It can be a common misconception: living paycheque to paycheque only happens to those that earn a low income. But that’s not always the case.
It can affect anyone, no matter their income level.
“I've dealt with both ends of the spectrum,” said Cindy Marques, a certified financial planner at Open Access Ltd.
She’s seen situations where a client is very frugal with their spending but their income still doesn’t cover their basic cost of living. She’s also had clients where overspending on discretionary items is the problem.
“I've dealt with this for very high-income earners (where) their lifestyle starts creeping up with that income they're earning. They're not really noticing that and realizing they're stagnating on any further progress in terms of savings or making debt repayments because they're just living larger and larger compared to a larger income,” she said.
“It’s possible to be rich while broke.”
The first step to breaking the paycheque-to-paycheque cycle is identifying the root cause, which means laying bare all the numbers to gauge how much monthly income you have to work with and where exactly the money is going.
This process usually makes obvious what the issue is and what next steps someone should take, said Doris Asiedu, a credit counsellor with Credit Canada.
Those next steps could involve increasing income by advocating for a raise, changing jobs, taking on extra shifts or finding part-time work.
On the other side of the balance sheet, cutting expenses is the usual route.
Tracking where the money is going uncovers the reality of what you’re spending on versus what you think you’re spending on certain items, Asiedu said. This exercise is less about recurring bills such as rent or the internet, where it’s the same amount every month, and more about looking at variable costs such as ride-share bookings or takeout lunches.
Asiedu said some clients may think they're spending $20 on lunches a week but in reality, they're spending a lot more.
Marques generally lumps spending into three categories: non-negotiable living expenses (shelter, food and transportation), savings and debt repayment, and then, discretionary spending.
She’s reluctant to give a specific percentage of income that should be going to each category because it’s different for everyone and is affected by whether you live in a high-cost or lower-cost region.
“It's more of a personal gauge and a gut check on how that makes you feel relative to what you're earning,” she said.
As an example, if the majority of your income is going to basic survival or if you feel you’re just working to pay bills, then something likely needs to be overhauled.
To help convince clients to change their ways, Marques likes to show them the opportunities that come with a change in behaviour.
Simply saying that shopping, for example, is the problem doesn’t create a great deal of motivation, she said. But seeing what they could have instead if they revamped their money habits — whether it’s a bigger savings account or a nicer retirement — that’s where the motivation comes from.
“Just saying ‘spend less’ on its own does not make any kind of connection or stir something from the client to want to do something about that,” she said.
She finds having visual indicators like fundraising-style thermometers that fill up and inch closer toward a goal help people see the progress and make their targets seem more personal.
Once the individual is in a good groove with their new financial plan, the next trick is to remain on track.
Marques suggests having a slush fund to absorb extra costs that can arise, since spending needs can change by the season. She says banking apps can sometimes help with this — some can automatically transfer an amount into a separate account, while others can round up the balance of each transaction and set the extra money aside for you.
Asiedu said avoiding setbacks or falling back into the paycheque-to-paycheque cycle means setting goals that are measurable, realistic and attainable: “You have to give up something to get something.”
If the numbers you've given yourself, based on your income, are reasonable, it will often be a success, she said.
“You have to ensure this is important enough for you to want to follow through and then once it becomes something that is a part of you...it becomes like second nature because now you know this is the deal, this is what I'm going to do and I'm going to stick to it at the end of the day,” Asiedu said.
This report by The Canadian Press was first published March 11, 2025.
Michelle Zadikian, The Canadian Press
