Valley First

Consumer Spending Tips

Valley First experts weigh in on consumer spending and saving
May 1, 2012

Penticton, B.C—The Bank of Canada recently raised its economic growth forecasts while at the same time repeating its warnings about increasing household debt. In response, the experts at Valley First share their views on what this announcement means for the average Canadian.

At the heart of the Bank’s announcement was an increase in economic growth forecast – an increase driven largely by consumer spending supported by continued low interest rates explains Kevin Tom, Valley First’s assistant vice-president of wealth management.

“Low borrowing costs, which provide the cash to drive consumer spending, will continue to play a big role in Canada’s economic growth,” says Tom. “The flipside is the availability of relatively cheap credit, which means we will continue to take on debt to fuel our spending, leading to a potentially dangerous play now, pay later scenario.”

To combat this borrow-spend cycle, Tom recommends people map their money flows. Like creating a household budget, this requires people to look at their income and identify required expenses and then determine if they have any financial leaks.

“When we create a budget we can easily identify those fixed expenses, such as mortgage payments,” says Tom. “Where we fall down is assigning an arbitrary amount to activities or expenses, like eating out. When you actually review your bills to figure out where your hard-earned dollars are going, you will probably be shocked to learn exactly how much something like a restaurant habit is costing you.”

Luke Ellis, a financial planner at Valley First, agrees the small expenses quickly add up and people can realize big changes with just a little behaviour change.

“The reality is, we have to spend to survive,” says Ellis. “However, it’s what we spend our money on that makes a difference. A few dollars here and there, such as a coffee on the way to work every day, can add up to more than $500 a year. Is that coffee really an essential purchase? Even by cutting back to a couple of coffees a week and directing the savings to a tax-free savings account, you will soon notice a big difference in your account balance.”

“Set and forget.” That is the advice offered by Dustin Read, a personal banking manager at Valley First.

“It’s easy to say pay yourself first, it’s a lot harder to actually follow through with it,” says Read. “However, by creating an automatic payment that redirects a set amount to a savings account each payday, you can avoid the temptation to spend rather than save. Sooner than you think, you will adapt and you won’t even notice the difference in spending money.”

About Valley First

Valley First is a division of First West Credit Union, B.C.'s third-largest credit union, which has 39 branches and 28 insurance offices throughout the Lower Mainland, Fraser Valley, Kitimat and Okanagan, Similkameen and Thompson valleys. Led by Launi Skinner, First West has $7.7 billion in assets under administration, more than 177,000 members and close to 1,300 employees.

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