“When we’re scrolling, we’re being influenced.”
Parween Mandar, a certified financial counselor and trauma facilitator, sees the effects that social media has on people’s spending habits. She has witnessed her clients comparing themselves to family and friends, creating a narrative around the life they’re living.
“We're seeing other people, maybe taking trips or going out to fancy dinners and that comparison game just starts to seep in,” said Mander.
She’s quick to point out that, when you’re on social media, “no one’s posting receipts.”
The materialistic things you see on social media, Mander notes, are often funded through debt.
You don’t see the financial struggle that people are facing.
“We just see the nice flashy stuff,” she said.
The endless assault of images can be triggering if you have a debt problem. If you can, Mander recommends removing yourself from social media to avoid the problem. She also suggests following more positive influences.
A 2021 survey of 1,000 British Columbians showed that half of those aged 18 to 34 experience FOMO. Of that 50%, 38% agreed that social media is a good source of investment advice.
“There are quite a few personal finance creators out there,” she notes. Mander says you can start educating yourself about personal finance by transforming what you’re and who you’re seeing.
The why of the buy
“There's complicated layers below our spending decisions and that doesn't get talked about enough.”
“It’s labelled as you’re bad with money because you’re overspending, and that’s the end of the conversation.”
One of the main problems facing individuals is that getting a quick fix is often easier than identifying the source of the problem. For many, this results in impulsive purchases and “retail therapy.”
If you’re stressed or tired, you might go online and buy a product you’ve been wanting in order to help you feel better.
“What are we seeking here?” asks Mander. “In most times it's comfort, safety, security.”
For Davies, understanding her relationship with money and the emotional weight it carried was one of her first steps to getting out of debt.
“I thought spending money showed that I was successful, which wasn’t healthy,” Davies said.
Keeping a journal of her expenses and using spending trackers helped Davies find a path out of debt.
Mander recommends creating a system to counter the temptation of impulse-buys. You can delete e-commerce apps from your phone and remove credit card information from places like the App Store and Amazon.
“Small things like that may also be enough to deter that mindless spending in the first place.”
- Why is it that our savings stay the same even as our salaries go up? Or that once we’ve hit our dream income, it still feels like we’re living paycheck to paycheck? The answer may be a phenomenon called “lifestyle creep.” On this episode of Half Banked, hosts Cadeem and Bethan sit down with Cindy Marques, financial planner and co-founder of MakeCents, to discuss what lifestyle creep is, why it’s such a problem for young Canadians, and what you can do to avoid falling victim to it. Join our hosts weekly on the Half Banked Podcast as they ask the big money questions that matter to young Canadians. Episode 5 is now available on all major podcast platforms including Spotify and Apple Podcasts.
Look for signs
Davies has felt the spiral of debt first hand.
“Early on, I didn’t even consider the reality that I would have to pay back all of the debt I was accumulating.”
“As soon as I had maxed out two credit cards and was struggling to pay the minimum balance on my cards each month, it was impossible to avoid thinking about debt,” said Davies.
Seeing the signs of a debt cycle can be difficult. Mander has identified three signs that may suggest you’re in trouble:
You avoid looking at bank or credit card statements. Mander says this suggests you’re avoiding accountability, and therefore don’t want to face the truth about your money.
You carry a consistent balance on your credit card, and are only paying off the minimum amount each month.
You regularly pay off your credit card debt, but you spend your entire paycheck doing it. Mander says this is a silent sign of having uncontrollable debt, as it’s a hidden cycle. Due to this, you’re not able to save any money for the future.
The social pressure of spending
Mander acknowledges that there’s a social element to spending, whether it’s going to an event with friends or out for dinner and drinks. This can be a hard thing to let go of when you’re trying to get out of debt, which is why she teaches her clients “stepped down spending.”
This technique involves coming up with a compromise that can limit your exposure to spending, while allowing you to take part in a social event.
For instance, if your friends invite you to dinner and drinks, Manner suggests you can offer to meet them at happy hour. You still get to spend time with your friends, but you also make a conscious decision that’s better for your budget.
For both Mander and Davies, being able to talk about your financial situation can help to make your journey out of debt easier.
The journey out of debt
Mander recognizes that there’s an emotional and psychological component on top of the financial reality you face. While it’s important to analyze why you’re spending, you also need to take a look at the numbers.
When Mander works with a client, she goes through the past two or three months of credit card and bank statements. This lets her show her clients how they can start making different decisions with their money, whether that’s reducing takeout or retail shopping.
The next stage is to focus on debt resilience. For some clients, throwing all their money at their debt can ultimately lead to greater debt in the future. It’s important to build an emergency fund while you reduce debt, so that you are better prepared for unplanned expenses.
Mander stresses that building an emergency fund takes time, but that’s a normal part of the process.
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