Elena Delgado picks up food during a visit to the Daily Bread Food Bank on April 18. Delgado has been using the food bank once a week since the pandemic began.Fred Lum/the Globe and Mail
Saijal Patel is the founder and chief executive officer of Saij Wealth Consulting, a consultancy and education platform dedicated to empowering women’s financial independence and security.
As a financial educator and a business TV host, I’m witnessing firsthand the profound impact that recent economic changes have had on the psyche. There’s a notable shift in conversations – from what used to be on investment strategies and retirement planning, to now finding ways to maximize limited resources and preventing overwhelming debt. There’s a prevailing sense of hopelessness in achieving financial goals.
According to Bank of Nova Scotia’s recent Worry Poll, 73 per cent of those surveyed had high levels of concern over the rising cost of living. Those who worried spent the most time stressed about paying for day-to-day expenses (44 per cent), paying off debt (39 per cent) and saving for emergencies (38 per cent).
Amid the current cost-of-living crisis, traditional personal financial advice is becoming outdated. And as its impact on the financial well-being of Canadians wanes, the role of another factor has grown and is threatening to eclipse all others: politics and government policy. Now, more than ever before, the primary influence on Canadians’ financial well-being is a force largely outside of their control.
Advisers and influencers can no doubt play a crucial role in empowering individuals to take the first step toward financial stability. They can help them prioritize what they can control, such as gaining awareness of their spending habits and acquiring savings extraction skills.
But so many experts, when asked for advice on what people who are financially stressed can do, often advocate budgeting or to follow a certain golden rule (that someone made popular), even when it is nonsensical or impractical. There’s a floor to how much, and where one can cut costs. Everyone needs an adequate living space, decent food on the table and basic necessities, all of which have skyrocketed in expenses.
Take for example, the 50-30-20 rule in budgeting that many personal financial experts tout. It recommends that 50 per cent of your net income go toward living expenses and essentials (needs), 30 per cent toward discretionary spending (wants), and 20 per cent toward savings (emergency funds and future goals).
According to Statistics Canada, the median after-tax income for households was $73,000 in 2020. Based on this, no more than $36,500 or $3,041 per month should be allocated to one’s essentials. Yet the average monthly rent in Canada stands at approximately $2,000 (rising to $3,000 in the Greater Toronto Area), and the average monthly grocery bill is $1,065 for a family of four.
Without even factoring in utilities, clothing, medicine and transportation expenses, it becomes unmistakably clear that adhering to these benchmarks would be unattainable for the majority of Canadians. In fact, the most recent National Bank’s Housing Affordability Report revealed that the average Canadian would need an annual income of $184,524 to purchase a “representative home” (more than two times the median).
Hence, a rule of thumb by Canada Mortgage and Housing Corporation, which suggests housing costs shouldn’t be more than 32 per cent of one’s gross income, is out of touch with reality. Given the stark choice between homelessness and incurring debt or cashing out their retirement savings, any reasonable person would opt for the latter.
The two biggest expenses Canadians face today are housing and taxes – both being under the control of the government. According to independent public policy think-tank Fraser Institute, the average Canadian family spent 43 per cent of its income on taxes in 2021 – more than housing, food and clothing costs combined.
To truly champion people’s financial well-being, we must acknowledge that many of our most significant financial hurdles don’t lie solely within individuals’ control, but rather in the hands of our elected leaders and the policies they shape or neglect.
Financial education is the key if we are to ensure individuals and, collectively, our society is prosperous. For one, it equips individuals with the skills to effectively manage their finances where they can. Secondly, it enables them to discern when politicians merely offer empty rhetoric or false promises – and to instead demand transparency, accountability and evidence-based policies that directly influences their economic needs and financial well-being.
Personal finance is inherently intertwined with politics. Denying this reality or claiming that political discussions are inappropriate means disregarding the profound impact of government policies on the economy, or the financial health and security of individuals.
OTTAWA – The chances of a half-percentage point interest rate cut by the Bank of Canada became more likely Tuesday after Statistics Canada reported the annual inflation rate fell to 1.6 per cent in September.
Economist Tu Nguyen of accounting and consultancy firm RSM Canada said she had expected the inflation rate to remain close to the central bank’s two per cent target, where it was in August, for a few more months.
“This is one of the instances where I’m happy to be wrong,” she said.
Nguyen said while the Bank of Canada has favoured a slow and gradual pace of 25-basis-point cuts each time, the inflation report raises the odds of a 50-basis-point cut.
“It’s clear that we are well behind the curve when it comes to rate cuts,” she said.
The inflation report is the last major piece of economic data before the Bank of Canada’s interest rate decision on Oct. 23 when it will also update its economic forecasts in its monetary policy report.
Statistics Canada said Tuesday lower gasoline prices were the main driver of the drop in the overall inflation rate for September as drivers paid less to fill up than they did last year.
Gasoline prices in September fell 10.7 per cent compared with a year earlier. Excluding gasoline, the annual pace of inflation was 2.2 per cent in September.
Meanwhile, rent prices increased at a slower pace in the month but remained elevated as they rose 8.2 per cent compared with a year ago following a year-over-year gain of 8.9 per cent in August.
Statistics Canada said prices for food purchased from stores rose faster than headline inflation as they increased 2.4 per cent in September, the same rate as in August. Prices for fresh or frozen beef gained 9.2 per cent, while edible fats and oils rose 7.8 per cent and eggs increased five per cent.
Prices for food purchased from restaurants rose 3.5 per cent compared with 3.4 per cent in August.
The Bank of Canada, which has a target of two per cent for overall inflation, has cut its key interest rate three times so far this year to bring it to 4.25 per cent.
Governor Tiff Macklem has said it is reasonable to expect more interest rate cuts are coming, given the progress made on inflation, but the pace and timing of cuts will depend on the central bank’s evaluation of the economic data.
In September, Macklem signalled a willingness to change the pace of cuts, if circumstances warrant.
This report by The Canadian Press was first published Oct. 15, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
OTTAWA – The economy added 47,000 jobs in September, while the unemployment rate declined for the first time since January to 6.5 per cent, Statistics Canada reported on Friday.
The agency says youth and women aged 25 to 54 drove employment gains last month, while full-time employment saw its largest gain since May 2022.
The overall job gains followed four consecutive months of little change, the agency said.
The unemployment rate has been steadily climbing over the past year and a half, hitting 6.6 per cent in August.
Inflation that month was two per cent, the lowest level in more than three years as lower gas prices helped it hit the Bank of Canada’s inflation target.
The central bank has cut its key interest rate three times this year, and is widely expected to keep cutting as inflation has subsided and the broader trend points to a weakening in the labour market.
Despite the job gains in September, the employment rate was lower in the month, reflecting continued growth in Canada’s population.
Statistics Canada said since the employment rate saw its most recent peak at 62.4 per cent in January and February 2023, it’s been following a downward trend as population growth has outpaced employment growth.
On a year-over-year basis, employment was up by 1.5 per cent in September, while the population aged 15 and older in the Labour Force Survey grew 3.6 per cent.
The information, culture and recreation industry saw employment rise 2.6 per cent between August and September, after seven months of little change, Statistics Canada said, with the increase concentrated in Quebec.
The wholesale and retail trade industry saw its first increase since January at 0.8 per cent, while employment in professional, scientific and technical services was up 1.1 per cent.
Average hourly wages among employees rose 4.6 per cent year-over-year to $35.59, a slowdown from the five-per-cent increase in August.
The unemployment rate among Black and South Asian Canadians between 25 and 54 rose year-over-year in September and was significantly higher than the unemployment rate for people who were not racialized and not Indigenous.
Black Canadians in that age group saw their unemployment rate rise to 11 per cent last month while for South Asian Canadians it was 7.3 per cent. For non-racialized, non-Indigenous people, it rose to 4.4 per cent.
This report by The Canadian Press was first published Oct. 11, 2024.
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