Why some Canadians are cutting back on expenses to spend big on 'lavish' vacations

Like a lot of us these days, Jennifer Anchan is keeping a close eye on her budget. She buys from online marketplaces selling second-hand goods on Facebook and Kijiji, and has been going to the dollar store more often than before.

"I tend to shop around before I make a decision. So kind of, you know, buy what's in season or buy what's on sale. And I tend to use those items a really long time," Anchan, a peace officer in Wetaskiwin, Alta., told Cost of Living.

And when she needed a car, she bought a used 2001 Honda Accord for $1,700 — in cash.

"It has a few scratches, has a few dents on the outside. But she's got me through a lot of tough times," she said. (Yes, the car is a "she" — Anchan named it Gertrude.)

But Anchan will splurge on travel, vacations and concerts with her friends when the time and price is right.

"If it's something like a road trip or going camping or something, I don't tend to budget for those types of experiences. I kind of just go with the flow," she said.

According to new data from the Royal Bank of Canada's spending tracker, Anchan is not alone. Its April 6 update said Canadians are cutting back their spending on discretionary goods like clothes and restaurants, but spending on non-essential services remained strong.

"Canadians continue to indulge in holidays despite higher flight prices and hotel costs," the report reads, while also noting that grocery transactions did not significantly change.

The info comes with some caveats: RBC says its tracker uses anonymous data from credit card transactions of its own Canadian clients, so this is more a snapshot of RBC customers than of Canadians at large. That sample is considerable, as it can cover "tens of millions of weekly card transactions worth billions of dollars each week," according to the bank.

Tandy Thomas, associate professor of marketing at Queen's University's Smith School of Business, says this kind of selective indulgence is known as split-brain budgeting.

"They'll cut back on grocery spending. They'll cut back on a lot of those everyday necessities to save money, and then they will spend lavishly on a vacation, for example," she said.

According to a recent survey from market research company Narrative Research, 56 per cent of Canadians had plans to travel in 2023. Out of those respondents, 25 per cent said they planned to go to the U.S., 24 per cent planned to travel within Canada, and 20 per cent had plans to travel to Europe.

There's some evidence of split-brain budgeting happening in the U.S., too. In a poll of 2,200 Americans conducted for The Wall Street Journal earlier this year, three in 10 said they purchased a "luxury good" in the last month. About a third of those respondents said they spent more than $100 on the purchase.

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