The Bank of Canada has held interest rates low for a very long time now. Through the economic turmoil in Europe, through the economic devastation in the U.S., Canada has stayed true and steady. But it’s only a matter of time before what’s happening in the rest of the world shows up on our doorstep. Are you in a position to weather economic dark clouds?
We’ve been chomping our way through the buffet of consumerism using false teeth—credit—to gobble up any and everything that’s caught our eye. When interest rates start to rise, will you be able to sustain even your most basic needs? Survey after survey tells us people are concerned that even a small increase in interest rates may have a devastating impact on their personal economy. So what should you be doing to prepare?
Stop borrowing. If you can’t live on what you’re making now—if you’re using credit to buy stuff—how will you cope when things get tight? If you’re carrying any balance at all, put away your credit cards. If you’ve got a line of credit, stop using it completely. Which brings us to…
Get rid of your debt. Make a plan to put an end to the consumer debt, and the interest you’re paying on that debt, before interest rates start rise. Negotiate the lowest possible interest rate you can on your debt. Use balance transfers, consolidation, whatever it takes to get those interest rates down as far as possible. Then set a date to be debt-free forever. Divide your principal by the number of months you want to take to get the debt gone and you’ll see how much principal you must repay every month. Not enough money?
Get another job. Hey, you spent all that money, now it’s time to earn it so you can pay it back. And you better do it while you can still get a second job. When the economy gets tight, jobs will be fewer. Now’s the time to make hay.
Build up your emergency fund. It’s important to have cash in the bank for when things get ugly. Cash means options. Cash means you can cope with whatever life, or the economy, throws at you. Don’t be one of those dopes living so close to the line that even a small change will have you pulling out your hair.
Batten down the hatches. This is the time to make that budget you’ve been putting off so you know exactly how much you can live on if times get tough. With two kids, one in university and one in high school, a paid for home and my simple lifestyle, I live on about $5,000 a month. Cutting out everything but the essentials, I can get that down to $3,000 a month. Do you know how far you can cut back? Time to find out so you’re ready!