Unimor Capital Corporation

Tag: financial plan

  • Interest Rate Hikes: How it Could Impact Your Finances

    Interest Rate Hikes: How it Could Impact Your Finances

    What is the policy interest rate?
    The policy interest rate is the fixed interest rate set by a financial institution for a country or group of countries. This determines how much it will cost to borrow money from a central bank. In our case, the Bank of Canada is the one that is regulating, among other things, the country’s economic activity. Once the Bank of Canada sets the policy interest rate, other financial institutions use it to set the interest rate on a variety of loans (personal, mortgages, etc.) offered to clients. The current increase is an attempt to counteract inflation, which is rising in Canada and the US.

    What is inflation?
    Inflation is an overall increase in the average price of goods and services. When inflation is low and predictable, it means that the economy is doing well, and the overall value of money is stable. Long story short, it means you have more money in your pocket.

    When inflation is too high, consumers, businesses and investors lose purchasing power. This means overall economic development suffers. When this happens, the Bank of Canada will usually step in with a policy interest rate hike to try and stabilize the economy.

    How does an increase in the policy interest rate affect my finances?
    Most people will be affected by a policy interest rate increase. This means that they’ll pay more interest on their loans. Households and businesses are more likely to reduce their expenses when this happens. Demand for goods and services is expected to decline and their prices may stabilize in the future:

    • New homebuyers may have to pass a mortgage stress test at a higher rate. Currently, the mortgage stress test is at the higher of 5.25%, or the mortgage rate plus 2%.
    • If you have a variable rate mortgage, your monthly payments will increase. Fixed rate mortgages will only be affected when you renew.
    • This could be an opportunity to make new investments. While the market is down right now, it could be the right time to buy low on interesting stocks. Also, investments such as GIC’s or bonds see their interest rates rise in a period of rising rates.
    • If your mortgage term expires in less than 6 months, an early renewal may be the key to helping you secure a lower rate before the next rate increase without penalty. If your term expires in more than 6 months, you’ll need to consider the penalty fee when making a decision on early renewal.
    • While food, gas, and furniture cost more than this time last year, now’s the right time to readjust and evaluate your budget.

    Policy interest rate hike: do I need to review my financial plans?
    If there’s a policy interest rate hike, take some time to think about your current projects and future plans, and make informed decisions. You might save money by postponing a major project rather than tackling it now. Alternatively, now be the time to consolidate your debt and get your ducks in a row before rates increase further.

  • Budget Your Way to Your Financial Goals

    Budget Your Way to Your Financial Goals

    Budgeting really isn’t that bad. Here are six easy steps to achieving your financial dreams. With a new year just over the horizon, it’s time to make a few resolutions. If you haven’t yet crafted a budget, now is the time to do so for 2018.

    Regardless of whether you want to take a trip to Hawaii, buy a fancy new set of wheels or simply save more and spend less, a budget can get you there. Following are six steps to budgeting to your financial goals.

    Step 1: Set Your Goal

    What do you want to save your money for?

    • Go on a vacation
    • Buy a house
    • Have a security blanket in the bank
    • Merely pay the bills each month, with a little left over

    Budgeting can help with every one of these goals. In addition, having a concrete goal increases your chances of sticking to the budget. Some people even look for motivation by creating dream or vision boards with photos representing their goal.

    Step 2: Track Your Expenses

    Getting a handle on where you spend money is important for two reasons:

    • It can help identify leaks in your budget. These might include the $100 a month gobbled up by daily fast-food breakfasts.
    • It can help you make a realistic budget. If you are currently spending $800 a month on groceries, budgeting for $500 is probably setting yourself up for failure.

    The old-fashioned way to track expenses is to collect receipts and keep a log of every penny you spend for the next month. However, you can make the process simpler by signing up for a free account with Mint.com. This service tracks expenses automatically and neatly categorizes them for you. Best of all, it doesn’t cost a dime.

    Step 3: Write it Down

    Now that you’ve tracked expenses, use those amounts as a guide to create a written budget. Whether you use an online tool, an Excel spreadsheet or a notebook and pen is up to you. But you want to have the budget recorded in a location where it can be easily accessed and changed as needed.

    It’s a good idea to always estimate your income low and expenses high. It’s better to reach the end of the month and find you have extra money in the bank than to come up short. In addition, make sure to put a name to every dollar. Maybe you finish with the monthly bills and have $200 left over. Don’t leave that as a catch-all slush fund; decide what you’re going to do with it. Maybe $100 will go into an online savings account, $50 will be an extra debt payment and $50 will be mad money.

    Step 4: Monitor Your Progress

    Once you have it written down, don’t ignore your budget. Make a point of comparing your actual expenses with your budget on a regular basis, such as each payday.

    If you’re using Mint.com, it’ll be easy to quickly see how much you’ve spent so far in each category for the month. Then, you can make adjustments as necessary. For example, if you’re budgeting $50 for clothing and have spent $75, you’ll need not only to stop buying clothes, but also to make an adjustment elsewhere in your budget to make up for the extra $25.

    On the flip side, maybe it’s the last week of the month, and you haven’t spent a dime of your entertainment budget. In that case, it’s time to make a date and have some fun!

    Step 5: Get a Coach

    Maybe you’re feeling overwhelmed. A budgeting coach can help. Make sure to do your homework and find a reputable company to work with and ask about any fees. You should be able to get budgeting help for free.

    As an alternative, you can ask a money-savvy friend for help. In either case, having someone walk with you step-by-step through the budgeting process can help you make more sense of how to create a realistic spending plan for your money.

    Step 6: Stay Flexible

    Finally, your budget is a living document. Unlike your slow cooker, you shouldn’t set it and forget it. Instead, regularly evaluate it and make changes as necessary. Always blowing through the food budget? You may need to increase it and consider where else you can cut back. In addition, as your income, expenses or goals change, your budget should be adjusted to reflect your new circumstances.

    Ultimately, your budget is not about restricting money, it’s about empowering it. A good budget finally puts you in control of your dollars and allows you to dictate where money is going instead of letting silly, incidental purchases drain your bank account.

     

  • 7 Most Common Financial Mistakes

    7 Most Common Financial Mistakes

    It is indeed a material world. When it comes to spending, North America is a culture of consumption. The result: rising levels of consumer debt and declining household savings rates. Don’t make these 7 most common financial mistakes. In 2008, this culture was hit hard by economic reality. According to the Federal Reserve, U.S. household debt grew steadily from the time they started tracking it in 1952. It declined for the first time in the third quarter of 2008. As a result of the credit crisis and ensuing economic recession, savings rates also rebounded.

    For those who had been living beyond their means for years, it suddenly got a lot harder to make ends meet. And, although the government tends to encourage spending during economic downturn and statistics may lead us to think that overspending is normal, it is often a risky choice. Here we’ll take a look at seven of the most common financial mistakes that often lead people to major economic hardship. Even if you’re already facing financial difficulties, steering clear of these mistakes could be the key to survival.

    Mistake No. 1: Excessive/Frivolous Spending
    Great fortunes are often lost one dollar at time. It may not seem like a big deal when you pick up that double-double, stop for a pack of cigarettes, have dinner out or order that PPV movie, but every little item adds up. Just $25 per week spent on dining out costs you $1,300 per year, which could go toward an extra mortgage payment or a number of extra car payments. If you’re enduring financial hardship, avoiding this mistake really matters – after all, if you’re only a few dollars away from foreclosure or bankruptcy, every dollar will count more than ever.

    Mistake No. 2: Never-Ending Payments
    Ask yourself if you really need items that keep you paying for every month, year after year. Things like cable television, subscription radio, video games, and cell phones can force you to pay unceasingly, but leave you owning nothing. When money is tight, or you just want to save more, creating a leaner lifestyle can go a long way to fattening your savings and cushioning you from financial hardship.

    Mistake No. 3: Living on Borrowed Money
    Using credit cards to buy essentials has become somewhat normal. But even if an ever-increasing number of consumers are willing to pay double-digit interest rates on gasoline, groceries and a host of other items that are gone long before the bill is paid in full, don’t be one of them. Credit card interest rates make the price of the charged items a great deal more expensive. Depending on credit also makes it more likely that you’ll spend more than you earn.

    Mistake No. 4: Buying a New Car
    Millions of new cars are sold each year, although few buyers can afford to pay for them in cash. However, the inability to pay cash for a new car means an inability to afford the car. After all, being able to afford the payment is not the same as being able to afford the car. Furthermore, by borrowing money to buy a car, the consumer pays interest on a depreciating asset, which amplifies the difference between the value of the car and the price paid for it. Sometimes a person has no choice but to take out a loan to buy a car, but how badly does any consumer really need a large SUV? Such vehicles are expensive to buy, insure and fuel. If you need to buy a car and/or borrow money to do so, consider buying one that uses less gas and costs less to insure and maintain.

    Mistake No. 5: Buying Too Much House
    When it comes to buying a house, bigger is also not necessarily better. Unless you have a large family, choosing a 6,000 square-foot home will only mean more expensive taxes, maintenance and utilities. Do you really want to put such a significant, long-term dent in your monthly budget?

    Mistake No. 6: Treating Your Home Equity Like a Piggy Bank
    Your home is your castle. Refinancing and taking cash out on it means giving away ownership to someone else. It also costs you thousands of dollars in interest and fees. Smart homeowners want to build equity, not make payments in perpetuity. In addition, you’ll end up paying way more for your home than it’s worth, which virtually ensures that you won’t come out on top when you decide to sell.

    Mistake No. 7: Living Paycheck to Paycheck
    The cumulative result of overspending puts people into a precarious position – one in which they need every dime they earn and one missed paycheck would be disastrous. This is not the position you want to find yourself in when an economic recession hits. If this happens, you’ll have very few options. Everyone has a choice in how they live, so it’s just a matter of making savings a priority.

    Making a Payment vs. Affording a Purchase
    To steer yourself away from the dangers of overspending, start by monitoring the little expenses that add up quickly, then move on to monitoring the big expenses. Think carefully before adding new debts to your list of payments, and keep in mind that being able to make a payment isn’t the same as being able to afford the purchase. Finally, make saving some of what you earn a monthly priority.

  • Debt Fatigue: How Long is Too Long to Be in Debt?

    Debt Fatigue: How Long is Too Long to Be in Debt?

    Despite record levels of debt across the country, fewer Canadians than you might think are making moves to reduce the amount of money they owe. According to a new CIBC poll, 25% of Canadians say they haven’t taken any action at all to accelerate debt repayment, while only 16% have talked to a financial advisor about ways to better manage their debt. It all points to signs of debt fatigue – feeling completely overwhelmed by the amount of money you owe but continuing to spend anyway. Six months? One year? Three years? There is no set timeline for when someone reaches debt fatigue, but when you throw your hands in the air and just start spending; you can bet you’ve hit your saturation point.

    There’s some nonchalance there, we’ve had an extended period of low interest rates, and the banks and financial institutions have done a very good job at marketing. You’ll see an ad for a car: just $199 every two weeks. People think ‘hey, that’s not bad,’ without stopping to think about the long term. People may think, ‘a bagel and a coffee a day is only five bucks a day. It’s no big deal,’ but when you add it up for a whole year, that’s close to two thousand bucks. Payday loan companies make borrowing seem easy too.

    According to a poll, 60% of Canadians currently hold debt. Historically low interest rates have played a huge role in this. People have a lot more debt than they have in the past; because it’s relatively inexpensive debt, debt seems like less of an issue. Although debt repayment has been the number one priority for Canadians, according to CIBC research, less than half of Canadians are taking concrete steps to lighten the load. The latest poll found that 46% of Canadians have cut spending in order to better manage debt, 34% have implemented a household budget, and 20% have made at least one lump sum payment toward debt on top of regular payments.

    With debt having become a fact of life for so many Canadians, there are ways to tell when your money woes are growing just as fast as your interest owing.  The standard question is: ‘Are you having trouble sleeping at night?’  When it becomes an issue with people’s day to day lives, when you can’t sleep or are worrying too much, when it’s affecting relationships, then it really starts to wear mentally. When you get a credit-card statement that shows you that if you make the minimum monthly payments and it will take you 84 years to pay off the debt – that really starts to hit home.

    Seek Support & Make a Plan

    Things don’t need to reach a crisis point before you can seek help and start chipping away at debt.  For starters, talk to someone, whether it’s an independent advisor, someone at your bank branch, a credit counsellor, or friends and family.  Money doesn’t have to be a taboo subject.  Don’t be afraid to say to someone, ‘Hey I can’t afford that. If they want to go out for dinner you can say ‘why don’t we do a potluck or we’ll order in pizza’.  Everybody struggles with these issues, and you’d be surprised once you start talking about it how other people can relate to where you’re at.

    Don’t let terms like budgeting or tracking spending scare you off.  Find money-management strategies that work for you, just the way you’d integrate exercise into your routine.  If you know you’re not a morning person, it’s unlikely you’re going to commit to going for a jog every day before work.  If you don’t have the patience to write down every single purchase you make over a 30 day period, try giving yourself a weekly spending limit instead.

    If you find it too easy to use debit or credit cards, use cash.  Be clear about what it is you’re trying to accomplish. The thing most people do not do is look at what their goals are.  If you have $500 in your account, do you buy the Lululemon hoodie you really like or do you put that money toward your home renovation fund?  You have to have goals, because that allows you to make choices.  Turn to technology to keep you on track too, most banks have tools where you can receive an alert via text message, phone, or email if you’re getting close to or have surpassed your customized budget.

    By Gail Johnson – Yahoo Finance