You had your best-laid plans and then COVID-19 came along and hammered the entire economy. But you’ve got this – if you have the right information. Join Rob Carrick and Roma Luciw on Stress Test, a podcast guiding you through one of the biggest challenges your finances will ever face.
Rob: So you spent more than usual on something you really, really wanted, at least in the moment.
Roma: Hopefully, that splurge brought you lasting joy, but maybe it led to feelings of regret and a depleted bank account.
Rob: Welcome to Stress Test, a personal finance podcast for millennials and Gen Z. I’m Rob Carrick, personal finance columnist at The Globe and Mail.
Roma: And I’m Roma Luciw, personal finance editor at The Globe. Today we’re talking splurges. We’re all human. We all indulge from time to time. Isn’t that part of the reason we work so hard?
Rob: While splurges can be good for the soul, they can be very bad for your wallet. How can you plan for splurges in a way that doesn’t wreck your finances?
Roma: I think it’s important to note that splurging has been around for a long time, right? It’s not new, but it does seem to have amped up since the end of the pandemic. Everything from trips to restaurants to handbags to concerts, it’s like times are tougher than ever and people are doubling down on that by splurging. Rob, how do you think splurging has changed in recent years, and have we kind of gone a bit overboard with all the spending?
Rob: I put it all down to the pandemic, which we can blame for pretty much everything bad happening. People were locked up, and when things opened up, there was this revenge spending trend, and now it’s become FOMO, fear of missing out, and it’s become treat yourself, and it’s become experiential spending. And I think it’s just sort of snowballed and it’s become a big thing. And I think it’s just become an accepted piece of our spending as we’ve got to have our splurges. And I think, yes, it has become too big. I mean, I want everyone to have a splurge. I want everyone to reward themselves for all their hard work. But it has to be within reason. And I think we’re losing sight of that a little bit.
Roma: Yeah, we’re like in a revved-up version of spending, and everyone’s constraints seem to have just dropped off. Right? We’re all go, go.
Rob: Yeah, I think we’re evaluating the experience and do we want to have that, not what the cost is.
Roma: Now, one of the things that’s interesting about personal finance is that there’s this undercurrent of denial in that we never talk about spending, right? We talk a lot about saving. We talk about investing. We talk about the kinds of things you’re supposed to do. But obviously, people spend their money. That’s why we do it. You know, the problem is when the spending spirals out of control, what it leads. Stress and anxiety. I mean, part of the issue is that everything is just so expensive now. Why isn’t that stopping people from spending, Rob?
Rob: It’s almost like we’re becoming accustomed to spending more and being stunned at how much things cost. And when we find out how much our splurge is going to cost, we just go, okay, well, and pay more for everything else. So this seems okay to me.
Roma: Our first guest certainly has no regrets about her splurge even if the haters are going to hate her spending habits.
Naomi: Hi, my name is Naomi. I’m 30 years old, and I live in Mississauga, Ontario.
Rob: Naomi is a pediatric nurse with one large ongoing splurge.
Naomi: So my relationship with Taylor Swift has been a long one. I’ve basically been a fan since the beginning. So basically, my big splurge, I guess, would be considered Eras tour tickets. I’ve gone to four of the American shows so far, and then I have two Toronto tickets.
Rob: Eras Tour tickets are notoriously costly and hard to come by. Naomi has run the gamut in what she’s willing to pay.
Naomi: The cheapest ticket that I got was the obstructed View Nashville seats, because they were also at the very back of the stadium, the last row. So those were about $100 Canadian. And then the most expensive tickets that I bought were for Detroit. They were in the 100 level. Those were $658.
Rob: All told, Naomi says she spent about $3,000 on tickets for the six shows. But the costs don’t end there. She estimates she spent an additional $2,000 on flights to Nashville, gas money to Detroit and Cincinnati, hotels, Ubers, food, merchandise, and, of course, a visit to the Taylor Swift exhibit at Nashville’s Country Music Hall of Fame.
Naomi: My friends and I did go in kind of with a budget. And then when we saw how expensive the tickets were and what the ticket prices were looking like for each section, we were like, okay, we just kind of have to do this if we want the tickets and then we can think about it later, especially like the tickets that I got in Detroit that were over $600. I didn’t necessarily want to spend that much money on tickets, but that show was my friend’s birthday show. And we’re like, okay, well, we need to be there on her birthday, so we’re just going to buy the tickets and then we can regret it later if we regret it or we won’t regret it because we’ll have the best time. And she’ll celebrate her birthday with Taylor. My friends and I would take turns putting tickets on each other’s credit cards. So then it kind of evened out because I usually go to the shows with the same with the same people. And then we would just work out the difference and then have payment plans towards each other. If somebody wouldn’t like to pay the full amount right away.
Rob: For those of us who aren’t swifties, I’ve got to ask, why spend all this money to go to the same concert multiple times? Especially when it stretches her budget?
Naomi: I’ve always been the type of person to go to multiple Taylor Swift concerts. She was just like pulling everybody’s heartstrings, playing stuff from her first couple, music from her first couple of albums. And it’s kind of like a celebration of like, her career, but also a celebration of just all the memories that you had if you were a fan when you were younger. There’s definitely been times where after, like buying tickets or buying everything or getting ready for the shows, I’m like, Well, this is more expensive than I thought it was going to be. But it’s not even like it’s regret or buyer’s remorse. But then I guess if there’s, there were times this summer when I went to all these shows, and then I also had a lot of weddings that I was going to. So when I was trying to buy like dresses to go to the weddings, or I was like, or I was like taking up money to give like, those wedding presents, I was like, Man, this would have been a little bit easier if I didn’t spend all that money at Taylor Swift. But then it wasn’t a regret because concerts and Taylor Swift concerts, in general, are like my happy place. So I would rather be doing that than doing anything else.
Rob: Naomi feels like she deserves the experience after the pandemic lockdowns. The concept of revenge spending to make up for lost time feels real to her.
Naomi: Like I’m a nurse. So I was working throughout the pandemic and didn’t really have very many outlets, I guess, on the frustration and just like the difficulties of working in health care during Covid. And then to top it all off, like everything being canceled. So concerts or just trips that you had during Covid were canceled that when asked for tickets were announced or I was kind of like, okay, like, why not? You worked hard. You deserve it. You never know when something like this is going to happen again. So you may as well just have fun. While I have while I’m capable and while I’m able to go and do something, I was like, I may as well just take advantage of it now because like, you never know like what’s going to happen if you’re not going to be able to go, if you’re going to be able to go to a concert again or if you’re going to be able to go on vacation or do what you like.
Rob: Well, she has no problem justifying her splurge. She knows not everyone understands it.
Naomi: There has been judgment about concertgoing and how many concerts or just like the money I’ve been spending on Taylor Swift from outside. Mainly, it’s just people that don’t really understand or don’t have like that one thing that they can like they want to do sport. Like I find that a lot of sports fans get it because they splurge and they spend money on going to games. But there’s been some people like coworkers or just random people that are like, oh, like you’re going. You’re going again. Like, I don’t know how you can afford it. What are you doing that you’re able to do this? But I also live at home, so I’m not paying for rent. So the money that, like people are paying for rent, they’re using on rent, and I’m using on Taylor Swift, I guess. And I’m just able to budget or like put aside money because I know this is something I want to do and if I didn’t have the money to do it, I would be pretty sad about missing out on it. I do have savings and investments, and then I’m also paying for my house. So I do have money going towards that and I am looking to move out. So I am saving money for that as well. But I have my regular savings fund. And then I also have a Taylor Swift savings fund.
Rob: Whether it’s a sports fan buying season tickets or a Swifty buying seats at a concert, Naomi believes splurges should be a judgment-free zone, and she has no plans to give up her indulgence anytime soon.
Naomi: I don’t think there’s ever too much Taylor Swift, but if I really, like, didn’t think I could afford it or didn’t have the money for it, I would definitely say no. Funny enough, I woke up today to an announcement of her adding Vancouver shows and I got probably two like 100 text messages about it. One of the Vancouver shows is on my best friend’s birthday, so I guess we’re going to Vancouver.
Rob: The urge to splurge is universal. Coming out of the pandemic, there’s been an uptick in spending on cheaper indulgences like lattes or Uber. Our producer, Alicia, recently asked some of her thirtysomething friends about their spending habits and how they justify splurges, big or small.
Guest 1: My toxic financial trait is that, and this is a millennial cliché, I accept that, and I don’t care, that I spend too much money on coffee. That is because the act of getting that coffee and walking in the morning and walking into the coffee shop and ordering that coffee is just like a practice I have to do before I start my job every single day. And yes, I have an espresso at home, and yes, I have milk and all the things I need to make coffee at home. I will still buy it and I will not buy the small or the tall or the smallest cup that they have because it needs to be big enough for my hands to feel the warmth.
Guest 2: My toxic trait is that I forget to return everything that I thought I would return, especially to Amazon. So see those TikToks that are like things you need from Amazon and then like, “Oh my God, let me order them”. Did I need them? No. Did I forget to return them? Yes.
Guest 3: My toxic trade is that I don’t manage my time well always running late and have to Uber to wherever I’m going, even though I live five minutes away from the subway station. Hi. I’m the problem.
Rob: After the break, we’ll hear from a financial planner who will guide you on how to incorporate splurges into your life in a healthy way.
Roma: Shannon Lee Simmons is a certified financial planner, founder of the New School of Finance, and a longstanding friend of the Stress Test podcast. Shannon, you’re a financial planner, you work with a lot of young adults in addition to older adults. How do you define a splurge?
Shannon: Oh, I feel like a splurge is when you spend money that is sort of more expensive than the day-to-day stuff of your general budget. And it is usually characterized by something pleasurable. No one’s splurging on something that makes them unhappy. You’re splurging because it’s like if it’s something that you want, and it feels good, and it’s outside the range of your daily spending really quickly.
Roma: When you hear the word splurge, what’s your first reaction? Positive or negative?
Shannon: With my job, it is inevitable that, like, mom’s on the way to drop off people at parties. I’m like, Hey, how’s it going? And then they like to confess their finances to me. It’s like, I can’t help it. I’m truth serum. I don’t know what it is. And so people like, Oh, I’ve been splurging. And then my first reaction isn’t, Oh, shame on you. It’s like, Ooh. On what? Right. Because I feel like splurges are something that says something about who you are and what you value. Because if we’re talking about a splurge that’s expensive and you’re doing it even if you probably shouldn’t. This thing is important to you. So paying attention to your splurges is actually like a form of self-identification as well. What do I really think is important at all costs? And that’s like a very cool thing about splurges. So, I can learn a lot from a person by seeing where they splurge.
Roma: Okay, so what do you see people spending money on right now?
Shannon: Honestly, everything, because everyone’s different and what’s important to other people is different. But the real ones I see are like the typical ones that I think you’d expect. So a lot of, you know, people love clothing if that’s a form of self-care for them and that’s part of their identity, they’ll still they’ll spend money on clothing even when, you know, maybe they don’t need to, or they could do it cheaper somewhere else. That’s something that I see. Obviously, concerts because they are absurdly expensive right now, and live music is something that I’ve really learned, especially post-pandemic, is really important to people’s well-being. To see live music and be a part of that, they’ll kind of go at any cost. And I was thinking about this, too. I think what’s shifting is the cost of living is rising. Things that didn’t use to be considered a splurge are now sort of falling into the splurge category because we have less cash flow on a month-by-month basis for the day-to-day stuff. So, for example, people are saying things to me like, Oh, I splurged. I went out for dinner with my friends, and I’m like, you know, maybe a year and a half ago, it would have been something that was expected to be in there. But now it’s, you know, there’s less money towards that. They’re trying to cut back. And so now that dinner feels like a big splurge in a way that it may not have even a year and a half ago now.
Roma: Have you seen an uptick in splurge spending in the last year or two?
Shannon: Yes, absolutely. And I think it’s twofold. Reason number one, as I said earlier, what’s considered a splurge is changing, right? I made the joke the other day that I splurge on red peppers. That was a joke I made to my husband. But I’m like, I didn’t get the green or splurge in Babe. And he’s like, this world. So I feel like I feel like splurging on what used to be considered, quote, regular expense is now considered a splurge. So I’m seeing the splurging frequency increase because there’s just less money. So we have to make more and more sacrifices, and therefore we’re splurging more outside of what our planned spending was because regular life is just that much more expensive. So I think that’s like the prime reason I’m seeing an uptick in what is considered a splurge. But also you and I have talked about this before. When we live in scarcity for too long with too many rules around our money like we can’t do this and you can’t do that and you can’t do that and can’t do that. And social media really lights the fire of FOMO and inadequacy, right? Well, how come they could go to the concert? How come they can do two things and I can’t? Eventually, when you reach a point, you just say, screw it, I’m just going to do it anyways. And credit cards that are automatically put into your phone and you can just hit a button on it, and it’s done. Make that moment so easy to splurge, right? We have we have technology that is geared for splurge spending. It wants you to splurge and spend everything a bit like the ring from Lord of the Rings. And so I do feel like it’s the scarcity that everyone is feeling at varying levels is also creating this “screw it” moment more and more, too, because we’re just rebelling against the whole system because what’s the point in trying?
Roma: Now, the Covid pandemic has impacted us all very deeply. We were stuck at home and I mean, we were buying things like Pelotons and scented candles and whatever those things were, maybe spending a little bit on patio furniture and stuff. But we came out of there, I think, with a different mentality. Do you see that as well?
Shannon: Absolutely. Absolutely. I’m still seeing that. I’m seeing it because people are telling me that like, we haven’t done anything for years. Like I’m going on this trip. I see it with travel a lot or those many breaks. A lot like renting a cottage or going away with friends for a hotel weekend or doing a specialty with weddings stuff to all wedding culture, things that were put on hold, like all the bachelorette parties, all the showers, all the stuff. Like all of that’s kind of geared up into overdrive, and I find it that’s a stressful thing for people to navigate. If like, all their friends who were supposed to get married over three years waited till like the last year, and then it’s like boom, boom, boom, boom, boom. So there’s a lot of that pent-up stuff. I am making up for lost time. And the thing about splurges because they’re pleasurable, right? The pandemic forced a lot of that not to happen for a long time. And now, when we make it okay, I get it, and I do this, too. I think it’s human nature. We are making up for lost pleasure.
Roma: Now, Shannon, you and I have talked about the fact that there is a level of exhaustion among your younger clients. You know, climate change is going to ruin everything. I’ll never be able to afford to buy a house anyway. You know, my salary is not keeping up with the cost of, you know, living my life. Do you think that there is an element of people giving themselves permission to be splurging because they’re just, you know, it’s just also beyond them?
Shannon: Absolutely. Absolutely. And I completely understand. When you don’t think that there’s a point in trying, then why would you try? Right. And so you can be on your best financial behavior. As things become more and more expensive, your best financial behavior is literally doing nothing. It can feel like that. I don’t know that it’s true, but I think that’s how it feels. And I think that social media gives us this window into other people’s lives. So it looks like everybody else is doing okay, and you’re not, which breeds resentment when you resent your own financial situation. Is that like a number one red flag for me when I hear people talking about that, that at some point it’s just going to be splurge spending with no remorse because what is the point of trying? And so I do think that as life is getting more and more expensive and harder and harder, the permission is there because you’re going to wait for years to go on a trip to save your 50 bucks a month. Do you know, I mean, are you just going to go and figure it out later? And I kind of get it. I understand.
Roma: So, how do you see the increase in splurges impacting your client’s finances?
Shannon: The only place splurges show up is on credit cards. And it has always been that way. But again, it’s the frequency of splurging that I’m seeing. So the overspending month after month after month is 300 bucks here, 200 bucks here, 100 bucks here. It’s adding up to an ever-increasing credit card that can’t be paid off. So it’s a slow grind of splurging that I’m seeing. Typically, it’s like doing a thing, trying to pay it off, then doing another thing, then trying to pay it off, and doing another thing. And it’s like a staircase almost. And I’m seeing the rolling over of credit card debt that didn’t come back down increasing. And then the other impact I’m seeing, the splurges, is people’s. As that happens, your sense of financial confidence goes down. Right? So it’s a double whammy. Not only are you carrying credit card debt that you are paying interest on, but you’re also now feeling like things are out of control.
Roma: Right.
Shannon: And that combination of feeling like I have no control and my life is now more expensive because I have these minimum payments I have to pay. It then exacerbates an initial problem, leading to more splurge spending, leading to more. Well, whatever. This is my life; I just am a person with debt. I’m not saying splurging shouldn’t happen, but it does happen, and it’s a part of our lives. But the frequency needs to chill out so that people can, you know if you have a splurge. Cool, Awesome. We all do it. Make sure you wrestle it down before we sort of do another splurge because it’s the splurge on splurge, on splurge on splurge, that is that’s really tricky.
Roma: What’s the amount of credit card debt that you see?
Shannon: A stubborn $3000 to $4000 rolling through month after month? I can tell you anecdotally, obviously, I see more than that, and I obviously see less than that. But I find that to be the magic number that no one can get; wrestle it down beyond that. And it almost is like 3000 on their credit card becomes the new zero, right? So it’s like, oh, well, as long as I get it back down to the 3000 mark, then I, you know, it’s kind of like I paid off this month. And what that actually is a recognition of is like each one of those. Larry, just maybe it bumps it up to five. And then there was another story, too. Now it’s a thousand. Now it’s 1500. Because of your daily life, you can manage, but it’s those big ones that are ever increasing on the credit cards.
Roma: How do you distinguish between an okay splurge and one that should probably be avoided?
Shannon: Can you tackle this realistically in three months if you were to pay it off? Right. So if you can preemptively, and this is the sober second thought before you hit the buy button, and this is what’s making my job so much harder in the last few years as we’ve got these pre-populated, you know, we can just press a button and arrives at your door the next day. You can do it at 3 a.m. And so if you can stop before you press buy and say, Look if I do this, can I reasonably pay this off in three months? If I reduce my spending money by, let’s say it was three in a box? Could I actually reduce my spending money by 100 bucks for the next three months and still not go into more debt because I can still save for my daily life? And if the answer is yes, I can probably do that. I mean, obviously, we don’t need to get to a granular spreadsheet for every purchase you’re going to make, but it is a thought process that you should be going through when you’re buying something that’s sort of outside the norm of your regular life. How long am I actually going to have this with me, and how long is it going to take me to pay it back? If you can tackle it within three months, then, you know, like all good, there’s always going to be stuff that we need to buy that’s outside of the regular day-to-day life stuff. The problem with the frequency I’m seeing is, " Yeah, that 300 bucks, sure, I’ll pay that off. And then, in a month, there’s another $300 purchase that is like, Oh, okay. Well, now you have to reduce by 200 bucks a month, and then there’s another $300 purchase. And so it’s like it just adds up. It’s a snowball. It’s a snowball that builds.
Roma: When you meet with clients, do you advise them to build or create a splurge budget? Like is that something feasible for people now? Talk through an ideal scenario for how this would look.
Shannon: So sometimes what I’ll have people do is if they go through past spending, highlight the things that they considered sort of spikes or splurges. Which ones do you still feel great about, and which ones do you like? That was bad. And I regretted that. That’s really good knowledge for yourself. They’re about, okay, what was happening in that splurge that you regret? Well, maybe it was done actually because I was really insecure at the moment, and I just did it for the wrong reasons. It wasn’t actually a splurge that pleased me. It was an anxiety purchase. Okay, that’s not a splurge that brings us pleasure. Let’s get those out of the way and deal with those and recognize when a splurge for pleasure versus a splurge for anxiety or a splurge for rebellion or a splurge for all the different exhaustion and convenience. Right. Like, let’s identify which one of your past splurges has been helpful for you and still like, Yeah, I’ll go into debt for that forever. Cool. I will literally do it again. And that is a happy splurge, right? Like, cool. And so then the ones where you spent money on that is like I those are things that still are part of me, and I want them to be still a part of me going forwards. Let’s plan for them. And then just put aside an amount, divide that number by 12, and then try to put it aside every month with the full acknowledgment that you’re going to spend that at some point. And then when the splurge happens, there’s a little bit of buffer between you and the splurge, right? So it’s not all on credit. It helps you feel less guilty. It helps you manage what goes on the credit card a little bit more. And there is a sense of almost heightened pleasure from the splurge because it’s like it didn’t create anxiety in your life because you had a little bit of money on the side that was supposed to do this. So you’re not eating into savings that are earmarked for the long term. This is money that’s specifically for you.
Roma: And that it’s probably a good idea to keep that separate from your regular account.
Shannon: I literally have it come out If people can make a payroll deduction or fake a payroll deduction. So, like, on payday, 50 bucks, whatever it is, doesn’t it’s not even yours. Act like it’s not there. And then, one day, it will be there for you. And there’s something also psychologically important about labeling that account, like spikes or splurges. There’s permission, right? That it’s like going there for that. This isn’t your emergency account, which can cause deep-seated anxiety if we’re dipping into our emergency savings. This money is meant to be spent on for something fun.
Rob: We get it. Splurges happen. So do credit card bills. Here’s how to make sure your big spend doesn’t leave you in long-term debt. Roma, what are your takeaways?
Roma: One. Everyone splurges, but if your little luxuries have left you in debt, it’s time to reevaluate your spending and stop hitting that buy button. Two. Ideally, your splurges will be covered by your savings. To do that funnel a small amount of money each month into a separate account labeled “things that bring me joy”. Now that’s stress-free spending. Three. Pressure to spend is all around us. Be honest with yourself about whether your purchases are really making you happier. There’s a difference between wasting money and spending on things that you value, and only you can answer that question.
Rob: Thank you for listening to Stress Test. The show was produced by Kyle Fulton, Anna Stafford, and Emily Jackson. Our executive producer is Alisha Sawhney. Thank you to Naomi and Shannon for joining us and to everyone who sent us a note about their notable splurges.
Roma: You can find Stress Test wherever you listen to podcasts. If you like this episode, please give us a five-star rating and share it with your friends.
Rob: Next week on Stress Test, young adults are having a harder time finding a job as the economy slows. Employers are regaining some of the power, and that makes it tricky to get the salary, flexibility, or position you want.
Roma: Until then, find us at the Globe and mail.com. Thanks for listening.