It's the season to spend
It’s the season to rack up the credit card debts through shopping for that “perfect gift” for your loved ones and participating in numerous social events over the holidays. This coupled with fewer working hours in December and increased costs as retailers try to increase their year-end and take advantage of stressed-out last-minute shoppers, can lead to a serious financial hangover in January when the bills come rolling in. Yet there is hope for the Canadian consumer to manage his/her debt and survive the holiday spending.
With increased costs of living, it is tempting to make up the balance by using credit cards to buy us some time so we don’t have to wait to buy something, or have to say “no” to social events. Despite the fact that many Canadians have slowed down their borrowing, according to TransUnion, the average consumer debt for 2011, not including mortgages, was $25 594, which is slightly higher than it was in 2010. This may be due to global economic issues and uncertainty, but since 2004 according to an article published in The Star last week, Canadian consumer debt has reached record levels. While interest rates are set to remain stable for at least another year, if they do increase, this can mean huge financial troubles to those with high credit card debt.
It can seem normal to have credit cards, unsecured lines of credit and mortgages, since we have been spending more than ever before, but in uncertain times this is dangerous, particularly if you carry debt on credit cards.
Financial Tips to survive the holidays
Here are some tips to get you through the holidays and maintain your financial health:
- Don't spend more than you earn.
Eliminate high-interest debt.
- Be careful with your housing budget.
- Increase your payment frequency.
- Save your money.
- Invest what you save.
Do your taxes carefully.
The Vanier Institute of the Family reported last February that average family spending hit a record of 150%, which means that families are spending 150% of what they earn after taxes on debt and living costs. Everyday spending habits, such as daily coffees, can quickly eat up a family budget.
If you are carrying credit card debt, you are paying far too much interest on the money you have borrowed. Since you will save a lot of money on lower interest loan options, it is important that you pay off your credit card each month. If you can't, a home equity line of credit or a debt consolidation loan can help you save on interest, and use the savings to pay down the amount you borrowed.
Before you buy your home, or invest in a property, it is important to ensure that you have enough money to cover all the costs involved in buying a home. Costs include not only the down payment and real estate agent fees, but also several legal and closing costs. If interest rates increased by 2% could you still afford the home? It is a good idea to sit down and budget all the costs of owning a home as well, such as utilities, taxes, maintenance and other expenses to ensure that you won't buy beyond what is affordable.
Instead of paying a monthly fee on debt, why not pay off some debt with every paycheque? You can set up your mortgage and loans to be paid every two weeks quite easily, and since it is coming off your paycheque right away, it is harder to spend it. By paying a mortgage or a loan every two weeks, you decrease the amount of time needed to pay off the debt, as well as increase the number of payments. This results in savings of thousands of dollars over the years.
An easy way to save your money for emergencies or upcoming expenses is to set up a TFSA account (read more about this great savings too here: http://www.tfsa.gc.ca/), and deposit money into it with every paycheque. This is a tax-free savings account that enables you to invest your money, plus save on a regular basis. By saving only $25 a week, you will accumulate $1300 by the end of the year, plus interest. This habit of saving money weekly can be a HUGE benefit in the long run, plus it makes sense to save for financial needs, rather than just borrowing to cover the costs.
Too many people put all their money into savings accounts and never think about investing beyond that. A TFSA account will pay more interest, as will GIC's, or guaranteed investment certificates pay more interest, and will lock up your money for longer periods to help you save more. (For a review of rates, check out: http://money.canoe.ca/rates/gics.html. ) Property and mutual funds are other investment vehicles that can help you attain more financial freedom.
By investing in RRSP's and managing your taxes carefully, you can also save more and reduce your debt loads. We all work too hard to have our money not go far enough to support our families. By careful tax preparation with the help of an accountant, you can save on the income tax you save, and put your tax refund down on your debt to reduce the amount you owe.
Consult the Specialists
As the holiday season comes closer, keep in mind that January and its bills are right around the corner. This doesn't mean you can't celebrate with family and friends, but it requires you to spend carefully and manage your money well.
With the help of a Mortgage Broker, you can discover how you can take advantage of lower interest rates and consolidate your debts.
The One Stop Mortgage group is always available to assist you in finding the best loan to fit your needs. Give them a call at 604 874 8988 or 1-877-874-8988 or email them at firstname.lastname@example.org. The team of Mortgage Brokers at One Stop Mortgage can find the best mortgage, home equity loan or debt consolidation loan package that best fits your needs and helps you to become more financially stable and get your life back.