How to avoid overspending as the economy reopens, according to money experts – National
After 15 months of rolling COVID-19 restrictions, the financial pendulum has started to swing. With an ever-increasing number of opportunities to spend money at restaurants, stores, fitness centres salons, personal finance experts caution against going overboard.
“It’s like releasing a dam when it comes to our spending. I can certainly relate to that feeling of being excited to ‘live’ again,” says Melissa Leong, author of Happy Go Money.
According to a behavioural science study released June 23 by Interac, people across Canada are increasingly making non-essential purchases. This phenomenon, known as “feel-good spending” as economies reopen, is more common among younger cohorts.
Two-thirds (66 per cent) of gen-Z nearly three-in-five (58 per cent) millennials are more likely to make feel-good purchases today than they were before the pandemic hit, according to the study. By contrast, 35 per cent of baby boomers 22 per cent of those aged 75 older are likely to indulge in such so-called retail therapy.
“Canadians are increasingly spending their own money on the simple pleasures pursuits that enrich their lives,” said Andrea Danovitch, associate vice president of marketing at Interac, in a statement. “Even a low-value purchase can trigger a significant positive emotional response if it’s linked to our passions — proving that the smallest things in life can often feel like the biggest.”
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Leong says a combination of small pleasures renewed obligations can add up quickly. She suggests tallying it up to understyour new financial reality.
“Have a clear idea of how much money you’re currently making how much you’re spending as well as how this might change,” she tells Global News. “Last week, I sat down looked at what expenses would be returning in a new normal: childcare, commuting, vacations, kids’ hockey swimming lessons.”
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Parween Mander, millennial money coach founder of The Wealthy Wolfe, a financial platform designed to help women of colour from immigrant upbringings, highlights the fact that although many have struggled during the pandemic, the majority are poised to emerge from the crisis in better financial shape.
“If you are in a privileged position to save pay, pay off debt or even begin investing during the pandemic, let’s not lose that amazing momentum by overspending once things open back up again,” says Mander.
She suggests automating the process of saving monthly.
“This way the money is out of sight out of mind you’re less likely to spend it,” she says.
Canadian households managed to save a record $212 billion in 2020, based on data from Statistics Canada. And according to Equifax Canada, there are fewer credit card delinquencies on average, credit card balances have decreased during the pandemic, though its latest snapshot suggests that spending levels “returned to normal levels” by the end of 2020.
In order to maintain the momentum many gained during the pandemic, Leong suggests finding ways to boost your savings earmark money for pleasure spending.
“Get into the habit of putting some money away in a separate savings account, in a jar, in an envelope for fun, for entertainment, for travel. See if your bank has programs that will round up your purchases put the rest into savings,” she says.
Managing personal finances through COVID-19
When it comes to spending on things that you haven’t been able to do for a long time, Mander suggests prioritizing which things you want to indulge in first, without beating yourself up for wanting to do it all at once.
“Group dinners, gyms, going out, are all very exciting things. Pace yourself, but don’t shame yourself,” says Mander. “List which activities you’re most excited to go back to doing first — maybe just hitting the local mall or going to the movies with your family. Spread that out a little bit spare your bank account check your expenses once a month to make sure you’re on track.”
Leong says the “new normal” in spending is an opportunity to build on habits developed during the pandemic as well as an opportunity to build better habits going forward.
“If you’re tempted to pull out the credit card, take stock of how much debt you have currently or have accumulated during the pandemic,” she says. “You might want to set some new money goals going forward so you have other priorities in mind when it comes to spending.”
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