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It will affect anyone regardless of income level.
“I’ve already processed the spectrum at both ends,” said Cindy Marques, a certified financial planner at Open Access Ltd.
She has seen clients spending very frugal, but their income still doesn’t cover their basic living costs. She also has clients who have overspending on discretionary projects that are the problem.
“I have people who have this income (of which) their lifestyles start to spread with the income they earn. They don’t really notice this and realize they’re stagnating in any further progress in saving or repaying debts because their lives are getting bigger and bigger than income,” she said.
“It may become rich when you go bankrupt.”
The first step in breaking the Paycheque-to-Paycheque cycle is to determine the root cause, which means articulating all the numbers to measure how much monthly income you have to use and exactly what income you have to use.
The process often makes it clear that the problem and the next steps someone should take, says Doris Asiedu, credit adviser at Credit Canada.
These next steps may involve increasing income by advocating salary increases, changing jobs, making additional changes or finding part-time jobs.
On the other side of the balance sheet, cutting expenses is the usual route.
Tracking where money goes reveals the reality of what you are spending with what you think you are spending on something, Asieedu said. This exercise is less than a recurring bill of the same amount per month, such as rent or the internet, and more about looking at variable costs, such as ride-sharing bookings or takeaway lunches.
Asiedu said some customers might think they spend $20 a week on lunch, but in fact, they spend more.
Max is usually divided into three categories: uncommercially available living expenses (sanctuary, food and transportation), savings and debt repayments, and then discretionary expenses.
She is reluctant to give a specific income ratio for each category because it is different for everyone and will be affected by whether you live in a high or low cost area.
“It’s more like a personal specification and how it feels about your income relative to income,” she said.
For example, if most of your income will go to basic survival, or if you feel like you are just trying to pay your bills, then you may need a major overhaul.
To convince clients to change their ways, Marques likes to show them the opportunities that behavior changes bring.
She said that simply saying shopping is a problem is not arousing much motivation. But if they change their monetary habits (whether it’s a bigger savings account or a better retirement), that’s where the motivation comes from and see what they can have.
“Just say ‘spend less’ there is no way to make any kind of connection, and it doesn’t stir things up from clients and want to do something about it,” she said.
She found that with visual indicators, such as fundraising style thermometers, will fill and get close to the target, helping people see progress and make the target look more personal.
Once an individual is in good shape with his new financial plan, the next trick is to stay on track.
Marques recommends having a muddy fund to absorb the extra expenses that may arise, as spending demand may change throughout the season. Banking apps can sometimes help with this, she says – some can automatically transfer the amount to a separate account, while others can put the balances of each transaction together and put the extra money on hold for you.
Avoiding setbacks or returning to the Paycheque-paycheque cycle means setting measurable, realistic and achievable goals: “You have to give up on something to get something.”
She said that if the numbers you give based on your income are reasonable, it will usually be successful.
“You have to make sure that this is enough to make you want to follow, and then once you’re part of you, it becomes like second nature, because now you know that’s the deal, that’s what I’m going to do, and I’m going to stick with it at the end of the day.”
This report by Canadian media was first released on March 11, 2025.
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Last modified: March 14, 2025
