Last Updated: May 2019

Personally, I think Canada is a great place to live with wonderful opportunities.  At the same time, I can't help but worry some days about the current economic conditions in the world.  Bank of Canada governor Mark Carney has been warning about the high level of consumer debt in Canada since early 2011, and in 2019 his replacement Stephen Poloz continues to sounding warnings. The Bank of Canada is not a bank, but rather in charge of overseeing Canada's financial system and health.

The Bank of Canada is Talking to You! Time to Listen

According to the government, Canadian consumers’ debt levels today are by any measure higher than they have ever been. The concern is that we may be on the cusp of the second phase of the financial crisis that began in 2008.  In plain English: If every economy that Canada trades with is slowing down, there will be job loss or reduced pay for Canadians, and that could mean you or me.

The question I have to ask myself is:
If Canada goes into another round of very slow economic growth, or maybe even a global recession, and I have high debt levels,
Will I make it out the other end?

Here some advice. The best thing you can do is go back to the basics of prudence and financial management. Recessions come and go; it is the weak hands that get into trouble.

Here is a checklist:

1. Build up a safety nest of at least 3-6 month’s expenses.
2. Don’t live within your means, live below your means. The bigger the margin, the more you save.
3. Get rid of debt. Pay off your higher interest rate debt, such as credit cards, first.  Here's a link to Dealing with Debt
4. If you have a mortgage on your home with a floating rate, consider locking in the rate for between three to five years. Similarly, with lines of credit that you cannot pay off. Interest rates may jump without warning.
5. Look for a secondary source of income to either increase your safety net or decrease debt. Consider a part-time job or renting out a room or basement in your house or a garage.
6. Expect a lot of volatility in the stock markets. If you have money invested in the markets that you may need soon, you shouldn’t be in the market.
7. We are entering an age of frugality, so be frugal, but not cheap.
8. Would it be wise to put off big-ticket purchases and make do with what you have?
9. If you are considering selling your home to buy another, make sure yours is sold first or you risk being stuck with two homes and extra debt in an uncertain economy.
10. If you are considering buying a home, make sure the monthly payment is something you are used to and comfortable with - not the max you can get. 
11. Think twice about quitting your job.
12. Reconsider whether you need all the cars you have. Each car has hidden costs.

Buying your own home is a fundamental building block to your financial future and financial security. But do it wisely, within your means, and address your debt levels.  There is "good debt" (mortgage) and "bad debt" (borrow to consume today, but pay later).  If you'd like a free consultation on your financial health and ability to qualify for a mortgage, click here. If you like to do some self-study, start here.