The start of a new year is always a good time to try to get your finances back on track –- and break some bad habits.
Interest rates are climbing – offering some extra motivation to crack down on debt and start saving in 2019.
Many people don’t remember what it’s like to have normal interest rates, never mind high interest rates, said portfolio manager Daniel Thompson of Lorne Steinberg Wealth Management.
“I’m going to sound like a broken record but I’m going to tell you you need to spend less, you need to save more and you need to reduce debt,” he said, adding, "Easier said than done."
Most Canadians seem to be going more into debt instead, said Thompson.
To compound the issue, interest rates have been mounting since 2017 and are expected to go up again this year.
"We are a whole generation of people now that have forgotten what it's like to live in normal interest rates, let alone high interest rates," he said. "It's going to get tougher."
The question we put to Thompson: Do you pay off debt before you start saving?
“The answer is you need to do both,” he said. “If you’re fortunate enough to have a company plan that helps you save or a company plan that helps you save for retirement – a pension plan. Start there. They frequently having matching plans, which are free money for you, it’s great.”
There’s still hope for those who don’t have company plans, he said.
“If you don’t have that advantage, you’ve got to do it on your own. Look into the RRSP, look into the TFSA, look into taking money off your own paycheque, so to speak, coming straight out of your bank account, going into some sort of savings vehicle.”
