6 MONTHS TO A BETTER BUDGET
One of the challenges with proper budgeting is that it has to become habitual in order to be effective. You can survive without knowing how to budget if you manage to keep more money coming in rather than going out or have credit cards to cover the gap, but this won't last forever. Emergency Fund The crux of this six-month plan is the emergency fund. Ideally, everyone should have at least one or two months' wages sitting in a money market account for any unpleasant surprises. This emergency fund acts as a buffer as the rest of the budget is put in place, and should replace the use of credit cards for emergency situations. You will want to build your emergency fund as quickly as possible. The key is to build the fund at regular intervals, consistently devoting a certain percentage of each paycheck toward it and, if possible, putting in whatever you can spare on top. What's an Emergency? You should only use the emergency money for true emergencies: like when you drive to work but your muffler stays at home. Covering regular purchases like clothes and food do not count, even if you used your credit card to buy them. Downsize and Substitute Now that you have a buffer between you and more high-interest debt, it is time to start the process of downsizing. It’s odd that the natural solution to not enough money seems to be increasing income rather than decreasing spending, but this backwards approach is very familiar to debt counselors. The more space you can create between your expenses and your income, the more income you will have to pay down debt and invest. This can be a process of substitution as much as elimination. For example, if you buy coffee from a fancy coffee shop every morning, you could just as easily purchase a coffee maker with a grinder and make your own, saving more money over the long term. Focus on Rewards Another trick that will help your budget come together faster is to focus on the rewards. A mixture of long- and short-term goals will help keep you motivated. This can be as simple as saving for a small luxury, or even something bigger like buying a car with cash. Watching these goals slowly but surely become a reality can be very satisfying and provide further motivation to work harder at your budget. Find New Sources of Income Why isn't this the first step? If you simply increase your income without a budget to handle the extra cash properly, the gains tend to slip through the cracks and vanish. Once you have your budget in place and have more money coming in than going out, you can start investing to create more income. Now, it is possible that it will take you more than six months to get your budget balanced out as it all depends on your situation, including how much or what kind of debt you have. But, even if it does take you longer than six months to get your budget turned around, it is time well spent. (Source: Investopedia.com)
Home affordability improved in Q2 2020
Housing affordability in Canadas large urban centres improved in the second quarter of 2020 after having deteriorated in the two prior quarters. Higher incomes helped in Q2 but the largest portion of the improvement came in the form of lower interest rates. Indeed, the latter declined 19 basis points in the quarter, reflecting the easing from the central bank. Combined, income and mortgage rates were more than enough to offset the increase in home prices. Still, the decline in interest rates on a quarterly average basis does not completely reflect the change in 5-year mortgage rates since the beginning of the COVID-19 pandemic. The February to June decline in mortgage interest rates was a much more significant 41 basis points. Looking ahead, the preliminary data for rates shows additional improvements in the third quarter of the year (cumulatively they are down over 70 bps). While we expect this to help affordability, home prices should remain resilient based on the latest resale market data showing record sales volumes. Homebuyers have rushed back to the market after having delayed purchases and are now being offered record-low interest rates. Once pent-up demand is exhausted, the Canadian housing market will still have to face high levels of unemployment and reduced household formation due to lower immigration.
Bank of Canada maintains commitment to current level of policy rate, continues program of quantitative easing
The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of percent. The Bank Rate is correspondingly percent and the deposit rate is percent. The Bank is also continuing its quantitative easing (QE) program, with large-scale asset purchases of at least $5 billion per week of Government of Canada bonds.
Both the global and Canadian economies are evolving broadly in line with the scenario in the July Monetary Policy Report (MPR), with activity bouncing back as countries lift containment measures. The Bank continues to expect this strong reopening phase to be followed by a protracted and uneven recuperation phase, which will be heavily reliant on policy support. The pace of the recovery remains highly dependent on the path of the COVID-19 pandemic and the evolution of social distancing measures required to contain its spread.
The rebound in the United States has been stronger than expected, while economic performance among emerging markets has been more mixed. Global financial conditions have remained accommodative. Although prices for some commodities have firmed, oil prices remain weak.
In Canada, real GDP fell by 11.5 percent (39 percent annualized) in the second quarter, resulting in a decline of just over 13 percent in the first half of the year, largely in line with the Banks July MPR central scenario. All components of aggregate demand weakened, as expected.