What Canadians are spending their disposable income on

For this week’s top story, we’re looking at how Canadians are changing their discretionary spending to cope with rising prices.

We double-dog dare you to have a conversation about groceries and not talk about the prices. Same with used cars. Gas. Condos. You can’t do it. It’s impossible. With inflation and fees rising, it’s tough to avoid feeling the pinch. Have high prices impacted the way Canadians spend their money? You betcha. And we investigated it. An analysis of Neo Financial source data—millions of transactions, anonymized to protect privacy—offers an illuminating snapshot of how Canadians are actually spending right now and what they’re starting to cut back on. The biggest takeaway: Spending hasn’t stopped. But it seems to be splitting. The data suggests essentials and fixed costs are eating up more of the household budget. 

Some Canadians appear to be stepping back from discretionary spending altogether, with lifestyle categories—think shopping and concerts—slipping. (BTW, why are concert tickets so expensive now?) Meanwhile, those who can afford to spend are paying more per purchase. 

It’s not an across-the-board belt-tightening. The numbers point to something more uneven: a growing gap between households that still have room in their budgets for extras, and those that don’t.

We dug into the data—and got insights from a few experts—to understand what the spending shifts might reveal about the financial reality Canadians are navigating right now.

A look behind the numbers

To get a clearer picture of how spending habits are shifting, Neo Financial analyzed anonymized transaction data from its clients, comparing discretionary purchases made in 2024 and 2025. The analysis focuses on categories like shopping, dining, travel and entertainment—the kinds of purchases people tend to cut back on when budgets get tight. It doesn’t include purchases made with cash or other payment methods. In other words, the results offer a snapshot of spending behaviour among Neo clients—not a complete picture of everything Canadians are buying.

Fewer Canadians are spending—but those who are, are spending more

The first big shift shows up in discretionary spending. The number of active discretionary spenders dropped by about 20%, while the average discretionary spend per user jumped by close to 37%, according to the data. That suggests some Canadians are cutting down on optional spending—while those who can afford to spend are absorbing higher prices.

“What we might be seeing here is a bifurcation—a splitting—of spending,” says David Macdonald, Senior Economist at the Canadian Centre for Policy Alternatives (CCPA). “In other data, we’re seeing that renter households are much more likely to be defaulting on consumer debt. Prior to defaulting, there’s going to be a large cut in discretionary spending.” In other words, the higher cost of living may be leaving some Canadians with little room for flexibility, pricing them out of discretionary spending. Meanwhile, those who can still afford to treat themselves here and there are paying more for it.

“This speaks to the growing wealth and income inequality in Canada,” says Janine Rogan, financial educator, CPA, and founder of The Wealth Building Academy. “The discrepancy between lower- and middle-income households and those earning more continues to widen.”

Canadians are cutting “fun” spending first

When Canadians are forced to make trade-offs, lifestyle spending is often the first to go.

Neo’s data shows spending in the “shopping” category fell about 26% year over year. As well,  several lifestyle categories saw low retention; among people who purchased in 2024, only a fraction returned to spend again:

• Jewellery: 26.4% of Neo clients continued spending
• Stadiums and live events: 23.7% continued spending
• Electronics: 40.4%continued spending
• Sporting goods: 40.9% continued spending

That doesn’t necessarily mean Canadians have lost interest in those things; it’s the price tags that have changed. Inflation and post-pandemic cost recovery have pushed many discretionary purchases into a new price bracket. Tickets, events and big purchases increasingly carry costs that feel closer to a mortgage than a one-off indulgence. “For people spending the majority of their income on necessities, it becomes harder and harder to actually have money left to enjoy things,” Rogan says. 

Put simply: some Canadians still have room in their budgets for extras. Others don’t. When budgets get tight, lifestyle spending is usually the easiest category to cut.

Is convenience the new luxury?

On the flip side, Canadians still appear willing to spend on things that make daily life easier. Neo’s data shows some of the highest year-over-year retention rates in categories that save time and effort.

Among Neo clients who made purchases in these categories in 2024, a majority returned to spend again in 2025:

• Fast food: 67.1% of Neo clients continued spending
• Services: 66.5% continued spending
• Restaurants: 65.1% continued spending
• Food delivery: 60.8% continued spending

Tired? We feel you. “Canadians are exhausted,” Rogan says. “There are so many micro-decisions people must make every day. After a long day of work, commuting and responsibilities, convenience wins.” People may skip the shopping spree, but they won’t cut dinner delivered to their doorstep when they’re wiped out. (Are you paying the convenience tax?)

“It’s incredibly easy to purchase something on Uber Eats or Skip,” Rogan says. “Your credit card is already saved in the app — and you’re not even really feeling the impact of the payment in the moment.”

The quiet budget killer: expenses

If Canadians feel squeezed right now, a major reason is that everyday costs are swallowing up more space in the budget. Neo’s data shows spending in the “expenses” category is nearly three times higher year over year, outpacing most discretionary categories. These expenses include costs Canadians can’t easily avoid, including housing, insurance, utilities, transportation and fees. And housing alone appears to be swallowing up a big chunk of Canadian budgets. 

“Housing costs are what have changed,” says Macdonald. “Rents are still rising at roughly twice the rate of inflation. And the rapid jump in interest rates from historic lows has put similar pressure on mortgage holders.” In cities like Toronto and Vancouver, you need to earn more than $40 an hour just to rent the average two-bedroom apartment—without spending more than about a third of your income on housing, he adds. 

Mortgage holders are feeling the pinch too. Even if mortgage interest rates today are still lower than what some previous generations faced, the size of the debt is dramatically bigger. “A small percentage of a big number is still a big number,” Rogan says. “People talk about 17% mortgage rates in the past—but that was on a $100,000 home. Today we’re talking about mortgages that are several times that size.”

A $100,000 mortgage at 17% works out to roughly $1,400 a month over 25 years. A $1 million mortgage at 4%—a much lower rate—is closer to $5,300 a month. This could help explain why Canadians still appear to be spending but feel increasingly stretched: more of their money is being redirected toward obligations.

“I suspect as rent and mortgage interest costs explode, housing is eating discretionary spending,” said Macdonald. “For those without mortgages and/or with rapidly rising wages, this is probably less of an issue, meaning they can afford the higher prices on discretionary items.”

Travel takes off

Travel is one of the few discretionary categories still showing clear growth. Travel spending increased 32% year over year, even as Canadians pulled back in other discretionary areas. 

But that increase doesn’t necessarily mean Canadians are travelling more. “Travel spending is up, but that isn’t necessarily good news,” says personal finance and travel expert Barry Choi. “Prices for flights, hotels, transportation and even dining have climbed steadily over the past few years, pushing the overall cost of travel much higher.” In other words, rising costs driven by inflation and post-pandemic pricing may be pushing spending higher, even if Canadians aren’t traveling more often. 

“What used to feel accessible now feels like a luxury,” says Choi.

How Canadians are spending their disposable income

Canadians haven’t stopped spending, but they’re becoming far more selective about what stays in the budget and what goes. Higher costs are forcing some households to prioritize essentials and convenience while treating discretionary purchases more carefully. And Rogan says the pressure people feel right now isn’t always visible on paper. “Even people who are doing well—their net worth is increasing, they own their homes—on the day-to-day, their cash is feeling constrained,” she says. 

That tension may help explain the new shape of Canadian spending: fewer impulse buys, more trade-offs—and a rethinking of what’s actually worth paying for.