Moving From Critical To Stable Condition

By Evelyn Jacks

We have recently been told that the Federal Government anticipates that the result of a more prolonged economic slow down is a reduction of anticipated tax revenues.  This will delay deficit reduction by at least a year to 2016.  If you were born in 1951, that’s the year you turn 65.

All of this scares already-spooked individuals, who are trying to build up their savings and reduce their debt after the financial crisis. But in particular the plentiful boomer generation, many of whom are already delaying their retirements by an extra year or two, must weigh the serious effects of continued poor investment returns on their future.

It is a vicious circle—debt, debt repayment, poor returns, fewer services–yet, the outlook is may not be so grim.  We may in fact be moving from critical to stable condition.

Where in this is there reason for cautious optimism? If recognizing the problem is the first step, then we are well on the road to financial recovery, despite the recent sharp decline in economic activity throughout the G-7 nations.

In Canada, labor markets have performed well and private credit remains strong, while the economy is projected to grow by just under 2% in 2012.  Domestic demand, though weaker than anticipated in 2011, continues to be a catalyst for growth.

The biggest threat, according to the International Monetary Fund (IMF), is that Canadians need to be vigilant on the housing front, given the level of household debt in Canada.   Domestic consumption could slow more, if there is a drop in housing prices, and so paying down that mortgage is important.

There are numerous ways to do so.  Consider making an RRSP contribution to generate new tax savings with which to then pay down your mortgage.  Consolidate your consumer debt, and reduce expensive credit card fees.  Use your savings to bump up mortgage payments.   Take the money from your TFSA to reduce your mortgage upon renewal.  Or, take advantage of the strong housing market today to downsize.

It’s Your Money.  Your Life.  It may be a good idea to discuss your options for managing your mortgage debt now before the end of the year so you can start 2012 with greater financial stability.

Evelyn Jacks is President of Knowledge Bureau and has recently been named one of Canada’s Top 25 Women of Influence.  Knowledge Bureau has just published new courses on debt management, updates to cross-border taxation issues and a new library of personal, corporate and GST tax matters to take recent court cases into account.  For more information call 1-866-953-4768.

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