Christina Mychas used to have an “I work hard, I deserve this” philosophy when it came to spending.

The 35-year-old pharmacist and content creator in Toronto would often spend her spare time shopping, buying new clothes, eating expensive meals, and charging vacations to her credit card.

“I think this kind of spending can be fine if you can truly afford it, but at the time I was in $120,000 of student debt and living paycheque to paycheque. I couldn’t cover a $500 surprise expense and I was not saving for retirement at all outside of the pension I was extremely lucky to have,” Mychas says.

“I was consistently adding to my debt burden because I always told myself that ‘I’d cover it later’ or ‘I’ll be more disciplined next month.’ I can say with certainty that if I didn’t have my pension to fall back on, I very likely would not have been saving for retirement on top of all that YOLO-ing.” (YOLO being short for the phrase “you only live once.”)

Mychas eventually realized she was going broke trying to “treat herself,” and was sabotaging her financial future in favour of “the now.”

According to a national research study released earlier this year by the Co-operators, a Canadian financial services co-operative, Mychas wasn’t alone in putting off long-term planning in search of more immediate rewards.

In the study, 85 per cent of financial professionals reported feeling that today’s “culture of now” is preventing people from making retirement planning a priority. That number rose to 89 per cent when advisers pointed to younger Canadians aged 18 to 34.

“They’re finding that a lot of their clients are living and spending for now more than taking the future into account,” says Jennifer Cook, a financial adviser and owner of Jennifer Cook and Associates Inc., which operates under the umbrella of the Co-operators.

While this trend existed before COVID-19, the pandemic has amplified a culture of now, Cook says.

A culture of now might include splurging on trips, restaurants, clothes or other material items — often inspired by social media, she says.

Cook clarifies there isn’t anything wrong with spending money to enjoy the present, but cautions people need to set a little money aside and keep an eye to the future.

“Social media creates a lot of pressure to keep up with the Joneses or other people’s perceived perfect lives even though we really do understand deep down that social media is just a highlight reel,” says Jarrett Holmes, a financial planner at Ironshield Financial Planning Inc.

“It creates this pressure to be able to buy things and do things that we see other people doing, but at the same time we fail to consider that person’s lifestyle may be funded with debt, which can be the case with fancy houses, fancy cars, big trips, designer clothes and whatnot.”

Online marketing is also becoming more prevalent in our lives, persuading us to buy more than we need or intended, he added. Every day, online marketing is targeting our interests based on our digital footprints and making us feel like we need the newest or latest thing.

“That leads to a lot of spending in the present at the expense of our financial future,” he says.

Shay Steacy, an advice-only financial planner at inBalance Financial Planning, says that sometimes the traditional banking industry itself can make people feel overwhelmed and crushed when it comes to sorting their financial situation in hopes of bettering their future.

“What I hear from a lot of people — and what I personally experienced when I was attached to one of the Big Five banks — is that advice is given by selling something,” Steacy says.

“I used to sit before RRSP deadline and we’d have RRSP call nights where we’d be calling people to just put money into an RRSP, and to me, it’s not the advice that’s needed.”

Whereas many people are in need of cash-flow management and debt repayment support, that’s not what makes the traditional banking industry money, Steacy says. Instead, it’s often a push toward selling more products, which may not always be suitable for the scenario.

As a result, Canadians can feel like they can’t get the support they need — or don’t have enough money to get that help — which can lead to a defeatist attitude around finances and long-term planning, she says.

A bias toward the present can also make long-term planning difficult, both Steacy and Holmes say. Studies show that we tend to have a bias toward the present and think of our future selves — perhaps 20 or 30 years away — as somewhat of a stranger. Understanding how this bias works can help people create better balance between living in the now and saving for the future.

“The desire to put money away and sacrifice today to help that person — that stranger — is very difficult for a lot of people,” Steacy says.

Steacy recommends making a plan to put away “future money” to help that future self. That “future money” could look like a tax return, a raise at work or a point in the year when your paycheque will have fewer source deductions.

People are more likely to say “yes” to putting away a future amount than to agree to a change today, Steacy says.

So, if you get a raise at work, for example, continue to spend as you previously did and invest or save that increased amount for your long-term future.

There’s also an opportunity every year for Canadians to take advantage of an increase in take-home pay, she says.

“If someone earns $60,000 or just above, they will at some point in year max out on their Canadian Pension Plan and employment insurance contributions. So, they will basically get a raise sometime in the year,” she says.

If people can commit to saving that extra amount of take-home pay when it happens, that’s one way to find a little bit of balance.

Holmes recommends people try to get over their present bias by daydreaming about the future.

“It sounds a little bit woo-woo, but set a vision for your future and actually take the time to think about what you might want your life to look like in 20, 25 or 30 years. Think about what you want to be doing, where you want to be living, who you want to be spending time with, et cetera,” Holmes says.

“Once you start to envision those things, you can develop a stronger connection to your future self, which is the antidote to too much present bias.”

It will then become easier to start putting money away for that future stranger, he says.

Mychas was able to turn her financial situation around to create a better balance by first looking at all of her bills and statements to get a clear idea of what her expenses were, and where she was actually spending her money.

She then created a monthly budget and started tracking her spending.

“I did this everyday and now I have a consistent idea of how much it costs to live my life, and how much I can save, invest and spend. When I finally got out of debt, I was able to allocate more money toward my future and start making up for lost time in terms of building my savings, my emergency fund and funding my TFSA and RRSP,” Mychas says.

She says she doesn’t pinch pennies or try to live as frugally as possible because she doesn’t consider that realistic for most people, including herself.

“I do my best to allocate funds in my budget for some ‘fun money.’ It’s preplanned spending that allows me to still be spontaneous each month without much guilt or worry. I’ve also allocated lines in my budget for saving and investing, which get withdrawn automatically every pay period so I don’t even have to think about it,” she says.

“I do go overbudget on the fun money category more often than I’d like to admit, but I think the key is really making a plan. Both fun money and saving for the future deserve a line in that budget. I don’t think it has to be one or the other.”


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