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Your parents are so proud. You’ve finally hit that six-figure income sum after so much hard work, something they may only ever dreamed about. Or if they did, they knew they had made it.
Yet while your parents might be filled with glee, your bank account may not be filled with joy.
That $100,000 salary may have been more than enough for Baby Boomers to live a rich life, but today it can hardly be enough to get by. An American study by PYMNTS recently found that 70 per cent of millennials were still living pay cheque to pay cheque.
Canadian youth aren’t fairing much better.
A similar study by Deloitte found that of Gen Zs and millennials, 46 per cent and 47 per cent respectively also lived pay cheque to pay cheque. Further, a BDO Debt Solutions survey suggests that 53 per cent of Canadians overall are living cheque to cheque.
Here’s why younger Canadians are feeling the squeeze, despite high salaries — and what you can do to claw back some of your buying power without having to negotiate for a raise.
Far from their parents
While Canadian Gen Z and millennials may be making more than their parents on paper, Baby Boomers were able to live a cheap and stable lifestyle. And they had enough left over for savings.
In 1981, Canadian families had a medium income of $78,200 in today’s dollars according to Statistics Canada. The average Canadian family brought in an average of $106,300 as of 2020.
When it comes to individuals not in an economic family, they earned an average $38,200 a year in 1981. In 2020, they earned just $47,500 on average.
While millennials and Gen Z are getting paid more than their parents (on a constant currency basis), the higher cost of living means their salaries aren’t going as far. And they are feeling the pressure.
Millennials and Gen Z Canadians may be the most educated of generations, but they need to be if they hope to find a job. Student debt is another big bill burdening young adults today, but higher education is still the ticket to entry for a high-paying job in most industries in Canada.
Once student debt is paid off, there’s the rising cost of housing across the country, and then child care to consider.
This can all sound incredibly dire, of course. High inflation, rising interest rates and every other aspect of Canadian life keep climbing. Amid these challenges, here’s how you can make that salary work for you.
Make your budget stick
With prices rising, even if you’ve had a budget for years it’s likely that it needs an overhaul. With that in mind, a great place to start is to look at the past three months and see how your spending has changed.
In all likelihood, there are still items you can get rid of that continue to be used on your budget. Go through and look for our fixed costs such as mortgage or rent, insurance, food and utilities. Then compare the cost of those essentials to what you are actually spending. If there are expenses that need to be cut, try categorizing them into your must-haves and nice-to-haves.
Just remember, paying down debt shouldn’t be pushed aside. These should also be treated like bill payments. So it might be that where your budget had room before to spend on yourself, it may not now. Therefore, consider a spending freeze until your budget gets under control.
If you are having a hard time getting out of debt, you might consider consolidating your debts. It can feel more manageable to pay off one bill per month, instead of keeping up with multiple debts and lenders.
Save while having fun
Just because you’re cutting back doesn’t mean you need to cut completely. Plus, life doesn’t stop just because you decide to stop spending. There might be a wedding or anniversary coming up, and these should be celebrated! Just perhaps in a different way.
There are many apps out there that offer ways to save money. Swagbucks is one of the simplest ones. It gives you cashback when shopping online, with an opportunity to earn more by doing things you regularly do online anyways, like watching videos.
Take the time to shop around before making a big purchase and you’ll often find you can find a way better deal.
Use your credit card
Hand-in-hand with all this is your credit card. Whether it’s buying items for fun, or paying down bills, you should be using this no matter what. You can collect rewards and use them to pay down your credit card, buy products, or even travel.
But there is one thing you might be paying for that you simply don’t need to, and that’s credit card fees. Credit card companies constantly have offers for new cards. If you find a new card, many offer $0 in fees for the first year, plus perhaps a bonus of credit card rewards. You can then use those rewards on top of the ones you’ve already earned.
Just remember, paying off your credit card down to zero should always be your priority. And opening and closing credit accounts often can impact your credit score, so you’ll want to be strategic about this and check your score often.
This article was created by Wise Publishing. Wise is devoted to providing information that helps readers navigate the complex landscape of personal finance. Wise only partners with brands it trusts and believes may be helpful to the reader. This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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