1.3.1 Case study: Tackling problem spending

From: Financial Consumer Agency of Canada

Raffi and Sandra look at bills and discuss how to cut down expenses.


Raffi and Sandra sat with a pile of bills. Mortgage. Car loans. Utilities. Restaurant tab. Hockey skates for the kids. New boots for Sandra. Golf clubs for Raffi. Veterinarian bills.

They needed to spend less. But how? "There's no extra," Raffi said.

Sandra wasn't giving up so easily. "We can do this," she said.

She found a budget worksheet. The income part was easy to fill out. They both knew their monthly take-home pay. As well, Raffi received a small amount of interest every year from an investment his grandmother had made in his name.

But when it came to the expenses part, they weren't so sure. The mortgage payment, car loan payments, utilities and property taxes—those things were regular and fixed. But how much did they spend on groceries in a typical month? Home repairs? Clothing?

They made rough guesses, but Sandra knew they needed to be more precise than that. So she and Raffi wrote down every expense they made for a month. They looked at credit card and bank statements to find out how much they were spending, and on what. Then it was much easier to fill out the expenses part of the budget, although they had to estimate the cost of some things that didn’t come up regularly, like car repairs.

Then they subtracted the total expenses from the total income, and looked at the bottom line: minus $200 a month. "And that doesn't even include savings," Sandra said, pointing at that line in the expenses section. "They say we should try to set aside at least 10 per cent of our pay each month."

Raffi said, "What if we got rid of my car? I could carpool with Jack. I'd have to pay something for gas, but it would be less than owning and running a car."

They went on through their expenses. In the end, this is what they planned:

  • sell one car and carpool
  • bundle their phone and cable services
  • cut out one restaurant meal and one show a month
  • buy grocery staples in bulk, cook large batches and freeze dinners
  • take their next vacation at home, enjoying the attractions in their local area.

In total, they figured they could save $300 a month.

"Not much left over," Raffi said.

Sandra thought for a minute. "Maybe if we plant a garden next year…"

Lessons Raffi and Sandra learned:

  • It's important to get into the habit of tracking your spending so you know where the money is going.
  • Putting your income and expenses together in a budget gives you a true picture of where you stand.
  • You can often save money by reducing expenses that are not necessities for life and making lifestyle changes.
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