As lockdown restrictions ease and more vaccinations are doled out, many Canadians are eager to make up for lost time when it comes to their spending.
The term “revenge spending,” has made headlines, explaining why people may be eager to splurge on consumer goods or experiences they cut back on or skipped altogether this past year.
In the U.S., where restrictions have been lifting faster than in Canada, most spending is happening at beauty and nail salons, sporting goods stores, restaurants, apparel and clothing stores and car dealerships, according to a recent pandemic recovery report by TOP Data.
The term “revenge spending,” was new to Liz Schieck, certified financial planner at the New School of Finance, but it’s a phenomenon she’s familiar with, especially when speaking with self-employed professionals and seasonal workers who experience income fluctuation throughout the year.
“Any time a period of scarcity ends, very often it’s like ‘Woohoo, make it rain. I want to do all the fun things,’” Schieck said. “It’s a natural reaction to not being able to do anything.”
Although all demographics may be feeling the urge to celebrate and spend, young people in particular may be motivated by the sense that they were robbed of precious time, Schieck said.
“This is the time where they want to go out, they want to go to bars, they want to go concerts, they want to do lots of travelling, and they want to see their friends. A lot of people are very social during this period of their lives, so I think that’s really been missed and that makes sense.”
Allie Bly, a 31-year-old Toronto-based employment counsellor, is eager to dine out with friends, grab cocktails at her favourite bars, attend concerts, museums and galleries, and visit her friends and family back home in Ottawa once she’s finally done hunting down her second Pfizer dose.
“When things are safer to get back out there more, I’m definitely concerned about doubling down on my spending in that I’d keep my pandemic habits, like spending more money on groceries and online shopping, while also spending money on going out and trips home,” Bly said.
“If I did that, I might wind up using more of my savings to cover those costs instead of keeping that as a little nest egg of money or investing a certain amount.”
When people get a job promotion or celebrate a birthday or holiday, they can tend to overspend but there’s a clear end period to that spending, said Avni Shah, an assistant professor of marketing at the University of Toronto and a research fellow at Behavioural Economics in Action at Rotman School of Management in Toronto.
“Where this is a little bit interesting and a little bit more dangerous than typical cases is it’s not just this one-time event,” she said.
Now there is an urge for people to spend once they’re fully vaccinated, perhaps when a partner is vaccinated, and then as each good friend gets vaccinated, and so on.
“There are more and more opportunities to go out and celebrate and it’s staggered,” Shah said, which makes it easier to go a little overboard when spending.
Shah’s advice is to make deliberate choices around spending, especially when it comes to material goods. She recommends making a list and asking yourself “What am I most excited about?” as lockdown measures lift.
“Deliberately search for those items rather than impulse buying, which can get us into trouble,” she added.
This tactic can also be applied to social, collective experiences, such as nights out with friends.
For experiences outside of that, look for cheaper options, such as one drink at a happy hour, Shah said.
Both Shah and Schieck recommend creating a budget to determine exactly just how much money you can allocate to personal services, consumer goods, big-ticket items (like travel), or experiences with friends, family or even acquaintances.
“It can be easy to forget because [spending money on going out] hasn’t been in our budget for so long because of COVID,” Shah says. “It’s not even in our habits anymore.”
This report by The Canadian Press was first published June 22, 2021.
Leah Golob, The Canadian Press