This & That: All Kinds of Stuff
Posted by Gail | Filed under This & That
M Wrote: My name is Mike, and my wife Becky and I were one of the couples on your first season of Til Debt.
Unfortunately, things did not work out the way we had hoped, and after 20 years of marriage, we have decided to end things and move on with our lives. Communication (which was the one thing we worked on during your show) ended up being the one thing that ultimately killed the marriage.
Luckily though, and I’m glad that we’re the exception to ‘bad break up’ rule, this is a completely amicable break-up, and we’re working very closely together to get everything organized so that we can BOTH end up squarely on our feet, debt free, with some cash in our pockets, and ready to start our new lives (case in point, we were looking at apartments and houses online with each other last night.)
As terrifying as the future is to us right now, there’s a part that’s kinda exciting for the both of us, and the plan is to adopt all that you taught us so we don’t fall into the same trap as before… but there are a lot of NEW factors now, living as individuals. We’ve been talking about working together to help each other with our individual plans and budgets.
Like I said, we’re the exception to the rule for breakups… we want to do this right… for everyone’s sake… kids, family, and our own safety and sanity.
What we don’t know is… what to do next. What pitfalls await us… do we rent or buy, do we stay separated (to maintain the financial benefits of marriage) or do we sever ties, what’s the best way to manage our money as individuals, while still sharing some expenses as they pertain to the kids. The list goes on and on.
I’m reaching out to you to see if you would be open to helping us once again. We would be willing to pay for your help if need be (although… we’re not exactly cash rich) and we both related well to you, and related well with each other when we worked with you.
Gail Says: Sure I remember you. I toasted your credit cards, didn’t I? Sorry to hear you’re at this transition, but happy to hear you’re both dealing with it so well.
I’m going to recommend you go see my pal Darren Gingras at The Common Sense Divorce. (I’m a part owner in this company.) He and his team will be able to guide you through all the questions you’re asking so that you come out the other end as financially healthy as possible and ready to move forward into the next phase of your life.
Keep putting the kids and the future in first place so you don’t get caught up in rubbish and I wish you the best of luck.
M Wrote: I’m planning on buying a house soon. I’ve decided that I can pay 150k for a house, and I have 50k in liquid savings. I plan on putting down 30k as a down payment. However, I also still owe 23k on a 0% 5 year car loan. Should I pay off the car in one fell swoop to increase my ability to ease my monthly finances after owning a home, at the cost of reducing my down payment? Or should I just keep a steady course as I am since the car loan is 0%?
27 years old, I also have a Roth IRA and 401k with 20k each, and an old pension plan with 5k from a part time job, almost the whole 5 years remaining on the loan, zero credit card debt.
Gail Says: The car has no interest cost so stick with the higher downpayment on the home. Take a long enough amortization so that the payments are workable and once the car is paid off take half the car payment and add it to your regular mortgage payment (or save it up for a principal prepayment) while you incorporate the other half into your budget for some more breathing room.
J Wrote: Do all Tax-Free Saving accounts have the same interest rate? Or does each bank offer different rates? I’m wondering if 0.1% interest per month is a good rate. (The account has $10 500ish and is making between 7-10 dollars a month.)
Gail Says: All TFSAs do NOT have the same interest rate. The TFSA is simply a plan registration that tells the tax man to keep his sticky fingers off your money. You have to “invest” that money to make it earn a return. If you choose a “savings account” option, you’ll interest. At today’s rates, you can earn as much as 1.9% interest on your TFSA.
BTW, you’re not earning 0.1% interest… then your monthly interest would be 88¢ in interest a month. You’re earning somewhere around 1.1% interest, which is pretty standard unless you go hunting for a better rate, which you should.
J Wrote: I just heard you on CBC radio. As I don’t watch TV I had never seen your show before, although I had heard about you. To be honest, I just figured you were another chastising media created personality similar to the likes of “the nanny” lol. However, after listening to you, I think you know what you’re talking about and I respect your frankness.
Now, to the reason I decided to take a chance and write to you and just lay it out there. I have a problem Gail; I spend money like I eat food. With pleasure and abandon. Which is also why I’m heavily in debt and fat, my two biggest problems that threaten my quality and longevity of life.
Anyhow, here’s my situation. I’m 36 years old and together with my husband about $70,000 in debt. Before we got married 2 years ago I was about $34,000 in debt due to $10,000 spent on a Masters Degree I completed at night, and the other $24,000 well that was me being single and depressed and feeling I should have the right to see this world I live on. I figured if pay it off later in life but have the experiences when I was young.
The wedding cost $30,000, bank manager convinced us to buy a townhouse, so borrowed some for down payment, furniture, lawyer etc. then 5 months after getting married and buying a house I found out I was pregnant and haven’t had a salary in almost 10 months.
Hence the mess we’re now in. What should we do? Any advice would be greatly appreciated.
Gail Says: You fell into the same trap so many people do: There. Will. Be. More. Money. Maybe not. Maybe spending money you HAVE NOT YET EARNED is a really dumb idea. And if you want to see the world you live on, then you’ll save for each of those experiences so you can have them without owing anyone anything.
By the way, $30,000 for a wedding? Really? And you bought a house without having saved a downpayment? That’s impulse shopping, m’girl, on the grandest of scales.
So now you have $70K in debt and don’t know what to do. Well you have a few options:
a) keep paying the minimums and be in debt with your cash-flow strapped for-frickin’-ever
b) declare bankruptcy, lose your home (maybe) and ruin your credit for a minimum of 7 years
c) find a way to pay it off.
Coming up with the money to pay off the debt may mean cutting back to bare bones spending. It may mean getting one, two, three more jobs. The only way to pay off debt is to find the money. That’ll be up to you.
P Wrote: First of all, thanks for all of your work to educate Canadians about our finances. My husband and I watch yours shows all the time and have learned a lot! This year we got our credit reports from TransUnion and Equifax (we had only done TransUnion in 2011 when we checked).
I’m concerned about some of the reports coming through Equifax, for example I had opened an RB Visa account in 2002 and then acted irresponsibly and missed a few (ok, quite a few) payments around 2008, 09,10, (I know, stupid!) but we paid off the account in full in 2011 and high fived each other.
But the report has the account listed as “R9, Meaning a bad debt, collection account or unable to locate” in the blurb underneath is says “Your account is past due in the amount of $0. Additional comments: Closed by credit grantor. Account paid.” But below that is says “From 2008/07/00 to 2013/01/30 there has been 40 reporting’s and has been reported delinquent 40 times.” But of those 40, 23 of them are listed after we had paid the account in full!!
What does all of this mean? And what kind of an impact is it having on my credit? We’re working so hard to get out of debt that something like this feels like a setback, or am I overreacting because I don’t understand how the system works? What should our next steps be?
Gail Says: People are often surprised at the mistakes on their credit histories, and how those mistakes are hurting them. You need to write a letter documenting the mistake and asking for the file to be changed. And you’ll have to follow-up and follow-up. And follow-up. It’s way easier to put something wrong on a record than it is to fix the something wrong, so you’ll have to be persistent.
C Wrote: I am enjoying the mymoneymychoices website very much. I am working on level 2.
My question is: I am promoting the site and have people who say they are going to start lesson 1. I don’t use Facebook and would like to add the tribe once we get people started. Is there a way to do this for use non-Facebook followers?
Gail Says: You’ll have to find another way of communicating with each other. Monthly meetings at homes. Skype calls if you’re in different parts of the country. However you would get together to discuss a book or talk about life, you can use the same methods for your Tribe.
C Wrote: In May I sold my apt because I wasn’t working and had decided to go back to school full time, but I sold my apt. at the same time I got a job offer. Ended up taking the job and didn’t go back to school (the online option wasn’t for me). I would like to buy again, but quite unsure as to whether that’s the best way to go. I have about $160,000 in the bank, plus $20,000 in TFA. My salary isn’t that great (approx $40,000) and am 50 years old with no debts. I’m almost sure my financial advisor (RRSP guy) will suggest putting the money into the RRSP acct. and I’d like to have an unbiased opinion. If you are not able to help me with this, are you able to suggest a Financial Advisor that I could consult with in the Vancouver area?
Gail Says: The questions to ask yourself before you decide to buy again are these:
a) how much of my current income will my shelter costs gobble up? Since you have no debt, then up to 50% of your net (take home) income can go to shelter without unbalancing your financial life.
b) will the mortgage be paid off by the time I retire? If you plan to work for as long as it takes to get the mortgage paid off, go ahead and buy again. But don’t think that retiring with a mortgage is a plan. I am mortgage free and it still costs me over $1,000 a month to carry my house (property taxes, utilities, insurance, and maintenance).
c) If you choose to rent and invest the money in the bank, I’d strongly recommend you find someone who is unbiased to guide you. Look for a fee-only financial planner — someone not associated with a particular company trying to sell you their products. Keep your investment time horizon — how long you have until you need the money — in mind; less than 10 years means you can’t play in the equity markets because you don’t have the time to recover.