Oct 17, 2026
It’s an unfortunate reality in Canada today: Just because you have a middle-class income doesn’t mean you have money left at the end of the month.
A study published Oct. 14 by the C.D. Howe Institute found that, on average, spending exceeded disposable income in each of Canada’s bottom three household income groups in 2025. Together, those groups represent 60% of households.
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For the middle 20%, spending was 12% higher than disposable income. The shortfall was larger further down the income scale.
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But that doesn’t mean everyone facing a shortfall is taking on debt. Some households are drawing on savings they’ve built up over the years — and it’s an indication that current debt could end up hurting the future financial health of Canadians.
How spending and saving differ across income groups
Study authors Mawakina Bafale and Peter MacKenzie divided households into five income groups. In 2025, the highest-income quintile (top 20%) saved 34% of disposable income, while the next quintile saved 16%.
The middle group had a negative saving rate of 12%, while the second-lowest and lowest groups recorded negative rates of 32% and 119%, respectively. Keep in mind these are group averages — not every household ran a deficit.
Here’s what this might look like. If a household with $60,000 in annual disposable income spent 12% more than it brought in, it would have $67,200 in expenses, leaving a $7,200 gap. The income figure is hypothetical, but works out to a monthly shortfall of $600.
Disposable income also includes more than your paycheque. It also includes income from sources such as government benefits and investments, after taxes.
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Improving debt figures don’t tell the whole story
It may surprise some that Canada’s overall debt numbers have improved. According to the C.D. Howe report, household debt stood at roughly 176% of disposable income in the second quarter of 2026, down from a peak of 188% in 2022. The share of income going toward debt payments has also declined from its 2023 high.
But those improvements don’t mean everyone is doing better. National averages can hide the financial difficulties some groups face. And when it comes to saving, higher-income households are putting away enough to offset the shortfalls further down the income scale.
A shortfall doesn’t always mean more debt
Spending more than your income doesn’t necessarily mean you’re in financial trouble. If you’re retired, for example, you may have planned to use your investments to cover some of your living costs. That’s different from charging groceries to a credit card because you’ve run out of money before payday.
It depends on where the money is coming from and how long you can keep it up. Are you using savings as planned, or relying on them more than you expected? If you’re borrowing, can you pay it back, or is the balance getting bigger each month?
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Everyday costs are outpacing income gains
An April 2026 Statistics Canada release helps explain why lower-income households struggled to save in 2025: their spending grew faster than their disposable income, particularly on housing and utilities, insurance and financial services, and transportation.
Households in the second-lowest income group saw average disposable income rise 2.3%, while consumption spending increased 3.8%. Statistics Canada noted that these households may be borrowing to cover the difference.
Cutting these costs isn’t easy. You may be able to cancel a subscription or two, but reducing rent, replacing a vehicle, or finding cheaper insurance is much more difficult.
That said, you should still look for expenses you can cut. But if you’re short several hundred dollars every month, cancelling a few subscriptions won’t be enough. You may need to look at higher costs, such as housing or your car payment, or find ways to bring in more income.
What to do if your income no longer covers your expenses
If you’re struggling to make ends meet, review a few months of bank and credit card statements. Are you dealing with an occasional expensive month or is it a regular shortfall? Remember to factor in less frequent costs, such as car repairs, annual insurance, and holiday spending. You’ll also want to check whether your debt balances are growing, even if you’re making every payment.
If payments are getting difficult, the Financial Consumer Agency of Canada recommends contacting your creditors. They may offer lower interest rates, more time to repay, or debt consolidation options. If you’re offered a new payment arrangement, compare the total cost to your current situation. Smaller payments could mean paying more interest over time, and consolidation may not fix an ongoing monthly shortfall.
Finally, if you find yourself borrowing to cover basic expenses, consider meeting with a reputable credit counsellor who can help you review your budget and options. Ask whether the first consultation is free — simply talking with them won’t affect your credit score.
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Colin Graves is a Winnipeg-based financial writer and editor whose work has been featured in publications such as Time, MoneySense, MapleMoney, Retire Happy, The College Investor, and more. Before becoming a full-time writer, Colin was a bank manager for over 15 years.
