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Pack Responsibly

Nelson & District Credit Union will strive to provide members with solutions to help them pack responsibly for their unique life-stages and reach their viewpoints. This process is called the Financial Hike.

What is a Financial Hike?

Your Hike starts with identifying your goals. Nelson & District Credit Union will create a personalized guidebook to help you reach them.

Healthy, long-term strategies incorporate all elements of your financial affairs. How you pack one element influences how you pack another. We offer professional financial planning and access to virtually every investment product and service in the marketplace today.

The information below will assist you in considering the best path to take and which guide to choose. Please contact us at thehike@nelsoncu.com for more information.

Rising Housing Costs, Interest Rates and Spending – Oh My!!

July 13th, 2007

Rising Housing Costs, Interest Rates and Spending – Oh My!!
There are several factors putting more pressure on the average family this year.
Troubling Issues
1. Rising housing costs
2. Interest rate increases
3. Home equity financing
4. Personal credit approvals
5. Disproportional spending to income

Housing Costs: Though some cities have felt the increase in house/condo prices more than others, almost every Canadian city has felt some margin of escalated prices. For instance, the average detached home in the Kootenay region (BC) increased 48.09% from 2006 to 2007 (Landcor Data Corp. study).

Interestingly enough, this doesn't necessarily mean saving longer for a larger downpayment. The reduction of CHMC's downpayment rules as well the banks likely extending mortgage terms from 25 to 30 or 35 years will simply increase the burdens of personal debt-levels.

I have high concern over younger families in particular who may get more discouraged not being able to buy a home in their community. This not only leads to less community involvement, but often to increased levels of vandalism. It is hard to be proud and part of a community that you are being financially forced out of.

Interest Rate Increase: Historically speaking, we still have relatively low interest rates. Expect rates to continue to rise to offset inflation. Every 1% increase translates into approximately $120 more per month on a $200,000 mortgage. Unfortunately, many people ask their banks "How much can get I approved for" instead of first asking their financial planners "How much should I get approved for". You need to plan for unexpected contingencies in your cash-flow by forecasting budgets with room to breathe. Variable mortgages and lines-of-credit will feel the increase immediately. Fixed mortgages and loans will feel the burn upon renewal.
Most experts agree that even a 1% increase in rates would start breaking apart many household finances - households that seemingly had solid finances!

Home Equity Financing: For those that own homes, it is all too temping to borrow against your increased value for that vacation, renovation or new car. Beware of the Loan Ranger. Borrowed money has to be paid back. Factor in how much you are really paying back after interest is added in and with rising rates. As a general rule: Don't borrow for personal expenses! If you cannot afford to pay for something in cash - save and buy it when you can.

Personal Credit Approvals: We are constantly mailed pre-approved credit cards and given higher limits for our lines-of-credit. Lending companies make millions at the expense of borrowers. Have a credit card for convenience (pay the balance off every month) and use a line-of-credit for emergencies only.

Disproportional Spending: The Vanier Institute of the Family reported that we are spending 103% of what we earn. This is largely achieved with the ease of borrowing and refinancing based on appreciating homes. We cannot spend more than what we make for long!
"The implications of the credit boom in the last five, six, or seven years is that we have a generation of borrowers that has never experienced high interest rates and, therefore, people have been borrowing much more... As a society, we have become more vulnerable to the risk of higher interest rates," agrees Benjamin Tal, senior economic at CIBC World Markets Inc.
Solutions
· Ensure that you'll stay in a positive cash-flow even if your monthly payments increase (plan for interest rates being 2-3% higher).
· Don't borrow against the value of your house, just because you can.
· Build up 3-4 months of income as savings. This will get through tough times, avoid borrowing, use debt-swapping strategies for tax-planning and will allow you to take advantage of opportunities.
· Forced savings. Arrange your spending habits as if you were earning $10,000/year less.

In Summary
You cannot control rising housing costs and interest rates. However, you can control your own consumption patterns. Don't let marketers and lenders convince you to get further into debt. Avoid debt-financing for personal expenses.

We offer strategies to help you achieve your Viewpoints. To meet with one of our financial planners contact us at thehike@nelsoncu.com

Added on July 25th, 2007

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