Step into Sheila Walkington’s basement and you’ll find a stationary exercise bicycle collecting dust. Now, the co-founder and chief financial officer of Money Coaches Canada in Vancouver is using the ill-advised purchase as a teachable moment for clients who are weighing short-term versus long-term financial goals.
The lesson comes at an opportune moment, too. As the COVID-19 pandemic has raged through 2020 and 2021, Canadians have tried to reduce their stress – or at least beat the languishing blahs – by spending more disposable income on self-care. Think online yoga classes, baking supplies, $5,000 Peloton bikes and class memberships, $85 meditation apps, or meal delivery services that take the thinking out of dinner prep.
According to a recent Bank of Nova Scotia survey, 70 per cent of Canadians started partaking in at least one self-care activity during the pandemic, with 60 per cent of those spending an average of $282 in the past 12 months.
Granted, some of the survey’s items deemed to be self-care are questionable. Online shopping, for one. But the overall results point to a growing trend of clients spending to “treat themselves” in response to daily stresses.
Even before COVID-19, self-care was a US$10-billion industry in the U.S. alone. Add the pandemic, with its harsh economic realities, loneliness, burnout, and health fears, and people have been enticed to turn to and pay for activities that give an extra sense of comfort and good health.
“For sure, people’s spending habits are different,” Ms. Walkington says, adding she has seen an uptick in spending on streaming services this past year – not to mention trampolines for kids, fitness equipment, and so-called pandemic puppies. “They’re not good for savings, but they’re good emotionally.”
Regardless if these expenses are good for the soul, it’s still important for financial advisors to help clients stick to their bigger, longer-term financial goals like debt repayment and saving for retirement. The trick is helping them find the right balance between those long-term goals and short-term wellness yearnings.
Ms. Walkington says she starts the conversation by talking about goals and priorities. Maybe the client wants to get fit or travel again someday. It’s a zero-sum game though – if they want to spend more in one area, they have to take that money from another disposable income bucket to pay for it.
“You can play the game, ‘Would You Rather,’” she says, “and sometimes clients will surprise you. They say, ‘We love our alcohol, but I’d rather travel and have a glass of wine in Italy.’”
Elke Rubach, principal at Rubach Wealth in Toronto, agrees that conversations about self-care spending need to revolve around setting priorities but also require a deep dive into cash flow and discretionary spending. Can clients actually afford what they want to spend? She calls it “cash flow clarity,” and it means tracking even the small, ongoing expenses.
“If you can afford it and it’s important to you, go to town. But if you can’t afford it, it’s not going to make you feel better. It’s going to make it a lot worse,” she says of overspending on self-care. “First, figure out if you can feed the puppy – then you can buy the puppy.”
People’s age and lifestyle have an impact on how spending on physical health, mental health, and wellness should be handled. Ms. Walkington says those purchases haven’t made much of a dent in retirees’ financial plans. In fact, according to the Scotiabank survey, those in or approaching retirement spent the least on self-care during the past year ($220).
Yet, these expenses have a larger impact on younger clients, such as millennials. Although they struggle to find the money for down payments for homes and families, even in good times, the Scotiabank survey found that Canadians aged 18 to 34 significantly outspent others of self-care activities in the previous year ($395).
Jacqueline Soong, a 28-year-old certified financial planner with Desjardins Financial Security Independent Network in Toronto, works primarily with young people. She says she’s not surprised by the amount younger clients spend on, or the fact they might have a different take on what constitutes, self-care. Anything that makes life better and easier is up for grabs. She often helps clients carve out budget space for expenditures like online shopping or meal delivery services as often as for online meditation classes.
“This generation, we’re more aware of mental health,” she says. “We will prioritize spending a bit more money, but being happy and comfortable, as opposed to cost-cutting.”
Still, finding balance can be tough. One of her clients spends $800 a month on therapy, a large chunk of that person’s income. Ms. Soong says it’s hard to tell the client she should save that money for something else, so instead, they try to find the funds in other places. For Ms. Soong, it’s important to be realistic and to keep her tone light and helpful, but direct.
“I’m not like the 50-year-old [advisor] who’s going to judge you for buying a latte a day, but if you want to reach your goals, then you need to know where to cut,” she says.