Global Courant 2023-04-16 13:00:00
Cost of living4:42Why Canadians Are Split-Brain Budgeting
Like many of us these days, Jennifer Anchan keeps a close eye on her budget. She buys from online marketplaces that sell used goods on Facebook and Kijiji, and goes to the dollar store more often than before.
“I tend to shop around before making a decision. So, you know, buy what’s in season or buy what’s on sale. And I tend to use those items for a very long time,” Anchan, a peace official in Wetaskiwin, Alta., told Cost of Living.
And when she needed a car, she bought a used 2001 Honda Accord for $1,700 — cash.
“It has a few scratches, has a few dents on the outside. But she got me through a lot of hard times,” she said. (Yes, the car is a “she” – Anchan called it Gertrude.)
Jennifer Anchan of Wetaskiwin, Alta., and her 2001 Honda Accord that she bought with cash. (Submitted by Jennifer Anchan)
But Anchan will spend money on travel, holidays and concerts with her friends if the time and price are right.
“If it’s something like a road trip or camping or something, I don’t tend to budget for that kind of experience. I just go with the flow,” she said.
This is according to new data from the The Royal Bank of Canada spending tracker, Anchan is not alone. The April 6 update said Canadians are cutting spending on discretionary goods such as clothing and restaurants, but spending on non-essential services remained strong.
“Canadians continue to enjoy holidays despite higher airfare and hotel costs,” the report reads, while also noting that grocery transactions did not change significantly.
There are some caveats to the information: RBC says its tracker uses anonymous data from credit card transactions from its own Canadian customers, so this is more of a snapshot of RBC customers than Canadians in general. That monster is significant, as it can cover “tens of millions of weekly card transactions worth billions of dollars per week,” according to the bank.
Canadians made fewer restaurant and grocery sales in March, but still spend on travel, according to the Royal Bank of Canada’s April 6, 2023 spending tracker report. (RBC Data & Analytics, RBC Economics)
Tandy Thomas, an associate professor of marketing at Queen’s University’s Smith School of Business, says this kind of selective indulgence is known as split-brain budgeting.
“They’ll cut back on groceries. They’ll cut back on a lot of those daily necessities to save money, and then they’ll spend lavishly on, say, a vacation,” she said.
I’ll drive a shit until the day I die if it means I can travel—Jennifer Anchan
According to a recent survey by market research firm Narrative Research56 percent of Canadians had plans to travel in 2023. Of those respondents, 25 percent said they plan to go to the US, 24 percent plan to travel within Canada, and 20 percent plan to travel to Europe.
There is also evidence of split-brain budgeting in the US. In a poll of 2,200 Americans performed for The Wall Street Journal earlier this year, three in 10 said they had bought a “luxury item” in the past month. About a third of those respondents said they spent more than $100 on the purchase.
WATCH: Dollarama’s profits skyrocket as cash-strapped people look for deals
Dollarama’s profits soar as shoppers look for deals
Sales at discount chain Dollarama are up nearly 17 percent as Canadians in financial distress look for bargains amid high inflation. But the bargain chain is also not immune to inflation and faces fierce competition from rivals.
Delete and save to spend
Anchan holds back daily expenses to spend more on a smaller expense category. These are personal care products such as perfume, skin and hair care, but especially about experiences such as travel and events such as concerts with her friends.
“My primary love language is quality time. So if it’s something I do with someone else or if it’s an opportunity to spend time with someone — or spend time with myself, because that’s still just as important — I’d rather do that because I have something to remember.”
But even then she tries to be as mindful as possible. She hunts down travel deals on an Alberta-based deals forum.
“I’m generally the type of traveler that my destination is what’s on offer,” she said. “I’ve flown to China, Estonia, (the) Netherlands – all $500 round trips.”
‘Revenge Spending’
According to Thomas, a split-brain budgeting trend is unusual in a time like today when many Canadians are feeling the financial strain of high inflation and high interest rates.
“These aren’t normally the situations where we would see consumers say, ‘Fuck it, I’m going to spend all my money on a lavish vacation,'” she said.
Tandy Thomas is an Associate Professor of Marketing at Queen’s University’s Smith School of Business. She says it’s unusual for people to save in some categories but spend heavily in others during a period of high inflation and high interest rates. (Submitted by Tandy Thomas)
But the years of the pandemic have shifted many of our priorities and needs, especially as lockdown policies and travel restrictions eased.
One term might explain it, Thomas said: “revenge spending.”
“Like (they say), ‘I couldn’t do all these things during the pandemic, and now I’m going to do it all. Whether it’s hell or high tide, I’m going on this journey, I’m going to buy this stuff. I’m gonna do this thing.'”
Some people, Thomas said, may have saved money to regularly spend on travel during the pandemic. Now that many travel restrictions have been lifted, they can spend their “pot of gold” that they have accumulated over the years.
Of course, that doesn’t describe everyone’s situation. “There is a group of consumers who are struggling financially tremendously” and don’t have the luxury of indulging at all, she said.
Thomas pointed out that not all travel expenses can be a “lavish vacation” – they can also include trips to see family they haven’t been able to visit for quite some time.
Anchan is soon going to India to do just that; she last visited family there in early 2020. And if you ask her if it is worth buying second-hand goods and driving a worn-out car to pay for it, she will give you an unequivocal yes.
“I’ll drive a shitty car until the day I die if it means I can travel,” she said.
