Pattie Lovett-Reid: Don’t give in to the urge to splurge as COVID-19 lockdowns loosen
HUNTSVILLE, ONT. – Do you want a financial “revenge”?
I think I might have some pent-up revenge inside me.
Usually when we talk about revenge it can be very mean and just to annoy someone else. This revenge is a little different. The target is COVID-19, and after the many months of public health measures and lockdowns, we are ready to unleash this vengeance with vengeance.
The pent-up demand is real and is exactly what the economy needs.
As restrictions continue to ease, people are ready to splurge, especially on items and experiences that weren’t available during lockdowns.
The belief is that we will aggressively seek ways to feel good and make up for lost time.
According to Craig Alexander, chief economist at Deliotte, in his latest Economic perspective, he expects growth to accelerate sharply during the summer months and continue at a rapid pace through early 2022, as Canadians return to previously limited social activities.
He suggests that GDP is expected to grow 6.7% this year, with another sizable 4.1% gain expected in 2022.
With businesses opening up, according to Andrew Graham, CEO and co-founder of Borrowell:
âSome Canadians are excited to socialize and get together with friends at restaurants, bars and dinner parties, while others look forward to shopping in person or doing big purchases after just browsing online. Many Canadians plan their trip after being locked up. inside. Canadians look forward to these types of activities outside the home to gain a new sense of normalcy. They want to be satisfied with pre-pandemic experiences, and they may be willing to spend more to do so. “
To be fair, I understand this mentality. When the United States opened in April, there was clearly an increase in designer items ranging from handbags, accessories and even shoes.
My fear is going too far. If you can afford it, so much the better. We need you to spend, support disadvantaged sectors like the hospitality industry, and help support the Canadian economy.
What we don’t need is for Canadians to take on more debt in revenge for the pandemic.
Before the pandemic, Canadians were heavily in debt and that was a problem. It was not sustainable and it took a deadly virus to force us to change our ways.
Canadians save more, distinguish between a want and a need when it comes to spending, and in many cases are enjoying a little financial flexibility for the first time. We don’t want to blow it up now.
The reality is that debt levels are still stubbornly high, especially for those most affected by the pandemic.
So if you are planning to splurge and need to borrow to do so, proceed with caution. Here are some guidelines for maintaining a good credit rating.
Borrowell, a Canadian fintech company, suggests using 30% or less of your credit limit as a recommendation to maintain a good credit rating.
The average credit utilization rate in Canada was 43.5%, which is too high. By the way, the average revolving credit balance is $ 10,361, which means a person’s average credit limit is $ 23,818.
In other words, revenge may feel great in the moment, but a better revenge would be to lower your average revolving balance by $ 3,215 and come out of a pandemic with better creditworthiness than when you entered it.
However, I am not naive and it will not only be those with large sums of money spending a little. Since March 2020, the pandemic has taken its toll on our lives and it is fair to say whatever your financial situation is, we have all earned the right to spend time with our family and friends.
But we also all know that revenge can be bittersweet. Pleasant at the time, followed by regret.
My hope is that we don’t go back to our old ways of spending like there’s no tomorrow.