The Bank of Canada announced a 0.5% cut yesterday. This is good news, and above all a good opportunity to get our finances in order.
On the other hand, now is not the time to fall back into spending on credit. We have won the battle against inflation, but other dangers await us.
This decline especially affects our psychology. For a $500,000 home, this reduction will represent a reduction in the monthly payment of $100. It’s good. But you have to be quiet.
Sweet, sweet journey
After almost two years of financial difficulties, we are starting to see the light at the end of the tunnel. Is it time to buy a trip south on credit? Not at all. Not at all, actually.
Canadians are the champions of the G7 countries for household debt. The sum of our individual debts corresponds, on average, to 180% of our income. At 80 and 90% of their income, Italians and Germans have half as much debt as we do.
So our personal “debt service” is double that of our European cousins. It is a terrible burden that we have carried, all our lives.
I hope that we have learned something from the last two years, and that we will reduce this ratio.
Take back control of your debt
As of 2022, many have accumulated high-level debt: mortgage loans, car financing, credit cards, etc. A period of low levels like the one that is starting is a good opportunity to clear all this.
A colleague at 99.5 FM asked me yesterday if it was wise to borrow from your 5% line of credit to repay a car loan taken out last year at 6.99%. The answer is YES!
Likewise, most mortgage loans allow you to pay back a lump sum. Often it is 10 or 15% per year. If yes, do it! If your financial institution allows you to “double” your monthly payments, you can also use the dollars saved after a rate cut to lower your balance.
Time to invest?
Yes, we need to reduce our debt. But low rates also represent a good time to invest. This is no different; you just need to know the difference between cost and investment!
A study published by HEC Montréal and the Mentoring Network last week revealed that entrepreneurial intent was declining significantly in Quebec. It is a pity; Quebecers are exceptional inventors, inventors and innovators. To create the giants of tomorrow, you still have to start.
Blame it on high standards? Maybe, a little.
One thing is certain: when money costs less, the risk is less. Whether it’s to buy a delivery truck or construction equipment, or to develop your website, low rates should encourage us to think of smart ways to borrow money and make it grow.
We must see the reduction in rates as an opportunity: to reorganize our finances, reduce our unnecessary costs and invest, to build a future.
2024-10-25 05:00:00
#control #debt #falling #interest #rates
