Discounting your delight

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This article was published 09/03/2024 (588 days ago), so information in it may no longer be current.

Take a pat on the back, Canadians consumers. We’ve set a new collective personal best — for debt.

Recent data for the end of 2023 shows we’ve collectively amassed a record high of $2.4 trillion in debt.

Credit reporting agency TransUnion released its final 2023 data for Canada’s credit market, finding Canadians like to borrow with 31.5 million individuals having at least one credit product in a nation of about 39 million souls.

“We’re seeing historic growth in the credit market, and it’s really a combination of population growth and increased need,” says Matt Fabian, director of financial services research and consulting at TransUnion Canada.

He points to many Generation Z — adults under age 30 — getting their first credit cards, along with hundreds of thousands of newcomers.

“We’ve also seen an increase in balances, spend rates and people taking on more credit products.”

Inflation — while now about three per cent compared with eight per cent in mid-2022 — has had an impact. We’re paying much more for mortgages and groceries than a few years ago.

“People are also definitely making deliberate changes to spending behaviour,” Fabian says.

That said, many continue to spend at their discretion, only maybe with more challenges, perhaps leading to unsavoury financial decisions like taking on credit card debt.

TransUnion data show credit card balances grew 13 per cent year over year to $114 billion — the only debt type showing significant growth last year.

Minimum payments increased too, up 11 per cent, an average of $114 — the equivalent of owing about $3,000 on a Visa card.

Fabian says it’s hard to know what exactly is driving debt growth.

For consumers, it likely is they are struggling to put food on the table and pay the rent/mortgage. Yet, given the middle class drives the bus of this market-based economy — and discretionary spending is the fuel — could it be we are spending on fun more than we should?

If that rings true, the solution isn’t a mystery. Spend less, save more and pay down debt. How hard is that?

Often insidiously so, given we’re immersed in a sea of marketing, playing on emotions and instincts to consume more.

Some are offering interesting solutions — like the notion of “funflation” from Ratehub.ca and MoneySense.

“We set up a guide to make fun spending a priority,” says Lisa Hannam, executive editor at MoneySense, noting cutting back doesn’t mean cutting out fun.

She suggests creating a fun budget, broken into three categories: things that are free or very close to free. The second involves affordable items and activities, and third are the splurges.

Of course, what’s affordable and what’s a splurge are in the eye of the spender.

But Hannam says “funflation” is really more about making budgeting more approachable. Otherwise, belt-tightening feels like a chokehold, squeezing out all the fun.

Some folks are thrifting their way to cut costs, showing others that the thrill of the purchase is much more thrilling with a deep discount. Among them is Dina Younis, from Akron, Ohio.

“I have a little bit of a different approach where I encourage people to shop — only sustainably and affordably,” says the millennial, noting most social media influencers skew toward hyperconsumption.

But Younis has always had an affinity for buying second-hand.

“It just stuck with me,” says Younis, whose website is Dina’s Days with similarly named Instagram and TikTok handles.

“There were periods where I did it out of necessity throughout college and when I started my family.”

Also driving her mission is sustainability.

“With the rise of fast fashion, it’s come to a point we have to do this,” she says, noting consumption — driven by the corporate need to show continual growth — is untenable economically and environmentally.

Yet consuming for pleasure is hard to shake.

A whole industry has developed around pushing our buttons so we buy even if we don’t need it.

A recent Washington Post article, written by personal finance columnist Michelle Singletary, about why living within our means is so challenging alludes to this.

It cites a metaphor describing research about the relationship between our rational and emotional minds. The rational part is a rider on an elephant, and that elephant represents the emotional part of the brain.

The elephant can be hard to control at the best of times, and even more so with advertising vying for control.

There is a term for the elephant of consumerism running amok — affluenza — which dates to the 1950s describing children who inherit wealth. Yet it became popular in the 1990s thanks to a PBS documentary and book, called Affluenza: How Overconsumption is Killing Us — and How to Fight Back.

The term was a bit “tongue in cheek” in the documentary’s development, but “it’s a good metaphor to illustrate a real issue: people getting deeply into debt by spending beyond their means” often on items they do not need, says John de Graaf, the film’s maker and book co-author.

The notion of affluenza certainly resonated in the late 1990s and early 2000s, but it’s arguably even more applicable today. Marketing is much more sophisticated and compelling in the age of machine learning algorithms and social media, he says.

“Perhaps, the biggest price people pay for affluenza and materialism is over-work,” adds de Graaf, based in Seattle.

“They work longer hours to buy all this stuff, and maybe it would be better for wellness, happiness and social connection if we had more time?”

Spend less; work less and have more time for fun.

Now, that sounds like “funflation.”

Joel Schlesinger is a Winnipeg-based freelance journalist

joelschles@gmail.com