How to manage debt living in Toronto

Table of Contents

If you live in Toronto then you can appreciate how high the cost of living has become especially as it pertains to home prices, education, debt repayment, high-interest rates, and the normalization of debt it can be difficult to know what financial decisions to make. In this article, we look at the common financial challenges people face and how to manage debt living in a city like Toronto.


The city of Toronto is known for being an exciting, safe, and accessible place to live. As a home to a multitude of universities and colleges, it’s a prime location for students to live and study. But everyone knows that student living comes with its fair share of financial woes.

After all, students are learning how to live on their own and budget for the first time all while paying for tuition that can be pretty steep.

High Tuition

Students face high tuition rates and a difficult renter’s market in the city, so it’s important to have a strong support system and a budget for managing your finances.

Observation Period

For those who are learning to budget for the first time, you can try a simple three-month observation period where you spend as you usually would for your usual living costs, luxuries, and miscellaneous expenses.

Use a Budgeting App

Use a budgeting app to track your spending during those three months and at the end of the observation period, categorize your spending and see where your money actually goes. You’ll be able to see how much you spend on the essentials and how much might be going towards frivolities that you could do without. From there, structure a budget that will work for your lifestyle and make it a priority to regularly save money.

Payday Loans

There is no singular, steadfast secret to living debt free in Toronto. You have to be committed to making financially smart decisions on a regular basis and you need to have a healthy relationship with your finances. Out of those who turn to Licensed Insolvency Trustees (formerly known as bankruptcy trustees) for help with debt relief, many individuals are seeking help after having tried to stay afloat using payday loans.

The Trend

When you’re under serious financial stress and struggling to make your regular bill payments, it can be quite tempting to rely on payday loans to cover costs. In fact, out the most commonly used loan products in Ontario, payday loans represent an increasing share of the province’s insolvent borrowers. In 2018, 37% of insolvencies were attributed to payday loans, a notable increase from the 32% in 2017. Between 2011 and now, the number of Ontarians who use payday loans has tripled.

The Larger Issue

These trends are symptomatic of a larger issue between Canadians and debt loads. The numbers are also quite troublesome when you consider that just under half of the people who turn to payday loans do not understand the interest rate they are being charged. Without the money to repay a payday loan, the sky-high interest rates only work to further complicate a person’s debt and cause more problems down the line.

Avoiding Payday Loans

With all that in mind, it makes sense that one of the most important things you can do for living debt free in Toronto is to stay away from payday loans. Some of the latest figures from the Bank of Canada indicate that in the average Canadian household, the debt for every dollar of its income is over $1.70. Debt can grow quickly and it’s a common problem for many, but payday loans do not offer true relief. It’s best to avoid them and look to alternatives for debt relief.

Credit Card Use

It’s pretty easy to slide into trouble with unsecured debt when using credit cards. The high-interest rates and easy way to make purchases often spell out trouble for those who do not (or cannot) make full payments on time. That’s why one of the ways to reduce your debts while living in Toronto is to pay the full balance on your credit card every time you receive a statement.

If you are unable to make the full payment, then that’s a sign that you are living beyond your means or that you budget is not adequately distributed. It means that you need to make an adjustment to your spending behaviour in order to avoid collecting even more debt in the form of interest charges.

Responsible Credit Card Use

Responsible credit card use can have highly beneficial effects on your financial profile. When you pay the full balance on your card on time, not only do you avoid the extra interest charges but you also build good credit. Effectively, your credit card can work like a debit card where you only spend what you have and the funds come out of your account as you go. This is a great strategy for those who have credit cards that collect points or offer cashback rewards.

You can put purchases through the card, but those purchases are within your means, you aren’t borrowing anything you don’t have. That way, you can collect points that can be put towards travel or necessary costs like groceries or gas and you build your credit score, too. With this good credit score, you’ll be looking at more favourable loan terms down the line, better mortgage rates, and more.

Living Expenses

Do you know the full extent of your living expenses? There’s a lot to consider and sometimes more than we account for. What’s more, Toronto is known for being an expensive city with a high cost of living, so it’s essential that you have full knowledge of how much it costs you to maintain your lifestyle.

Cost of Living

In 2018, some sources were reporting that the cost for a single person to live and rent in Toronto was $1,672 per month on average. This number is a significant $300 more than it was last year.

When the rule of thumb of personal finance is that the amount you spend on rent should be no more than 30% of your overall monthly income, these numbers can be a little daunting.

In fact, it’s been said that it’s more realistic these days for the amount an individual spends on rent to be 50% of one’s gross monthly income. Just one glance at a rental service provider will show that the prices of various rental units in the city are quite high. For instance, a one-bedroom condo averages at around $1,919/month for rent, a one-bedroom apartment can cost around $1,683/month, a studio or bachelor is not much less at $1,600/month, and sharing a two-bedroom condo with a roommate ends up costing each individual $1,486/month.

Cutting Down on Living Costs

With all that in mind and the predictable costs of living expenses, those who wish to live debt free in Toronto should never borrow money to cover basic costs. It can be difficult to cut down your living costs, especially when it already feels like you’re stretched thin. But if you are in a position where you are borrowing for basic living expenses or even turning to short term loans to cover costs, you need to look for ways to trim down your spending even further.

Impulse Shopping

One way to cut down on your everyday expenses is to reduce impulse shopping. You can do so by understanding your own spending behaviour and knowing the triggers that lead you to an impulse buy. Try following the 24-hour rule for things that you want to buy that suddenly catch your eye. If you are compelled to buy something that is not a part of your regular spending budget, hold off on the purchase for a full 24 hours. When the time is up, you’ll be in a different mindset in regards to the purchase and likely will find that you do not need the item as much as you originally thought.

You can cut costs by choosing to shop smart by foregoing convenient fast food in favour of fresh produce according to your grocery store’s specials. Learn to differentiate between your must-haves and want-to-haves when it comes to your food, and try to trade out your trips to Whole Foods for trips to the No Frills. Cutting down on living costs might also take the form of otherwise more serious changes to your lifestyle such as downgrading your living arrangement from a home to a smaller apartment or rental.

Trade Your Car

If you have substantial car payments to make, then it could be time to trade your car (and the associated car payments, insurance costs, and gas spending) for a transit pass and a trusty bicycle. Owning and maintaining a car in Toronto isn’t cheap, and you never know when an unexpected car cost like a flat tire or faulty engine could end up setting you back. With the cost of car ownership and parking in the city, switching from a car commute (20km per day, 5 days a week) to public transit can save you easily $300 per month.

Start Saving for Retirement

If you are in a position where it feels like you can barely keep up with your current expenses, saving for the future might not even seem like a possibility. Too often we get caught up in trying to make ends meet with our everyday living costs that we delay the need to save, promising ourselves that we will finally open that tax-free savings account (TFSA) or Registered Retirement Savings Plan (RRSP) as soon as things hit smooth sailing.

The truth is, however, that saving money should be a priority as long as you are generating an income. Long-term financial success is based around smart savings decisions, and one big thing that you can do to ensure that you can retire in comfort is to start saving for your retirement right away if you aren’t already. As it currently stands, only about half of working Canadians are saving for their retirement.

Don’t get left behind. Part of a debt recovery plan is the promise of being able to make fruitful investments one day. Invest in an RRSP to start saving for your retirement as soon as you can. When meeting with a credit consultant to discuss how you’re going to solve your debt problems, mention that you want to make saving for retirement a priority. Your trustee can help you come up with a budget and savings plan that works with your income, living costs, and long-term financial goals.

Avoid Debt Consolidation

You may be tempted to turn to a debt consolidation loan since it can look like the ideal solution. You get a loan to pay your debts and from there you have some much-needed breathing room to recover and then pay back the debt consolidation loan. But the lenders of these loans often use aggressive advertising techniques targeted to those who are already struggling with debt. When you’re in that position, you’re vulnerable and might not see the red flags of this type of debt relief route.

Debt consolidation works like this: a lender such as a bank or debt consolidation company loans the individual a lump sum to pay down unsecured debt like credit card bills or payday loans. But these loans come with incredibly steep interest rates, some as high as 30%, which can only mean more trouble down the line.

Leave Debt Behind

You want to get out of debt. You have to address the situation at its source and take a course of action that will lead you towards debt relief one day. A debt consolidation loan is much like a payday loan, it might work in the short term, but it’s not the best solution for the long-term.

Your bankruptcy trustee can guide you towards your long-term financial goals. It’s entirely possible to live without debt one day. It just takes a committed attitude and the right help from skilled bankruptcy trustees to lift those who struggle with debt out of money troubles and into the green. Don’t wait any longer to take charge of your finances, schedule an appointment with a bankruptcy trustee today.

Take Your First Step Towards A Debt Free Life

If you are overwhelmed by debt, call us at 1-844-962-9200 to book a FREE, confidential appointment. We will review your financial situation in detail and discuss all of your options with you. Alternatively, you can fill out the form below and our team will reach out to you. 

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