Two welcome economic energizers have come our way early in the new year, putting cash in our pockets and offering a chance to shore up personal finances at a time when the economic outlook is unclear.
As every GTA driver knows, the first is the dramatic drop in the price of gas. On Saturday, I filled up at an Ultramar outside of Lindsay, Ont., for 83 cents a litre, a price not seen in six-plus years (and rarely seen in the GTA, where the majors make sure prices stay high in the absence of competition from independents). The tank cost $45, about a third less than a year ago.
At those prices, the weekly saving is $37.50, based on one and a half tanks. Over the course a year, that’s a hefty $1,950 in my pocket, which is a lot better than the average tax refund.
The second energizer is just getting started. Last week’s quarter-point cut in the Canadian central bank rate should translate into lower mortgages, cheaper lines of credit and a reduction in other borrowing costs. Sure, a quarter point isn’t a lot, but it all adds up. RBC was first off the mark Monday dropping its five-year fixed mortgage rate 10 basis points to 2.84 per cent.
More interest rate cuts may be in store as the Bank of Canada tries to stave off an oilpatch recession that has almost certainly started in Alberta and is likely rippling outward. TD Bank sees another quarter-point cut by March. Scotiabank economist Derek Holt sees one more round of cuts, and maybe two.
“I can’t see a compelling argument against cutting at least once more,” Holt wrote in research note. “Another cut after that is feasible, after which I can see the (Bank of Canada) parking it there for an extended period.”
These trends offer a chance to get the house in order after a decade-long ride of easy money and rising debt. Here are a few things to consider that don’t cost a thing:
1. Make your loyalty pay: If your mortgage is up, you may want to lock it in. If so, you won’t find the best deal at your bank. A 2011 study by the Bank of Canada found that a bank’s existing customers assume they’ll get the best renewal terms because they’re loyal. Lacking comparative information, they get something that satisfies them, but it’s not as good as it could be. The best deals go to new buyers, because the banks want to bring them inside the house. The best way to find a top rate is by using a mortgage broker.
2. Overcome inertia: Apply the same tactic to your cable, phone or insurance bills. Do not automatically renew. Take the time to go over each one annually. Call and ask how they can be lowered. This is not about being a cheapskate. It’s about raising cash for things that matter.
We cut off cable television in the fall of 2012, opting for an antenna and over-the-air TV. There are much discussed pros and cons to this, but we’re happy and the move has saved at least $1,600, probably more, since that figure assumes the price of cable stayed the same, which it hasn’t.
3. Use the Internet: The Web is a great information leveler and puts comparison shopping at your fingertips. Among the sites I use that compare rates for credit cards, mortgages, GICs and insurance: RateHub, RateSupermarket, Fiscal Agents and Kanetix.
4. Aim at something: In your financial life you can drift, drown or decide, as Brockville accountant George Caners summed up in his book, So You Want More Money. If you lack goals, you’re at the mercy of whatever happens. Goals keep day-to-day distractions in context and help you maintain a focus.
Money is only good for buying things, so saving without a goal doesn’t have much point. Choose what’s important and go get it.
5. You don’t need a budget: Budgets are nice, but surveys show few people actually have one because they’re time-consuming and boring to build. In a perfect world, you could spend the time, but an easier option works almost as well. Track your spending for a month and write everything down — the writing part makes it real. You’ll be surprised where the money goes. You’ll find leaks everywhere and some are surprisingly easy to plug.
The lasting benefit of cheap fuel and falling rates is an opportunity to put you on a stronger footing going ahead.
Most of us won’t take advantage of it because, sadly, we are easily led astray. Good intentions notwithstanding, many people who joined a gym this month will never go. They plan to get started next week, but next week will never come. But as the proverb goes, a journey of a thousand miles begins with a single step.