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Pattie Lovett-Reid

Chief Financial Commentator, CTV


Another reprieve for Canadians to get their financial act together? Maybe.

According to Statistics Canada, the ratio of credit market debt to disposable income hit a record 174 per cent in the fourth quarter, meaning Canadians owe $1.74 for every dollar of disposable income. The Bank of Canada has repeatedly flagged high household debt as a vulnerability in the economy. Add to this, TD Securities is now in the same camp following the sharp slowdown in economic activity last quarter, declining consumer spending, muted business investment, and an oil patch that continues to struggle. Not only could we see the central bank pause on rate hikes until 2020, the next move could – depending on economic data – even be a rate cut, according to Andrew Kelvin, TD Securities’ senior rates strategist for Canada.

This is not reason to cheer. The day of reckoning for debt-burdened households may still be around the corner if the economy stalls and you lose your job.

So what can you do to change course? Develop a millionaire mentality. Look no further than some of the financial and life habits of the wealthy to understand how they achieved financial success and weather the ups and down of the economy.

It all begins with a life goal. Lifestyle desires will drive financial requirements. What sort of life do you want and at what age? Create milestones for yourself and get specific about the numbers.

Budgets work. I’ve never met a truly successful person who didn’t know how much they were spending and what they were spending their money on. Conscious spending as opposed to mindless spending is the best way to ensure bills will be paid and helps to temper the temptation to splurge.

Pay off your debt in full as soon as possible. High consumer loans are toxic and destroy wealth creation. While the focus should be on high interest debt, any debt is still debt and a drag on the balance sheet.

Pay yourself first through automatic payroll deduction. Have a fixed amount come off your pay bi-weekly and have this money invested. There is no point sitting in cash. After taxes and inflation you are losing money. The magic of time and compounding works for you when you invest in the markets over time and against you when you owe money.

Negotiate for all goods and services. It doesn’t make you seem cheap, just savvy.

Follow your passion, play to your strengths, embrace lifelong learning and have no regrets.

Master a frugal lifestyle and a healthy money mindset. In other words, live below your means. Look after the things you have. This isn’t about becoming a minimalist or a dumpster diver – it is simply about distinguishing the difference between your wants and needs.

The landscape is choppy and we are more financially vulnerable than we think. Time to take charge now.