Inflation gets a lot of attention these days as the cause of the financial stress many people feel, and rightly so.
But there’s another explanation that is much harder to fix than inflation. Through the internet and social media, we’re saturated with images of people living better than we do. Better nights out, nicer vehicles, bigger houses and cooler trips. If you want to keep up, you have to increase your spending to levels that may not be sensible or sustainable.
Would it help curb the impulse to spend if you knew how people in your friend group and family afford better lifestyles than you? It might be they make more money or received an inheritance, but a likely explanation is debt. Peers of yours who live better may just owe more, or at least be more willing to use debt to finance their lifestyles.
Use our Real Life Money Launcher to calculate how to set up your savings with each paycheque
The fully loaded SUV in your friend’s driveway could mean payments close to $1,000 per month and a loan term of seven years. Lux vacations could mean lingering credit card balances carrying an interest rate of 20 per cent. People who own houses or condos may be financing their lifestyles with a home equity line of credit, which currently carries an interest rate of 7.7 per cent or so. I recall an acquaintance telling me they had paid off their mortgage. I asked if they had a HELOC balance and the answer was along the lines of, ‘yes, for sure, of course.’
In a survey commissioned by the financial software company Intuit, 62 per cent of participants said they felt less prosperous when they compared themselves to others. Among the Gen Zs in the survey, the comparable number was 76 per cent.
It’s beyond the scope of personal finance to help people feel satisfied with what they have, so let’s try something else. If someone in your world is living larger than you, consider the debt angle. They may not be able to afford the great stuff they’re buying or doing – they’re just more willing to live beyond their means.
Subscribe to Carrick on Money
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
Rob’s personal finance reading list
Mom and dad are downsizing
Advice for the adult kids of parents who are selling the family home. Great take on storage units from the owner of a Calgary company that specializes in downsizing: “I’m sorry, waste of money.”
Unappetizing news on food
Someone has compared grocery store flyer ads from 2019 and 2024. Everyone knows grocery prices have soared, but seeing these numbers really drives it home.
A personal finance writer on the decision to retire
Liz Weston, a popular U.S. personal finance columnist, talks about the thinking she did before making the decision to retire, and how difficult it was to make the jump.
The dreaded dividend cut
Dividend cuts are rare, but they do happen when companies decide they must conserve cash. Here’s a summary of Canadian companies that have cut dividends, with an additional list of companies that are stretching to pay their current dividends.
Ask Rob
Q: I’ve just about had it with Aeroplan. My latest attempt to book something with points has me really frustrated and I’m thinking of ditching my Aeroplan-linked credit card. I’ve heard that you shouldn’t cancel credit cards – not sure why – something about credit score. But I really don’t want to be paying an annual fee for something I’m not using. Advice?
A: If you cancel a credit card that you’ve had for a long time, you could negatively affect your credit score. It helps your score if you have long-standing card accounts with timely payments. If you have other long-term cards besides the one linked to Aeroplan, your score may not be affected much. And even if it is, the net effect may be minimal if you have a strong history of paying what you owe on time. Suggest you look hard at ditching the card to save the annual fee.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Tools, explainers, guides and charts
For RRSP season, a guide to retirement income produced by a financial advisory firm. Resources like this are often just an attempt to prospect for new clients, but here we have some useful information.
The Money-Free Zone
I hear people say they have trouble focusing on reading a book because of online distractions. Can I recommend three books that will grab and hold your attention the old-fashioned way – with great writing and stories? The three, which I read in the past six weeks, are Birnam Wood, The Heaven & Earth Grocery Store and Prophet Song. I’m still replaying scenes from Prophet Song in my head.
Watch this
Introducing Vivian Tu, a young American personal finance influencer known as Your Rich BFF.
On social media
For people with variable-rate mortgages and home equity lines of credit – a post on X with a list of dates on which the Bank of Canada can change its trendsetting overnight rate.
What I’ve been working on
- Credit card issuers quietly offer bonuses to keep clients
- Homeowners are getting a tax hike, but not the one they feared most
- While the Bank of Canada stands pat, interest rates for savers, investors and borrowers are changing fast
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Why millennials and Gen Z are Alberta-bound for a more affordable life • Rising interest rates brought pain for new homeowners – and opportunity for house hunters • Why more Canadians are choosing to be childfree or delay parenthood • Love in the time of inflation: How to manage rising costs when dating • You're not bad at money – you're suffering from money shame • Retirement might look different for Gen Z and millennials. Here's how to plan for it • Recession-beating tips for the job market, housing, investing and the cost of life • Is the middle class dead for millennials and Gen Z?
- ✔️ The housing file: A house isn’t special. Get your head straight about the reality of home ownership • The good, the sad and the unaffordable: Saving for a home downpayment in Canada’s big cities • Property taxes are popping in some cities – how worried should you be about other tax hikes? • Our other real-estate problem – people have too much wealth tied up in houses • Borrowers and savers, here’s how to time the eventual rollback of interest rates
- 📈 Investing: Canada's top digital broker is TD Direct Investing, with an assist from the TD Easy Trade app • 2023 Globe and Mail ETF buyer's guide part one: Canadian equity ETFs • For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio • Yes, there is risk in Canadian bank deposits for the unwary and complacent • CDIC covers bank deposits, but who protects your investments if your broker goes bust? • Answers to your questions about the low-risk ETF paying almost 5% • Happy fifth birthday to one of the all-time best investing products for everyday people • An investing strategy that wins cleanly over the long term by outperforming in bad years like 2022
- 💰 Your money: Mortgage holders, savers and GIC investors, it’s time to change your thinking on interest rates • How much debt is each generation of Canadians carrying, and how do you compare? • For the sake of their financial futures, young people should leave Toronto and Vancouver • This practical new spin on a savings account might just peel you away from your big bank • Rental fraud grows amid rise in fake, falsified tenant applications • Are Canadians worse off financially now than in the 1980s? • From groceries to auto loans, here’s how much more it costs to live right now • When saving for retirement, should you change your asset mix over the course of your career? • Do retirement income needs always rise alongside inflation? Not necessarily • When the bank suggests you lock in your variable rate mortgage, it has an angle
Rob Carrick