55%) have a mortgage (vs 38% of millennials and boomers/seniors). Over two-in-five (44%) indebted Gen Xers have a debt of over $20,000.

Women, lower income individuals, and Gen Xers still struggle the most with affordability

As compared to men, more women in Canada face affordability challenges. Women are more likely to have growing debt due to lack of income (35% of women vs 28% of men), and are more likely to struggle to save for a major purchase (75% women vs 70% men), afford grocery bills (33% women vs 24% men) and take a vacation (70% women vs 63% men).

The Affordability Index also shows that women’s affordability challenges have increased compared to last year. A growing number of women are living paycheque to paycheque (59% vs 54% in 2018) and more admit to having no retirement savings (43% vs 35% in 2018).

Compared to average Canadians, women along with lower income individuals (income less than $50,000), millennials and Gen Xers are also particularly vulnerable to affordability and debt challenges, rating their financial readiness as “poor” or “terrible” for these significant life events:

  • Unexpected costs (50% total; 56% of women, 55% Gen Xers, 65% lower income)
  • Retirement (56% total; 62% women, 71% millennials, 62% Gen Xers, 71% lower income)
  • Purchasing a home (57% total; 60% women, 67% millennials, 76% lower income)
  • Having children (54% total; 62% millennials, 76% low income)

Recent years have been challenging for Canadians. As reduced affordability and debt obligations continue to weigh, the BDO Canada Affordability Index points to more challenges ahead. In order to change course, Canadians should be actively seeking ways to improve how they balance their debt obligations and future financial goals.