Save. Spend. Splurge.

Canadians are spending more than they earn

Surprised? I wouldn’t be.

According to the last calculation from Statistics Canada, the average household owes 165 per cent more than it earns in annual disposable income, meaning an average family with $100,000 annual disposable income owes $165,000.


WE OWE 165%!!?

Even if most of it is in mortgage debt, it is a huge honking amount of money to owe and to have no way of being able to pay it off.

Things that could and probably will go wrong for some Canadians:

  • Interest rates on mortgages start rising and people can’t make the extra payments
  • Someone loses a job
  • Someone gets hurt or sick and can’t work, and ends up on half their pay (disability)

Think about it, that’s the average.

There are people like me out there who have $0 in debt, so someone is owing way more than 165% of what they earn in annual disposable income.

I can think of at least ONE family who is in trouble like this.

They’re on the brink of getting their house re-possessed because they got so used to the husband making $80,000 a year, that they never thought he would lose his job and didn’t save a damn penny.

They sure tithed a lot though, about 15% of their income to those ‘less fortunate’ at that time.

Now she’s begging the utilities company to not cut their hydro off, and wondering if she should continue even buying milk for the kids because it’s costing them so much money.

Don’t be that woman. Don’t reach that point.


It’s one thing to borrow money from the bank, invest it, and take advantage of low interest rates by leveraging your money*.

It’s entirely another thing to borrow money from the bank, spend it frivolously, and to not be able to really pay it back if one little or big hiccup happens in your life.

*Leveraging is essentially when you make more money than what you pay in interest rates to the bank.

Borrow if you can afford it.

If you’re borrowing to pay for some fancy vacation you think you deserve, then you can’t afford it.


  • Spend less than what you earn, and learn how to do it by budgeting and tracking your expenses
  • Make sure that if you own a house and a mortgage, you are able to weather higher interest rates
  • Be prepared for any sudden drop in income and have an emergency financial plan ready
  • Pay down consumer debt that is probably choking your finances at 20%+ interest rates
  • Don’t buy more house than you can afford — 2X your income should be the max you can take on



If you have been budgeting and tracking your expenses, you will know exactly where your unnecessary expenses are that can get the axe.

Examples of unnecessary things in a budget that you can eliminate completely or at least REDUCE in a pinch:

  • Cable TV
  • Cellphone plan**
  • Eating Out
  • Coffees Outside
  • New Clothing — if it’s necessary, buy secondhand
  • Toys
  • Entertainment
  • Electronics
  • Gifts
  • Travel
  • Grooming
  • Spa

You get the idea.

Anything beyond a roof over your head, basic food in your mouth and basic clothing (you need a basic, perhaps secondhand coat in winter, of course), is unnecessary in times of a financial crisis.

**Even if you have to pay $300 to get out of the plan, do the math — $300 now or $2400 over 3 years? Read: How I made the decision to get rid of my rather useless smartphone

You can go even farther than that and start chopping things like your car over the long-term and take the bus instead.

You’d get rid of a good chunk of the car loan (even if it’s at a loss), but you’d save on parking, gas and car insurance.

These are all things you should consider in case something bad happens. I’m not advocating that you live like that now, but you have to be mentally prepared to do what it takes.



  • Sara

    L’s debt is about 55% of his yearly salary. Assuming no changes at all before I graduate, then when I finish school our combined debt will be 3.5x his salary.

    This is the reason that when I start working my entire take-home pay will be going to my student loan, at least for a year.

  • jane savers @ solving the money puzzle

    I owe $17,590 on my HELOC but it is decreasing monthly. I am like Germany and Japan, the only 2 countries that have seen reductions in personal debt levels.

    I don’t know how you make people be financially responsible but it may be up to the governments to raise interest rates to frighten people in to reducing their debt.

    • saverspender @ save. spend. splurge.

      *LAUGH!*! “I am like Germany and Japan.” 🙂 Two of my favourite countries.

      I think the government would LIKE to frighten people into reducing debt, but they can’t do too much or go too far, because then companies (run by people) will freak out and stop investing or spending money because they see a big disaster looming that will hurt the economy.

      It’s a balancing act, and I can only hope that people are desperate enough when they’re in debt to google things like “how to get out of debt” and find the PF blogging community as I did 7 years ago.

    • PK

      Believe it or not, personal leverage in the US has come down quite a bit from the RE peak:

  • StackingCash

    We owe $0. However, this will be changing soon if we end up purchasing a new home. In regards to your equation of buying a home that is only 2X one’s household income, what about money on the side? Is having one year emergency fund and putting the rest of the money into a new home purchase ok?

    • saverspender @ save. spend. splurge.

      I’d say you sound pretty responsible if you have one whole year of an emergency fund set aside and putting the rest into your new home purchase.

      I just really like 2X your household income because it’s a good benchmark to know whether or not you can afford a place. If you head up to 3X it is not impossible, but you’ll just have to tighten your budget, and there’s less wiggle room in case things change.

      I’d caution you on 3 things however:

      1. Whatever home you buy, new or old, will end up costing you something, and you should have an additional “first home” maintenance fund set aside.

      People estimate this at $10K – $20K because they don’t realize the stairs need to be fixed, or the water heater just happens to die a month after you move in, etc.

      Or maybe you just want to rip out all the kitchen cabinets and put in something new. Who knows? 🙂

      2. You need to also save at least 3% of your home’s value in a maintenance fund for each year.

      If you buy a home at $300,000, save aside $9K a year for JUST IN CASE moments (roof collapses, leaks, water heater breaks, stairs rot..), and you will have the money set aside to fix it right away.

      I know that practically NO ONE does this because they think homes are “forever”, but if you consider that condos charge you a monthly maintenance condo fee that is a percentage of your apartment’s value to keep the building well-maintained, you should adopt the same mindset for a home itself.

      3. Interest rates won’t stay low forever.

      On average, they’re 11% but that’s just a past benchmark. Now that the economy is improving, expect them to raise up to 6% in the short-term, but they could certainly go higher to 10% – 15%. Who really knows? All we know is that interest rates are ridiculously low right now and won’t stay low forever.

      If you can’t COMFORTABLY handle your mortgage payments if your interest rates go up by at least 2%, then you should consider buying a smaller, less expensive home. Or consider that one of you might not have a job, and if you can’t live on the lower of the two incomes, then consider doing the math on what mortgage can fit that lower income in the event of a problem.

      In short, I think you’re quite responsible based on the fact that you do have 1-year saved aside, but I’ve just listed a few concerns above that you might want to keep in mind in addition to just having 1-year saved.

      I’m also assuming you’ve done your regular real estate homework on the taxes you need to pay, the possible rise in utilities in having a larger home which increases the budget, the closing fees for when you buy a home, and so on.

      (Also, try and aim to clear your mortgage in 10-15 years. You can take a mortgage for much longer, like 25 years, but aim to clear it sooner…)

      😀 Good luck.

    • saverspender @ save. spend. splurge.

      By the way when I say save aside $9K a year, I really mean $9K a year on a $300K home, not just $9K in a fund and stopping at that.

      $9K + $9K + $9K and so on and so on. It’s good to have a slush fund for any home-related problems as they will inevitably get expensive and strain your budget. If you start building up a significant slush fund at $30K or more, then you can consider it part of your emergency fund, but more likely than not, you will end up spending part of it each year if you are careful in making sure you keep your house in good shape.

      • StackingCash

        Thanks for the detailed perspective and link you sent me! I always appreciate other views regarding home ownership just in case I miss something :-). I am actually uber conservative, so no need to worry about adjustable interest rates or having an ample emergency/maintenance fund. However, we are looking at an expensive property because the location is so prime. The price is well above my comfort zone but when it comes down to it it does seem manageable. I am hoping that there might be “some” investment value to this new dream home we are considering.

  • Liquid

    I currently have about $400,000 of various debts. If I take my mortgage out of the picture I still owe more than 300% of what I make. I want to pay down some of it but it’s hard when I’m constantly buying stuff lol. Doesn’t really help either that central bankers around the world are keeping interest rates so low. When money is so cheap borrowing can be quite addictive >_< But I guess that's exactly what the government wants us to do. Spend and grow the economy. Ironic how over spending and leverage was the reason for the last financial crisis haha. My goal for next year is to pay off at least my line of credit. It would be great to reach debt freedom like you some day. I just need some will power and conviction 😀

    • saverspender @ save. spend. splurge.

      YOU? BUYING STUFF? Joker. 🙂

      From what I can tell from your blog, you don’t spend frivolously… unless you’re secretly hiding it from us.

      Your debts on mortgage for me, are fine because they’re investments that you have considered and analyzed in-depth to bring you a long-term investment. It’s not like you spent $100K on a flashy new car.

      I don’t have debt because I haven’t bought farmland or invested my money in anything, yet our net worths are the same (I think I’m lower than you now) and you’re much younger than me by at least 5 years.

      You’re farther ahead!

Post a comment

Your email address will not be published. Required fields are marked *