Published on: 1/8/2013 9:18:15 AM Print | Font Sizes:  Normal Text Large Text

Crystal ball gazing: how 2013 could impact your financial future

By: Laurie Bissonette

Laurie Bissonette, CA, is a partner with KPMG Enterprise. She can be reached at 705-669-2521 or
Laurie Bissonette, CA, is a partner with KPMG Enterprise. She can be reached at 705-669-2521 or

Last year, Canadians were treated to a raucous U.S. election (which I would admit, I find entertaining) and a Washington fiscal melodrama along with ongoing woes in Europe and Asia, which have put a chokehold on global economic growth. As the new year begins, taxpayers will be bombarded with advice on how best to manage their finances. Crystal balls aside, here’s what the experts think is heading our way.

Even though Canadian economists aren’t predicting a recession at home, the general consensus is that we’re in for a period of slow growth across the board due to concerns about political gridlock in the U.S. and a softening Chinese economy, not to mention the Greek tragedy that is playing out in Europe which threatens the stability of the Euro and along with it the European Community. Any one of these factors could adversely impact Canada’s resource and manufacturing sectors – our Northern Ontario sectors. The main takeaway is that you should be prepared to be more involved in your finances if you want to weather the storm.

Reducing Debt

If it’s one thing that all the pundits agree on it is getting your debt under control. Currently, a record amount of personal and household debt is being carried by middle-class Canadians. Interest rates, which have been at historic lows, are not expected to remain so for much longer. If you have to borrow for that special project, a line of credit is probably your best option, particularly if it is at a low interest rate.

Housing Markets

The outlook on the housing markets is divided. Concerned about a potential bubble, last year the government took measures to dampen speculation in the housing market. Still, demand remains strong which has some economists saying that we are still in the middle of a gravity defying boom. Even with signs of life returning in the U.S. housing markets, most economists expect that growth will begin to soften nationally, including in Toronto and Vancouver, which has been fueled by strong condo demand.

Historically, buying a home was a rock solid investment that would appreciate over time to create a retirement nest egg. Unfortunately, that’s not the case anymore. Buying a home is more of a lifestyle decision. Not to mention, if the interest rates do rise, you will need to realistically manage your expectations on how much of a mortgage you would be able to maintain, if you have one, especially if you opt for a variable rate mortgage.

Optimal Investments

For those of you with a surplus of funds that you can allocate to investing, there are several areas that are well established this year. While I would never propose to recommend, I can tell you where I feel comfortable. Dividend-paying stock companies are not as erratic as other stocks and they provide a modest return of two to four per cent, or it can be even higher. Even mutual funds provide a safe harbour for a less risk-adverse investor. Try to remember to maximize those TFSAs, RRSPs and RESPs which will provide for you and your family in the long term.

The best advice for this year is stay within your limits. It’s always good advice to buy within your limits, and think twice about incurring any additional debt that is not necessary.

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