Based on the official statistics our country was in recession for the first five months this year. What does that mean for most Canadians? In terms of practicality; not much, most families focus their efforts on the continued development of their careers. When the unemployment rate is low it is a good sign for the economy in general, when Canadians have confidence in their abilities to generate income, their consuming habits is a key element in the profitability of large corporations. When those companies do well they maintain an increase their payroll which in turn continues to reduce unemployment.
The media along with officials from the Federal government, have suggested over the last two or three years that the consumer is taking on too much debt. I agree with that sentiment up to a point. We need to differentiate between bad debt and better debt. I have referred to this issue in a previous column; taking on debt to acquire assets that appreciate in value over time is generally a good strategy. Whereas unpaid credit card balances and lines of credit used for the purchase of consumed goods, are not good long term habits.
One of the basic financial planning strategies is to create and build up an emergency savings account, once this cash is set aside and the bad debt is paid off, then you would turn your efforts on other financial strategies that would improve your net worth even during recessionary cycles of the economy.
It would also be a good strategy to always re-evaluate one’s spending habits, taking into consideration one’s needs and wants. There has to be a good balance between spending money today and investing for tomorrow, life is short even if you grow old. You are the best judge of your own circumstances regardless of public opinion, so Dream Big, be responsible, and have fun.
What’s next? What is a life annuity?