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.
"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…
a) Jump at the chance. You charge the weekend to your credit card - you'll figure out how to pay for it when the bill arrives next month.
b) Check online for last-minute deals on flights and make an agreement to eat at local bistros, enjoy the free sights and window shop.
c) Review your available cash and decide to give Paris a pass. You do not want to rack up debt for a long-weekend trip.
3. How do you describe your grocery shopping routine?
a) I mainly eat out, order in or take out dinner.
b) I do a regular grocery run every week.
c) I stock up on bulk products to save money and tend to choose items that are on sale.
4. It's your sister's birthday and you've decided to have a group of friends over for a little cocktail party. You…
a) Make a stop at your local gourmet store to buy some extravagant cheeses and finger foods.
b) Go to the grocery store for some frozen hors d'oeuvres and pick up a nice selection of moderately priced wine and beer.
c) Whip up some homemade snacks and turn inexpensive red wine into great tasting sangria.
5. You see a great pair of shoes for sale online. You…
a) Buy them in two shades. With the click of a button, they're yours, since the shopping sites you frequent have your credit card number on file.
b) Take some time to decide if you really need them. If you don't have something similar … sold!
c) You pass. The shoes you already own suit your needs just fine.
6. You are off to a friend's high-profile fundraising gala. You…
a) Enter in an ensemble you saw your favourite celeb wearing in a magazine. You charge the dress to one credit card and the shoes to another.
b) Show up in a trendy dress borrowed from a friend and splurge on some new shoes.
c) Wear the same dress as last year with some new accessories - hopefully no one will notice.
7. Congratulations! You've been handed a big bonus from work. You…
a) Jump online right away and book a fabulous vacation to the Caribbean.
b) Get in the car and head to the country for a romantic weekend getaway.
c) Splurge on a great dinner out and do some online research to help you figure out the best place to put the extra cash.
Give yourself 1 point for every a), 2 points for every b) and 3 points for every c).
If you scored 10 or under: You are a classic shopaholic. You like to live like a millionaire but your bank account says otherwise. While you may not be worried now, this type of shopping may have a significant effect on your future. It is time to get savvy by creating a financial plan that lets you have some fun now without jeopardizing your financial security later on in life. Try channelling your passion for online shopping into online investing. If your dream is to retire rich, you can't be spending more than you earn!
If you scored 11 to 17: You are a responsible shopper. You stick to a budget but still allow yourself to indulge once in a while. You don't need to live a millionaire's lifestyle and don't expect a million dollar bank balance, but you know the importance of financial security - even if you don't always make the most frugal decisions. Remember that financial circumstances and responsibilities may change over time - getting married and having kids can have a big impact on your financial situation.
If you scored 18 or above: You are a disciplined shopper; cutting corners every chance you get. You definitely do not live like a millionaire but keep up the good habits and you might some day be one. Contributing as much money as you can to your future is a way to help you meet your goals and expectations and could provide you with financial security in the future.