It’s all about balance

With everything shut down in the early days of the pandemic, millions of Canadians had more disposable income than they could spend. And so they put money aside for later, paying off debt and contributing about $5,800 more than average to their registered retirement savings plans (RRSPs) in 2020.

But after the initial lockdowns and uncertainty passed, "revenge spending" took over as people spent more than they typically would to make up for lost time — with the most recent RBC Consumer Spending Tracker showing total card spending is up 30% compared to pre-pandemic levels.

Ed Coambs, a financial therapist in Matthews, N.C., and author of “The Healthy Love & Money Way,” says online shopping has made it easier — and more enticing than ever — to spend with abandon.

Coambs points out that marketing teams use neuroscience to develop platforms and content that trigger chemicals like dopamine when you shop.

“Their job is to get us to consume as much of their material, their ideas, their services, their goods,” says Coambs. “And often, there's some unmet psychological need there that shopping is fulfilling for us.”

The trouble, he adds, is that this feeling of fulfilment doesn’t last, because you’re not actually getting what you need. While there’s a time and place for shopping — Coambs himself loves buying himself something new — he always looks for physical cues that he’s not overindulging.

“I want to be able to do it in a way that I don't start to feel guilt or worry or [have] anxiety,” says Coambs. “If you have those things happening, psychologically, that’s a sign that something is out of balance.”

“It’s no different than if we're talking about an overeating cycle, if we really pay attention to what's happening in our body.”

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Many Canadians are on the right path

For most Canadians who’ve indulged in a little revenge spending, the occasional spree shouldn’t knock them off track financially.

In fact, Aman Anand, senior director of credit risk for TransUnion Canada in Burlington, Ont., says the credit bureau’s most recent Consumer Pulse survey shows Canadians feel good about where they stand financially.

And although Canadians said they were ready to splurge a little, the combination of rising inflation and interest rates means a good chunk of those surveyed were proceeding with caution.

“Even though the outlook seems positive, at least from a pandemic perspective, given this new era of inflation and [rising] interest rates, we have this mixed bag,” says Anand.

He adds that Canadians appear to be taking a “wait and see” approach for now: “They want to keep a check on their spending and credit behaviour due to the macroeconomic pressures we’re facing.”

What to do if your spending is getting problematic

While many are managing to strike a good balance, there are a few red flags to watch for that might indicate your habits are starting to threaten your financial security.

Anand says the likely first sign will be if you’re suddenly finding it hard to keep up with your monthly bills.

From a credit perspective, Anand says paying your monthly bills is critical. Missing or late payments will be a red flag for future creditors and make it harder for you to get everything from a credit card to an apartment.

As for credit balances, the rule of thumb Anand recommends is to avoid carrying a balance of more than 35% of your limit. This is known as your credit utilization. Keeping it below 35% with a $10,000 credit limit would mean your balance always stays below $3,500.

If you’re using more credit than that consistently, Coambs encourages you to approach your situation with non-judgmental curiosity.

“Just be mindful when you go to any checkout,” says Coambs. “Whether it's digitally or in person, just look at the number and watch what happens to you psychologically — you're going to have an automatic feeling.”

If your gut says you got a good deal, great. And if you hesitate for any reason, maybe it’s a moment to reflect on whether this purchase lines up with your goals. Coambs encourages taking a walk to clear your mind.

It might sound simple, but he says the movement of putting one foot in front of the other is proven to help balance and stimulate reflection. Some action will help most people figure out what they need at that moment.

But Coambs adds that for some who have experienced trauma — especially family conflict around money — they’ll be especially prone to problematic relationships with money. Whether it’s writing a budget out in writing or seeing a therapist, Coambs says a little help can make this problem much easier to manage.

“Building in the reflective process of looking at a budget and your spending can help you as you’re trying to find that happy medium of how much to spend,” says Coambs. “The reality is life is more complex and dynamic than our budgets lead us to believe it should be.”

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