Some people are savers. Some are spenders.
Corinne Winnett falls squarely into the latter category. While the 31-year-old designer purse aficionado would not reveal the value of her 50-something handbags, her collection includes such designers as Burberry, Gucci and Marc Jacobs.
Ms. Winnett, a Toronto-based regulatory specialist for a chemical company, admits her savings are “not that high” outside her RRSPs. “I’d say, for the most part, I’m in my spending years. I do have a savings account, though,” she said, adding: “I’m more proud of my purse collection.”
Andrea Hagman falls on the other side of the spectrum. “I guess I'm more of a saver. I don't like debt of any kind and I hate buying things at regular prices if I can get them for less,” says the mother of two girls.
Ms. Hagman, 36, has paid off her minivan and the mortgage on her house in Markham, Ont. “I would like to put more towards savings in the future, but am comfortable with where we are right now.”
Finding a good balance between spending and saving is tricky but rewarding, says Patricia Lovett-Reid, senior vice-president of TD Waterhouse. We know it's important to save for retirement, but the instant gratification of shopping can sometimes trump the peace of mind that comes from long-term investing, she said.
Making money is always in vogue. It never goes out of style. — Patricia Lovett-Reid, senior vice-president of TD Waterhouse
“It’s pretty challenging. We all like to add a little zip to our wardrobe with the latest trend. And I think people will do that with their portfolios and that’s fine, but it’s the tried and true that get you through year after year.”
The Canadian debt to disposable income ratio has risen from 0.90 in early the 90s to 1.47 now. In addition, only 31 per cent of eligible tax filers contribute to RRSPs, and only 6 per cent maximize their RRSP contribution room. Our personal savings rate has fallen from a peak of 20 per cent in 1982 to 10 per cent in the 1990s and 4.6 per cent at end of 2009.
“I don’t want people to save until it hurts but I don’t want you to spend as if there’s no tomorrow,” Ms. Lovett-Reid says. “And like most things in life, moderation is the way to go. But I will say making money is always in vogue. It never goes out of style. When styles come and go and you’ve got a financial foundation, I think that’s pretty stylish.”
So how can a shopaholic get motivated to start saving? Think of portfolio building as hunting for that little black dress, says Ms. Lovett-Reid, with investment-grade bonds and blue chip dividend-paying stocks as your portfolio wardrobe essentials.
“We’ve got the staple that sees us through events, that sees us through when you don’t know what else to turn to. And that’s what a good portfolio will do.”
Not sure where you fall on the spending spectrum? TD Waterhouse has come up with a quiz to help you figure it out. When you’re done, check out your financial institution’s online savings tools or TD’s retirement calculator to see how much you should be saving to reach your goals.
Quiz: Are you a shopper or a saver?
1. It's mid-winter and you are faced with wearing the same sad, old sweaters that you wore last year. You need a change. You…
a) Give away all your old sweaters and replace those empty hangers with a brand new wardrobe. Gotta look your best!
b) Hit the shops and buy two sweaters on sale and a belt to spruce up some of the ones you already own. You're set for the rest of the winter.
c) Buy a bottle of wine and host a clothing swap. Your new wardrobe was nearly free!
2. Your friend is heading to Paris on business and suggests you join her for a long weekend of fine dining and couture. You…
