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Why some Canadians are cutting back on expenses to spend big on ‘lavish’ vacations

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Cost of living4:42Why Canadians Have ‘Discrete Budgeting’

Like many of us these days, Jennifer Anchan keeps a close eye on her budget. Now go to

“I tend to shop a lot before I make a decision, like buying seasonal or sale items. And I tend to use those items for a very long time. said Alta Cost of living.

When she needed a car, she bought a used 2001 Honda Accord for $1,700 cash.

“There are some scratches and dents on the outside. But she has helped me through many tough times,” she said. Anchan named it Gertrude.)

Jennifer Anchan of Wetakiwin, Alberta and her 2001 Honda Accord that she bought with cash. (Courtesy of Jennifer Anchan)

But Anchan splurges when the time and price are right, such as travel, vacations, and concerts with friends.

“I don’t tend to budget for those kinds of experiences if it’s like a road trip or camping or something. I just go with the flow,” she said.

According to new data from Royal Bank of Canada Spending Tracker, It’s not just An-chan. According to the April 6th update, Canadians are cutting back on spending on discretionary items like clothing and restaurants, but spending on non-essential services remains strong.

“Canadians continue to enjoy their vacations despite skyrocketing flight and hotel prices,” the report says, but the food trade hasn’t changed significantly. also mentions

This information has some caveats. According to RBC, the tracker uses anonymous data from Canadian clients’ credit card transactions, so this is a snapshot of her RBC customers rather than the Canadian population as a whole. That sample is sizable, according to the bank, as it can cover “tens of millions of weekly card transactions worth billions of dollars each week.”

bar chart and line chart
According to a Royal Bank of Canada spending tracker report for April 6, 2023, Canadians cut restaurant and grocery sales in March, but still spent on travel. (RBC Data & Analytics, RBC Economics)

This kind of selective indulgence is known as split-brain budgeting, says Tandy Thomas, an associate professor of marketing at Queen’s Smith School of Business.

“They will spend less on groceries. They will cut many of those daily necessities to save money and splurge on vacations, for example,” she said.

If I could travel, I would drive a bucket until I died.– Jennifer Anchan

according to Recent research by market research firm Narrative Research, 56% of Canadians have plans to travel in 2023. Of these respondents, 25% said they planned to go to the United States, 24% said they planned to travel within Canada, and 20% said they planned to travel to Europe.

There is some evidence of fragmented budgeting in the United States as well. in a poll of 2,200 Americans Conducted for The Wall Street Journal Earlier this year, 3 in 10 people said they made a “luxury” purchase in the last month. About one-third of respondents said he spent more than $100 on the purchase.

Watch: Dollarama profits soar as cash-strapped shoppers search for deals

Dollarama profits soar as cash-strapped shoppers search for deals

Sales at discount chain Dollarama surged nearly 17% as economically distressed Canadians hunt for bargains amid high inflation. However, his chain of bargain stores is also immune to inflation and faces stiff competition from rivals.

save money and splurge

Anchan tries to cut back on her daily expenses and spend more on narrower categories of spending. Her personal care items such as perfume, skin care, and hair care are also included, but mainly related to experiences such as travel and events such as concerts with friends.

“My main love language is quality time. , I’d rather do it because it’s still just as important, because there’s something to remember.”

Still, she tries to be as careful as possible. She researches her travel deals on Alberta-based deals forums.

“I’m generally the type of traveler who takes destinations for anything that sells,” she said. “I am China, Estonia, [the] Netherlands—$500 round trip. ”

“Revenge spending”

The trend of fragmented budgeting is unusual at a time like this, when many Canadians are feeling the financial pressure of high inflation and high interest rates, said Thomas.

“These situations aren’t usually where you see consumers saying, ‘Frankly, I’m going to spend all my money on a luxury vacation,'” she said.

Profile photo of a woman with shoulder-length brown hair
Tandy Thomas is an Associate Professor of Marketing at Queen’s Smith School of Business. She says that in times of high inflation and high interest rates, it is unusual for people to save in some categories and spend heavily in others. (Courtesy of Tandy Thomas)

But years of the pandemic have changed many of our priorities and needs, especially as lockdown policies and travel restrictions have eased.

Thomas said the term “retaliation spending” might explain it.

“like [they’re saying]”I couldn’t do all these things in the pandemic, but now I’m going to do them all. Hell or tidal waves come and I’m going on this trip, I’m going to buy this stuff. I’m going to buy this stuff.” I’m going to do

Some people may have been saving money they would normally spend on travel during the pandemic, Thomas said. You can use the “little pot of gold”.

Of course, that doesn’t describe everyone’s situation. “There’s a group of consumers who are really struggling financially,” she said, and who can’t afford any luxuries.

Thomas points out that not all travel expenses are “luxury vacations,” and could be trips to see family members who haven’t been able to visit for quite some time.

Anchan will go to India soon. The last time she visited her family was in early 2020. And when I ask her if it’s worth it to buy a used one and drive a battered car, she unequivocally says yes.

“If I could travel, I would drive a bucket to death,” she said.

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