We are now living in a gig economy as a result of wage stagnation and increased globalization. While previous generations have usually worked one full-time job, often with a pension plan, today more and more Canadians are working for several different companies as independent contractors.
While this type of work does offer much-needed flexibility for some, it also creates financial instability for millions of Canadians. A recent survey of all working Canadians by the Canadian Payroll Association suggests that 43 percent of workers were living paycheque to paycheque prior to COVID-19. That statistic does not take into account COVID-19’s impact on the workforce.
Regardless of how we got here, the fact is that income volatility is a huge problem for almost half the country. Not knowing when or where your next paycheque is coming from can create a multitude of issues that can have lasting effects on both your health and your finances.
The Effects of Income Volatility?
A survey conducted by the Canadian Payroll Association in 2019 found that 40 percent of the Canadian population are so stressed about finances that it affects their performance at work.
The survey also found that 40 percent of Canadians said they were overwhelmed by the amount of debt they owe. And a whopping 75 percent of Canadians are saving less than 25 percent of their retirement goals.
Knowing that the problem exists is one thing, but if we want to understand the gravity of the situation, we need to know the implications of living paycheque to paycheque. Below are a few of the most substantial effects.
Financial Stress Can lead to Poor Health Outcomes
Living paycheque to paycheque increases financial instability and exacerbates stress, which can impact the cardiovascular system, degrade your mental health and other bodily functions. Worse, it can become a vicious cycle: You become stressed, so your health deteriorates, which causes you more stress, etc.
Conditions like depression and anxiety can go into overdrive when you experience financial instability, meaning that you have to work harder just to make it through each day.
How to Avoid Financial Stress in the Gig Economy
Make a Plan – This plan can be for six months, one year, or 10 years – whatever you want. The plan should include budgets, saving potential and job improvement. If you’re making incremental steps forward, that should help you relieve some anxiety about the future.
Save Anything – Whether it is $5 or $500, every dollar counts. You may not think it’s much, but it will add up overtime.
Avoid Accruing More Debt – Although this plan is easier said than done, it is sometimes better to pay less on your debt and save more money so that you don’t borrow more when something unexpected happens.
Invest in your Future – Start investing. Nowadays, there are many different options to consider when you think about investing your money. Whether you are a new or a seasoned investor, it is a good idea to make your money work for you.
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The foundation of any financial plan is recognizing that every person, individual or business owner is unique. Stan’s goal is to provide personalized solutions to each of his clients that reflect their needs, their situation and budget, and review these periodically to ensure their plans continue to measure up to their stated goals and objectives for the future.