Cash flow > Interest Rate & Why it Might be Time to Shift Your Focus
Most of us have short memories and adapt to a “new normal” pretty quickly (the last couple of years are great example).
It’s also why steadily rising interest rates are causing worry and stress for many Canadians. We’ve had ultra low interest rates for the past 2 years. It’s hard to remember where things were before then (**Note that Prime was at 3.95% in December of 2019 just before COVID hit. As of this writing it’s at 3.20%). The reality is that rates are going to keep rising. The Bank of Canada has told Canadians to expect as much until our soaring inflation is back under control. Which means our focus and strategy when it comes to our finances needs to shift and adapt too. Most people are generally opposed to breaking their mortgage when rates are rising. Why would you ever give up a lower rate for a higher one? Makes sense in theory however, what many fail to look at is the big picture. What is your TOTAL interest rate including consumer loans, lines of credit and credit cards? Would your cash flow improve if you consolidate your debt? If so by how much? Could you see greater returns on those savings if you invested them elsewhere?
You need a strategy when it comes to your mortgage and finances and it should be something that changes and adapts when necessary. The conversations should be more nuanced than "just take our equity to pay off your debt” or “just get a line of credit”. Anyone who is giving you advice without backing it up with actual math to illustrate why it makes sense for you, probably isn't best person to work with.
If your cash flow is stressing you out or you feel like your pay cheque isn’t going as far as it should, book a call with us and let us see how we might be able to help.