NEWS

WIRES

OTHER

BMO Offers Tips On How To Avoid Hitting Your Personal Debt Ceiling

- More than one quarter of Canadians living paycheque to paycheque

The August 2nd deadline is looming for the United States to come up with an agreement for raising the $14.3-trillion debt ceiling. The outcome has wide ranging consequences with the potential to have a significant impact on the global economy and stock markets.

While putting its financial house in order is a top priority for administrations, it should also be top of mind for consumers and their financial affairs.

Case in point - a BMO survey reveals that one in three Canadians are living at or beyond their means, with 27 per cent living paycheque to paycheque - a 10 per cent increase over last year.

BMO Bank of Montreal offers the top 5 tips to avoid hitting your personal debt ceiling:

--  Don't overspend - Spend less than you make. Develop a budget that
    establishes how household expenses will be paid and how spending will be
    managed. Take advantage of free online tools, such as BMO
    MoneyLogic™, to help stay on top of everyday household spending and
    saving. 
--  Curb credit card debt - Pay down credit cards, beginning with those that
    carry the highest rate, and consider using a low rate card for
    purchases. For instance, the BMO Preferred Rate MasterCard offers a low
    rate of 11.9 per cent for an annual fee of $20 per year. 
--  Invest to save - Set up a Tax Free Savings Account (TFSA) or high
    interest savings account to set aside extra cash in case of an
    emergency. Also consider using Exchange Traded Funds to reduce
    management expense fees. 
--  Become mortgage free faster - Cutting your amortization from 30 to 25
    years and increasing monthly payments on mortgages can help you pay down
    your mortgage faster while saving you thousands of dollars in interest
    costs. For instance, BMO offers a low 5 year-fixed rate mortgage with a
    maximum 25-year amortization at 3.79 per cent. Additionally, consider
    increasing the frequency of your payments and/or making lump sum
    payments to pay down your mortgage faster. For example, by making a lump
    sum payment of 5 per cent of the original principal each year, you can
    pay off a 25 year mortgage in less than 12 years and save over $136,000
    in interest. 
--  Have a Plan B - Plan ahead and develop a fall back plan in case you are
    unable to meet your financial obligations due to unexpected
    circumstances, such as loss of work, or damage to personal property,
    including your home or vehicle. 

For more information, please visit www.bmo.com/smartsteps.