It’s a fact that most North Americans are living paycheque to paycheque. We’re not the only ones. Most governments are doing the same, and have been for the last several years – not only during wars and natural disasters. This spending pattern has been going on for several decades and has finally caught up with them. Similarly, but more recently, people have been using their houses as personal lines of credit to rob the equity of their house to satisfy their insatiable urge for acquiring material goods.
So, where does that leave us? With nice cars and tvs, but insanely large mortgages. House values have been (key word: have) steadily climbing, but the level of debt among families is not decreasing. Most baby boomers will reach retirement age without their house being paid off and will be forced to stay in the workforce to pay their mortgage, which doesn’t bode well for the junior generations waiting for all those employment opportunities. It all sounds horrible, but it’s our lucky day!
Thanks to governments that have the same spending habits as us, interest rates will remain at unprecedented low rates for years to come. It was expected that interest rates would begin to rise this fall, but the global financial situation has forced central banks to hold tight.
So, take advantage of the situation and refocus your efforts on paying down that debt instead of borrowing more while rates are low. The longer you stall to pay down debt, the greater the risk that a rise in interest rates will compromise your level of expendable income and, more importantly, the lifestyle to which you have become accustomed.
Try to think past immediate gratification and consider the future. Think about enjoying more years in retirement, rewarding yourself for years of hard work.
Food for thought!