Does a bigger income mean less financial stress?

Financial wellness is a result of more than the size of your client’s paycheque.

“High income does not guarantee financial comfort,” said a research paper released Monday from the Canadian Payroll Association and the Western-Laurier Financial Data Analytics Laboratory.

In fact, it found that 20% of working Canadians with a household income of at least $150,000 are financially stressed. (Based on an analysis of responses, survey respondents were categorized as financially stressed, financially comfortable or financially coping.)

And, while the research also found that 50% of those who are financially stressed are over age 40, neither income nor age — nor geography — were key characteristics affecting financial stress.

What most affected financial stress was respondents’ ability to deal with brief financial setbacks — like missing a paycheque — and their savings habits.

For example, those who were financially stressed found it difficult to manage a brief financial setback, had saved little to no money and had an increasing debt load.

“[W]hen we spend beyond our means, financial stress follows,” said Peter Tzanetakis, president of the Canadian Payroll Association, in a release.

Those who were financially stressed also placed greater emphasis on salary than on work-life balance.

In contrast, those who were financially comfortable could manage a missed paycheque, had saved money and prioritized work-life balance over salary.

Those categorized as “financially coping” fell between these two groups.

The research paper said that a “surprising” finding was that respondents’ willingness to seek paid financial advice didn’t result in any variation among the three categories. Other research has found that such a willingness is an important component of financial well-being, the paper said.

About the research: The Western-Laurier Lab used 11 years of Canadian Payroll Association National Payroll Week Survey data, totalling more than 35,000 responses. The data were analyzed using an algorithm-based methodology, known as cluster analysis, to arrange respondents into distinct groups based on their similarities to one another and differences from all other groups.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.