Guest Post : GET OUT OF DEBT

Recent record increases in market indices (especially that of the Dow Jones Average) have led many to believe that a market correction is imminent. The financial picture for the United States and consequently Canada is in need of a correction. How severe that correction will be is uncertain but many experts feel that because Canada’s economic situation is so tightly connected to that of the USA that it will cause our bubble to burst here.

Notwithstanding the equity markets  the housing markets could also contribute to an economic correction. The lending for Canadian mortgages has more than doubled in this last decade and now exceeds more than $1.5 trillion dollars.  What this means is that servicing the average home and its related costs has risen sharply and that if there was even a small increase in the current mortgage rates that the take home income of a Canadian family might not be sufficient to cover the monthly costs. Ultimately this will result in highly leveraged homeowners defaulting and the economy would be thrown into an economic disaster.

If this was to happen (and I certainly hope it does not occur to that degree) the average person’s only protection is to be rid of debt-especially those high interest credit cards. That will allow him\her to weather an economic storm and take advantage of bargain prices and investment opportunities in a deflated market. But even if there is only a minor turn down in the short term one can, by reducing debt, create savings accounts that will have lifetime benefits.

Review your monthly budget carefully and often to ensure you are not overexposed and that you will not be affected by weak economy.

John Moran - Lyon Financial Services Inc.

jmoran@lyonfinancial.ca

Toll Free - 1-877-ONE-LYON (663-5966)

Tel: 519-766-0001

Fax: 519-766-1521