Revenge spending may not be so sweet after all

They say the best revenge is living well. After over a year inside, Canadians seem to be taking this to heart with a phenomenon called “revenge spending”; the brazen new buzz phrase for spending money on all the things we couldn’t do while we were relegated to our homes.

A recent report indicated that Canadian households managed to save an accumulated $212 billion in 2020. (For context, this is $184 billion higher than the before times.) Whether it was conscious penny pinching, or a side effect of not living the lifestyles we were accustomed to, many of us are coming out of the pandemic with our savings burning a hole in our proverbial pockets. This, paired with the country slowly opening up is creating a perfect storm for spending to make up for lost time.

Spend smart

Experts say it takes just over two months to develop a habit. So it makes sense that after more than a year, we’ve become accustomed to our pandemic budgets. As the world opens up, it’s important to remember the expenses that will re-appear as life slowly normalizes. Money expert Melissa Leong suggests making a list of the costs that will be coming back to your budget so you aren’t caught off guard when expenses ramp back up. And hey, this is a great opportunity to examine which expenditures you must keep and which you can continue living without.

If your post-pandemic plans include taking to the skies, we’re willing to bet you have some points racked up you could put towards your adventure. Now could be the best time to put them to use. If you’re planning a trip to The Wizarding World of Harry Potter, it doesn’t mean you have to say “wingardium leviosa” to all of your savings. Earmark a date for your trip and give yourself a savings goal in order to get there. (Just like in the “before times”!)

Give yourself some credit … or not?

Revenge spending doesn’t seem to be limited to spending funds we already have. The Bank of Canada rate is at a historic low, making it easier for many to obtain credit. But before taking out a line of credit or racking up your credit card to pay for your revenge trip abroad, take some time to think about how long it might to take to pay off. It’s best to avoid borrowing more than you need to just because the rate is low. After all, whoever said the best revenge is living well probably wasn’t talking about high interest debt.

All that said, if you’re determined to revenge spend, spend smart. Consider making a list of your revenge spending dreams and really analyzing it. What stands out the most; a trip, fancy dinner out, or spa weekend? Choose one, treat yourself, and support a local business when you can.

Better than revenge

If you’re looking for a smart alternative to revenge spending, how about revenge planning? It might not sound quite as exciting, but the rewards may be worth it. A few things you can try:

• Chances are over the past several months, maybe with the help of Tik Tok, you’ve gotten pretty good at cooking for yourself. Can you keep up your healthy at-home cooking when you head back to the office? It might seem like a no-brainer, but considering the average Torontonian spent close to $300 monthly on dinners out and ordering in pre-pandemic, that’s a sizeable chunk of change you could be funneling into your RSP, simply by taking some time out of your Sunday to meal prep.
• If you were able to contribute more to your savings this past year because you weren’t spending on dinners out, travel, or other activities, consider if you can continue this level of saving in the future.
• Is your workplace going remote-first or hybrid? Think about diverting the amount you used to spend commuting to your savings.
• Are you one of the many Canadians who contributed to the 172% Peloton sales surge in 2020? Say farewell to those gym membership fees and move that budget line over to your TFSA.