A new survey found that more than a quarter of Canadians feel they will not be able to weather a recession financially.
Twenty percent of those who responded to a Yahoo poll, conducted by Maru Public Opinionsay they won’t be able to weather an economic downturn for more than a month, while eight percent say their financial situation is already dire and would be desperate in the middle of a recession.
Thirty-eight percent reported that they could probably weather a recession for six months, but not much longer.
About a third of those surveyed (34 percent) believe they would emerge unscathed from a recession. These respondents were more likely to be 55 years of age or older and have an income of at least $100,000, according to the results.
“Surviving a recession is like staying afloat and about one in three Canadians have a lifeline to do it for a year or more,” said John Wright, executive vice president of Maru Public Opinion. Yahoo Finance Canada.
“Most of them are already out of air and will succumb in a month or less if the waves get rougher, while the rest think they can hold out for six months or so if necessary.”
Several Bay Street economists are recession forecastdefined by a contraction that lasts at least six months, is on track for the first half of next year as high inflation and rising lending rates hit consumer spending, the housing sector and the labor market.
Arguably, there are already signs of more difficult times ahead, as numerous companies, especially in the North American tech sector, have announced mass layoffs.
In anticipation of a recession, about three-quarters of those surveyed (74 percent) say they have cut spending in the past month to cope with the higher cost of living. These respondents tend to be younger and have a lower income.
The survey also found that 27 percent used credit cards to make ends meet, while 21 percent had cashed in on some investments to pay off debt or bolster their household balances.
How to prepare your finances for a recession
There are three basic rules to keep in mind when trying to prepare your finances for a potential recession, according to Kelley Keehn, personal finance educator and best-selling author.
Cash is king, cut where you can and generate more income, she says.
“Many Canadians have not recovered financially from COVID and getting their emergency savings back is key. Not just their savings, but also the cash on hand,” he said.
To help find extra cash, she suggests aiming to cut unnecessary subscriptions (which may include streaming services that aren’t used much, online cloud storage, or meal delivery kits), shop for better deals on cell phone plans, and Internet, home and car. insurance packages and cut through the expensive holiday season by buying refurbished or pre-owned items.
Keehn also suggests investing in your career, since that’s a person’s “million dollar ticket.”
“Even if you only earned an average salary, you’ll make millions of dollars over your working life. Are you investing in your career? Increasing your skills and knowledge? Should you invest in a resume service, a career advisor, or spend more time on the LinkedIn network? If they’re thinking you need to go back to school, you can use your RRSP to fund your education and skill acquisition,” he said.
However, there will undoubtedly be those who are particularly hard hit financially by a recession. The survey found that 27 percent of respondents used credit cards to make ends meet.
Since credit cards charge approximately 20 percent or more in interest, those people must first exhaust their other options.
“Many people will have balances on their credit card with super high interest rates and won’t want to use their lowest interest line of credit to pay them off (saying they’re afraid they’ll screw up their card again if you don’t have these people may need to talk with a nonprofit credit counselor to create a budget and understand how different debts work,” Keehn said.
Another option would be to call the bank to get a lower interest product because “everyone has one,” he adds.
For example, someone making only the minimum payment on a credit card with a balance of $10,000 and an interest rate of 24 percent could save more than $4,000 by switching to a card with an interest rate of 12 percent.
“Sure, there are no bells and whistles with the lowest rate card, but you don’t need benefits if you’re trying to make that pay,” he said.
The survey polled 1,528 Canadian adults who are panelists for Maru Voice Canada between October 28 and 30. The poll has an estimated margin of error of +/- 2.5 percent, 19 times out of 20.
Michelle Zadikian is a Senior Reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.