January is a time of year that new resolutions get made and also broken! For instance usually try to start some kind of diet or exercise program, only to give up by February.
For those that are looking at their debts – especially after Christmas with higher spending than usual, they may endeavour to start a budget or stick to a budget or even get some help with credit counselling.
For investors, this may be a great time to reflect on the past year’s successes or misses. For instance at the start of the previous year, you may have set a goal to buy 1-4 properties during the year or you may have wished to start lending your money instead of becoming a landlord or you may have started off great only to be brought to a full stop due to the inability to qualify for a mortgage or lack of a down payment.
So what do you do when your credit has suffered, you have credit issues or debt issues and you cannot qualify?
In light of the new mortgage rules, here are some tips to start your new year’s resolutions off right!
Tip #1 – Get your Credit in check
Pull your Equifax if you have not done so in the past 6 months and check where you are and what could be holding you back from qualifying. If you see something that looks out of place or is of concern, speak to your mortgage agent or broker for advice on how to fix these issues. The earlier you start, the better off you will be!
Tip #2 – Budget and Stick to It!
Put a budget into place or if you have one, update it and follow it. In order to know how much money you have towards a purchase, you need to know what your money is doing and how you are spending it. Heard of the Latte Factor? If you are spending a lot of money on coffees or lattes, cut back and put that money towards your debts – will get you much further ahead I promise.
Have too many debts and you don’t know how to get them under control? Put the snowball method into place. For example, let’s say you have 2-3 credit cards, a car loan and a line of credit.
Here are the steps to follow:
- Gather your bank and credit statements
- List your debts from smallest to largest
- Ignore the interest being charged
- Attack the smallest debt first
- Every spare dollar you have should go to this debt first, while maintaining the minimum on all of your other debts;
- Once you pay that one off, go onto the next smallest debt and do the same;
WASH – RINSE – REPEAT until you have paid down your debts in full and remember to watch your spending going further so you don’t rebuild your debts back up.
Tip #3 – Know your Net Worth!
Knowing your net worth and also tracking it on a 6 month basis is crucial to growing your wealth. If you have more liabilities than assets, you are moving in the wrong direction. By knowing your debts, your liabilities and learning how to tip the balance towards more assets than liabilities, you can grow your net worth. Those that don’t take the time to learn how to grow their assets and reduce their liabilities, should speak to a financial professional for advice – it could make the difference between eating chicken and steak in retirement vs. eating spam or in investor terms, having monthly cash-flow vs putting money out of your pocket towards your growing debts.
Tip #4 – Putting it all together!
Now that you know your credit score, you have learned how to reduce your debts and build up your assets, you are ready to proceed with your investing goals. First you need to know your WHY; second you need to know what your available downpayment is and third you need to be organized with your paperwork.
The last two years have seen some major changes in the Canadian mortgage marketplace. Being organized with your paperwork, means having your T1 Generals, Notice of Assessments, mortgage statements, etc in a place that is easily accessible for your mortgage broker as we need more paperwork than ever before and by having it ready we can assist you that much faster and more efficiently to obtain a mortgage.
Need some help putting your New Year’s Resolutions into action? Let’s have a chat so I can assist you to move forward with your investing goals in the New Year!