TORONTO, ONTARIO--(Marketwire - Jan. 4, 2013) - The deadline is approaching next month for the United States to come up with an agreement to raise the $16.4-trillion debt ceiling. The outcome has wide ranging consequences with the potential to have a significant impact on the global economy and stock markets.
While putting its financial house in order is a top priority for administrations, it should also be top of mind for consumers and their financial affairs.
The BMO Household Debt Report shows that 25 per cent of Canadians are debt-free, however 41 per cent say that they have taken on more debt in the past five years as a result of increased spending.
"While debt is a part of life for the majority of Canadians, it doesn't have to be a permanent fixture," said Nancy Marescotti, Director, BMO Bank of Montreal. "Establishing a household budget that includes a debt repayment plan and accounts for other priorities and financial goals such as savings is essential."
BMO Bank of Montreal offers the following five tips to avoid hitting your personal debt ceiling:
- Don't overspend - Spend less than you make. Develop a budget that establishes how household expenses will be paid and how spending will be managed. Take advantage of free online tools, such as BMO MoneyLogic, to help stay on top of everyday household spending and saving.
- Manage credit card debt - Pay down credit cards, beginning with those that carry the highest interest rate, and consider using a low rate card for purchases. For instance, the BMO Preferred Rate MasterCard offers a low interest rate option of 11.9 per cent for an annual fee of $20 per year.
- Invest to save - Set up a Tax Free Savings Account (TFSA) or high interest savings account to set aside extra cash in case of an emergency. Currently, the BMO Smart Saver account offers a 1.2 per cent interest rate - the highest rate offered among Canada's major financial institutions for a full-service savings account, without minimum balance requirements. Also consider using Exchange Traded Funds to reduce management expense fees.
- Become mortgage free faster - Cutting your amortization and increasing monthly payments on mortgages can help you pay down your mortgage faster while saving you thousands of dollars in interest costs. Additionally, consider increasing the frequency of your payments and/or making lump sum payments to pay down your mortgage faster.
- Have a Plan B - Develop a fall back plan in case you are unable to meet your financial obligations as a result of unexpected circumstances, such as loss of work, or damage to personal property, such as your home or vehicle.
For more information, please visit www.bmo.com/smartsteps.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $525 billion as at October 31, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.