Across Canada, many households are delaying the payment of one bill to keep up with another, as the cost-of-living climbs and rising interest rates increase minimum payments on existing debt. The cascading impact is concerning. The Office of the Superintendent of Bankruptcy (OSB) reported that consumer insolvency filings in Canada reached 140,457 in 2025, and B.C. recorded 15,331 filings (up 10.6% year-over-year). In this environment, clear, tactical budgeting support, paired with informed guidance on debt-management pathways can help address financial strain. The tips below can help manage debt and budget for cost-of-living increases.
Use a cash flow budget to monitor your finances
It’s helpful to think of budgeting as a plan to manage income, spending, and saving, as well as find ways to pay down debts. A cash flow budget identifies all cash inflows and outflows over a specific period, helping you get an accurate picture of your finances.
Start building a cash flow budget using this three-step approach:
- Track your income along with your actual spending for 30 to 60 days by using bank feeds and receipts. This removes optimism bias, such as thinking you are spending less than you do, and reveals “bill creep” (e.g., subscriptions, delivery fees, convenience spending).
- Separate items that are necessary and must be paid for from those that aren’t necessary. According to the Financial Consumer Agency of Canada (FCAC), framing your budget around “needs vs. wants” can be useful.
- Create a weekly operating budget for expense categories most affected by inflation, especially groceries and discretionary spending. Keep a monthly budget for more fixed categories like rent and utilities.
Tools help. FCAC’s Budget Planner provides an accessible way to consolidate spending categories and produce a baseline plan that you can maintain. Goldhar & Associates’ money management resources can help track where money goes and ensure there is enough to cover bills.
Budget for cost-of-living increases
Category-by-category tactics like the ones below can help you budget for cost-of-living increases.
Food (groceries and meals): It can be helpful to treat food like a controlled project by following the steps below.
- Set a weekly grocery spending cap;
- Build a repeatable meal rotation; and
- Reduce high-cost leakage (restaurant meals, delivery, convenience items).
The win is consistency – small weekly reductions compound quickly.
Bills and utilities: Run a “renewal audit” twice a year. Look at memberships and phone, internet, insurance, and streaming plans as they come up for renewal. In many households, the costs of these bills rise quietly through price increases and add-ons. Reviewing them before committing to a new term can help you identify savings opportunities. Individual cutbacks might seem minor, but together they can create meaningful savings each month.
Transportation: Transportation costs can be a budget breaker, considering the cost of fuel, maintenance, insurance, and car payments. Is your vehicle absorbing cash flow that could be used for essentials? Even a temporary shift, such as carpooling, making fewer trips, and taking public transit can help you save money.
Debt payments as a budget line (not an afterthought): Many people budget what’s left to pay off debt. In the current environment, it’s important to reverse this. Budget for essentials, then allocate a fixed, sustainable debt-payment amount. Remember that volatile minimum payment amounts can create a cycle of delayed bills.
Stabilize your finances, then start addressing debt
Once your budget is stable, households typically need a two-stage plan to start addressing debt.
Stage 1: Stop the financial bleeding
- Prioritize paying for essentials, such as housing, utilities, food, and transportation.
- Avoid or stop high-cost borrowing, such as payday loans or high-cost credit.
- Before accounts become delinquent, contact creditors early to request hardship options, such as temporary interest relief, payment deferrals, or restructuring.
Stage 2: Choose a debt payoff strategy
- Avalanche method: Direct extra cash to the highest interest rate first.
- Snowball method: Pay the smallest balance first.
- Careful consolidation: This method combines multiple debts into a single monthly payment. Debt consolidation works only if it reduces total interest cost and you do not re-extend revolving credit.
If the amount of interest you are paying is the primary barrier to paying off debt, for example, payments go out but balances don’t fall, formal options such as making a consumer proposal or declaring bankruptcy may be appropriate.
Filing a consumer proposal or declaring bankruptcy
The OSB describes a consumer proposal as a formal process administered by a Licensed Insolvency Trustee (LIT). Once filed, debtors stop paying unsecured creditors directly and legal actions such as wage garnishments and lawsuits are stopped. Creditors generally have 45 days to accept or reject the proposal.
From a practical budgeting perspective, the value proposition is often predictability. Consumer proposals can freeze interest and replace spiraling payments with a set repayment plan (up to five years), reducing stress and improving completion rates.
Bankruptcy is outlined by OSB as a regulated process with defined duties and required counselling, and discharge rules depend on circumstances, including whether it is a first or second bankruptcy.
Support for budgeting and debt management in BC
The BC government maintains a resource page that can support residents with budgeting, debt help, and navigating cost-of-living increases. These include the Credit Counselling Society and Consumer Protection BC for issues involving payday loans, high-cost credit, and credit agreements. These resources may be helpful if you need support beyond what can be solved by budgeting alone.
Disclaimer: This article is not intended as financial advice, and you should not make financial decisions based solely on the information presented.
Andrew Smith, CPA, CIRP, LIT, is a Licensed Insolvency Trustee with Goldhar & Associates Ltd.
