Money123: Not another Black Friday email

‘Tis the season for impulse buying

The days leading up to and following Black Friday tend to see shoppers inundated with sales advertisements. But the pressure to give in to buying impulses can be a drain on both holiday budgets and your mental health, experts tell Global News.

“The more advertising there is, the more it wears down your willpower,” says Carrie Rattle, financial therapist and CEO of Behavioral Cents. “You see it over and over and start thinking, ‘I guess I should get this, everybody else must be getting it.’”

Retailers can even go as far as to employ “manipulative psychology,” Rattle says, to convince shoppers that they need to pounce on the latest “must-haves.”

The urge to self-soothe and shop online during what can be a busy and stressful time of year can also prompt consumers to click “add to cart” these days, she notes.

But there are some practices you can put in place to ward off impulse purchases and keep your holiday shopping on budget. Read more for tips on how to rein in impulse spending.

Mortgage up for renewal? Read on

The Liberal government’s fall economic statement this week focused mainly on efforts to build more housing in Canada, but it did have a few items in there for existing homeowners.

The Canadian Mortgage Charter, namely, came with a set of expectations for how lenders should treat those with mortgages up for renewal.

While many of these proposals echo guidelines published by the Financial Consumer Agency of Canada earlier this year, one new item would see Canadians with insured mortgages not have to pass the stress test if they’re changing lenders at renewal.

Currently, when a homeowner’s mortgage term ends, they can automatically re-up with their existing lender or they can try to shop around with another financial institution, but would have to qualify under the stress test rates that are typically two percentage points higher than their contract rate.

Removing that barrier could add more competition to the mortgage landscape in Canada and give borrowers a bit more negotiating power when it comes time for renewal, says Sahir Khan, executive vice-president of the Institute of Fiscal Studies and Democracy.

Read more on how these changes could affect your mortgage rate.

BoC head says interest rates might be high enough

Canadian consumers got a dose of good news this week as Statistics Canada reported that annual inflation cooled sharply to 3.1 per cent in October.

That was largely thanks to cheaper prices at the gas pumps, though shelter and grocery costs remain elevated.

Bank of Canada governor Tiff Macklem said in a speech on Wednesday that the “excess demand” that was fuelling inflation previously has effectively been stripped out of the economy.

Interest rates might well be “restrictive enough” to bring inflation all the way back down to the central bank’s two per cent target, but he added that monetary policymakers are still looking for a few more months of “clear evidence” that price pressures are easing before confirming whether the policy rate has peaked.

Read more on what Macklem and co. are looking for to determine when interest rates could start to fall again.

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– THE QUESTION –

“I am about to close on my first home, and have managed to save some extra cash. Is it wise to put more than 20 per cent down to lower my mortgage payments, or am I better off putting that extra cash into the markets?”

— A Money123 reader 

“Congratulations on buying your first house! Trying to reduce your debt is a great idea, but you may want to wait before doing so. Houses often come with unexpected expenses, so you will want to make sure you have enough money set aside to handle them.

Having three to six months of expenses saved before making extra mortgage payments or investing is a good target. Your expenses will change now that you have a house, so it will take time to figure out what your new monthly spending is. The cost of trips to the hardware store for routine maintenance items can really start to add up.

If your mortgage has the option to make extra payments without penalty, you could wait a year to settle in before deciding how to use the money. In the meantime, the savings should be safe and easily accessible, such as in a high-interest savings account.

If you already have enough set aside for emergencies, then you can consider investing or reducing your mortgage. Each option has its merits, and the best choice depends on your financial situation, goals and risk tolerance.

Investing in the stock market comes with risk, but also the potential for higher returns. If you’re comfortable with this risk and have a long-term perspective, investing could be a good choice. Money invested in the markets is also more accessible than home equity. This flexibility can be helpful if your goals change in the future.

The safer option would be to pay down your mortgage. While it doesn’t have the growth potential of investing, you shouldn’t underestimate the peace of mind that comes from paying down debt.”

–  Jason Evans, Certified Financial Planner, Evans Retirement Planning

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