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Mortgage Insights

Prioritize your future.

February 7, 2020 | Posted by: Haystax Mortgage

When we spend time setting goals for ourselves and incorporate them into our budget, most people will forego those future goals to achieve more immediate results. This is largely due to the dramatic shift to consumerism that society experienced in the 1980’s.

While the industrial revolution gave the average consumer access to cheaper, mass produced, goods it was not until the credit card boom that the consumption of goods became a past-time in western culture. The race to own the newest product and not just keep up with, but surpass, the Joneses has created a highly leveraged society that is entrenched in the “have it now” mentality.

As technology has advanced and the use of credit more mainstream our propensity to consume, even when not needed, has created a social and economic dynamic that is having a severe impact on our communities, cultures, and planet. In Canada we create more garbage per capita than any other country on earth. According to the Conference Board of Canada, in 2012 Canadians on average produced 720 KG of waste per person. In 2014, only a two-year period, our per person waste production increased to a staggering 985 KG of waste per person.

Canadians discard an average of 37 Kilograms (81 pounds) of clothing each year and beyond the obvious environmental and social issues, there are also tangible correlations between the rise of consumer spending and the fall of household savings. The implications for the future are real.

With Canadian households saving at 4.5% in 2016 and most of the western world (the EU and USA) only marginally better (at just over 5%) we are lagging behind countries around the world. The European economic powerhouse that is Germany has a household savings rate of around 10% and China is at a staggering 37%. If we compare rate of saving to household debt those countries that have lower household savings also have incredibly high levels of debt. In 2019 Canada hit a world record of over 177% - that means that for every dollar we earn, we owe $1.77 on average. When we compare that to other countries, like Germany at less than 94% and then add the rate of savings it means that Canadians need to work 2x as hard to get ahead financially. China, with their 37% household savings rates has a household debt level of 70%.  All of this means that Canadian households are less able to deal with financial “bumps” in the road.

You are probably wondering what this all has to do with you.

One of the biggest complaints from people is that they never seem to get ahead. They feel as though they are stuck on a treadmill and just can’t seem to save enough. The reality for most of us is that we just are not that smart with our money. We want to have that new television, car, furniture – even if we do not need it. We are directly influenced by companies that depend on our insatiable appetite to consume to drive more and more profits. The problem is that these profits are all coming from your pocket and instead of that money working for your future they are being spent on things that will end up in the garbage.

When we say it is important to prioritize your future, we do not mean saving to buy the newest television or smart phone. There is nothing wrong with wanting to have the newest and best of something, but we should not be sacrificing our future so that we can consume. With only 25% of Canadians who work in private industry having an employment defined benefits pension plan it means that we will come to rely more and more on our personal savings.

The challenge is that with our level of personal debt continuing to climb, and savings dwindling, there will be more people unable to retire with a lifestyle that resembles the one they are used too. The key to overcoming this is to prioritize your future when you are setting up a budget.

Long term goals are harder for people because we live in a society where instant gratification has become the norm, but if we want to truly achieve some level of financial freedom, we must look beyond today. That means making sure that when we are setting our budget, really think about your long-term goals. Where do you want to be financially in 10 years or longer? It also means not falling into the trap of discarding our long-term goals in place of the desire to keep up with all of the social pressure to consume.

There are some great things that you can do to help yourself along. First is to do the obvious and really stop and think before you spend money, especially on credit. The next is to pay off your debt and then be stricter with yourself and try to curb spending that does not align with your goals. The last thing is to put a high priority on your future and your long-term financial health. If you can do that, you will find that your overall financial picture will improve and before long you will be in a position where a financial hurdle is less a mountain, and more a speed bump.

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