Canadians are adjusting how they live as financial commitments are catching up even before their paycheque arrives in their bank account, the MNP Consumer Debt Index shows on Monday.
Sustained cost pressures mean that for many Canadians, a substantial chunk of their income is already spoken for before they receive their paycheque, polling conducted by Ipsos for insolvency firm MNP Ltd. shows.
Three in five Canadians (61 per cent) say at least half of their income is already committed to bills, debt payments, and regular expenses before it arrives, while around one-third (32 per cent) say most of their paycheque is already committed before it arrives.
For one in six (16 per cent) Canadians, however, the situation is more dire as they say all of their paycheque is spoken for or their expenses exceed their upcoming income payment.
These financial pressures are driving “lifestyle shrinkflation,” said Grant Bazian, president of MNP Ltd.
“Lifestyle shrinkflation is people just cutting back on not their necessities, but their luxury items, their wish list, their events, their travel, their holidays or their kids’ activities,” he said.
Almost two in five (37 per cent) say financial pressures are hindering their financial progress, while more than one in three (35 per cent) are cutting back on family and personal enrichment expenses, such as personal care, clothing and children’s activities.
Travel plans are also taking a hit with more than half (57 per cent) saying they are cutting back on travel.
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Four in 10 (40 per cent) are also scaling back on attending events like concerts, festivals, sports, movies or other events while more than half (56 per cent) are cutting back on dining out.
The “lifestyle shrinkflation” is also affecting people’s relationships, as 28 per cent are scaling back on gifts, weddings, birthdays or other celebrations and 21 per cent are hosting family and friends a lot less.
A slide in your lifestyle doesn’t have to be all or nothing, said Stacy Yanchuk Oleksy, CEO of Alberta-based not-for-profit credit counselling agency Money Mentors.
“Instead of heading to Europe, maybe you do a Canadian vacation. Or instead of doing a Canadian vacation, you do a staycation. You can see there are decisions that can keep allowing the consumer to shrink that cost,” she said.
It can also be a good idea to take stock of automatic payments set up on your credit card for things like streaming services and consider which services you are paying for but not using, she added.
“They (streaming companies) bet on consumers being lazy. If I’m subscribing, I have to physically go and unsubscribe myself. That’s a hassle. It takes time,” Oleksy said.
The MNP Consumer Debt Index considers all kinds of credit-related consumer debt, from credit cards and lines of credit to payday loans and ‘Buy Now Pay Later’ services.
On Monday, the consumer debt index for the last financial quarter rose from 87 points to 91 points, which indicates that Canadians’ debt situation improved slightly.
“People generally are feeling a little better about their financial situation, but there’s still this lurking concern in the background that the paycheques are spoken for already,” Bazian said.
The use of Buy Now Lay Later services has more than doubled over the past year (109 per cent increase) as more Canadians turned to flexible payment costs to help manage grocery costs, data from Canadian fintech firm KOHO shows.
“The findings make it clear that grocery costs are rising faster than Canadians can adapt. People are changing where they shop, how often they go, and how often they pay and yet the spending keeps climbing,” said Faye Lucas, head of consumer trust at KOHO.
While seeing Canadians cut back on expensive lifestyle choices may seem concerning, it also indicates that Canadians are being smarter with their money so as to not compromise on necessities, Bazian said.
“They’re being proactive about it. You can actually interpret this as to be very positive that Canadians are getting it. They understand their financial situation and they’re making changes to accommodate for it,” he added.
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