Skip to main content

The truth about overspending and the risks of living outside of your means.


Getting your spending in check is vital for your financial well-being.

Living within your means is the cornerstone of your financial health. Put simply, it means you spend less than or equal to your net monthly income. As straightforward as this sounds, achieving a balance of spending and earning can be challenging. Especially when money is tight, credit is easily accessible, and expenses are adding up.

If you’re overspending, you’re not alone.

Canadians are currently in a state of overspending. According to the Bank of Canada, Canadians owe approximately $1.70 for every dollar of annual income they have after taxes, tipping the scales on the overall household debt level across the country to just over $2 trillion.

So, what are some of the factors contributing to increased overspending?


Things cost more than they used to.

In the past year, inflation on goods has rapidly increased in Canada making it more difficult for consumers to keep up. Energy costs, gasoline, housing, travel, and education have all contributed to an inflation rate that is continuing to increase.

As prices for goods and services continue to climb and outpace people’s annual net income, it becomes more challenging for some people to maintain consistent spending habits.

Rising interest rates.

The Bank of Canada borrowing rates fluctuate as things in the economy change.  Sometimes the interest rates go up and sometimes they go down.   Obligations to pay higher interest rates on mortgages, lines of credit, and loans means there are less funds to spend in other areas.  This could result in overspending if budget adjustments aren’t made.

It’s the little things.

Trips to the café, dining out, in-app purchases and more. These small expenses add up, contributing to overspending habits.

Cumulative debt has a not-so-funny way of covertly affecting overall monthly spending. These amounts are often missed in budgeting because they don’t seem significant compared to other expenses. For example, dining out for lunch at an average of $10 a day adds up to about $2,600 a year. Add in coffee at around $70 a month and the total annual spend hovers around $3,440. Depending on someone’s current financial situation, these numbers can make a big difference when it comes to overall spending.

Living outside of your means; what’s at risk?

Getting in the habit of overspending and living outside your means can have a negative impact on your financial health, resulting in:

  • A cycle of debt that can be difficult to break due to interest owed.
  • An impossible environment to save for retirement as you try to keep up.
  • Damage to your credit score making it difficult to get a mortgage, finance a vehicle, access better interest rates, and more.

So, how can you spend less than you earn and live within your means?

1. Know exactly how much you make.

In order to live within your means, you have to know what your net monthly income is. Take note and begin budgeting from here.

2. Spend less by creating a precise budget.

Use backwards budgeting by subtracting your monthly living expenses from your net income to get a clear picture of where your money is spent. Then, you can focus on reducing spending in different areas to work within your income.

3. Resist outside pressures to spend.

Everyone’s financial circumstances are different. Don’t give in to the pressure of having the same things as other people if you can’t afford them. Tapping  into credit may work in the short term, but in the end, you’ll end up paying more.

4. Save strategically for your ‘wants.’

Instead of using credit cards for purchases you can’t afford to buy at a given time, put aside some money every month until you can afford to purchase it outright. If what you want is out of reach, it’s always better to do without as opposed to overextending your credit.

For more advice on how to stay financially healthy, be sure to speak to a Northern Advisor for more ways to curb overspending and find out the best strategies to live within your means.