Earlier this week the Bank of Canada announced that they have maintained the overnight rate. This is the first of many announcements this year about potential interest rate changes that could impact your current and future borrowing plans.
Your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate; While fixed rate mortgages are based on the bond market.
Based on the outlook for the Canadian and Global economy, it is predicted that rates will remain fairly steady for the next few months.
With the holiday season over and December credit card bills rolling in, now might be a great time to set your New Years Resolution to consolidate debt and perhaps reduce spending! It is an unfortunate reality that Canadians are suffering from mountains of debt. In a survey recently conducted by Manulife Bank, as many as 40% of Canadians say they are living beyond their means and only 12% of respondents noted that their income was increasing faster than their debt!
So what are your options? Where do you go from here? Are you paying off your credit cards every month? Or are they piling and piling and piling? Here are some ways that you can overcome this debt struggle:
1. Start with a Budget. The number one tool to reducing debt is to be strict with a budget. We live in a society of #FOMO (Fear of Missing Out) and #YOLO (You Only Live Once), but the reality is this mindset is not helping your debt reality. Set your budget, be realistic and live within your means.
2. Prioritize Debt Repayment. Sometimes when our debt mountain seems insurmountable, you can’t even imagine where to start or figure out how to work your way out. Creating a plan and getting advice from professionals can make the debt load more realistic to tackle.
3. Work to grow your emergency fund. Even if you are in a good circumstance and financial situation, it is often the unexpected that throws everything off. When we don’t have that backup savings and are forced to borrow money to pay for unexpected costs or life changes it can easily set us back.
4. Consider consolidation. Have a consultation discussion with your mortgage professional to decide if consolidating your debt into your mortgage is an option, and if it makes sense for you and your family. Since your mortgage interest rates are much lower than credit card rates and other unsecured rates, this might be a great option to help you get on top of that debt mountain. You just need to be disciplined not to go right back to acquiring more debt! It is about changing your habits as well.
If you are concerned about your debt load and want more advice and support please do not hesitate to contact me!