9 Money To Do’s – Not!
Posted by Gail | Filed under Money Management
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9. Marrying a money moron. You can’t change people. They can change themselves if they really want to. And if they really want to marry you, they should be willing to be a grown-up about how they deal with their money. Can’t get them to pay attention? Have the money talk. Share your dreams and expectations. Ask your partner to be in bed with you when it comes to how you’ll manage your money. If he can’t, or she won’t, re-evaluate your thinking and ask yourself: Do you want to spend the rest of your life trying?
8. Procrastinating on making a will. More than half of us don’t have a will. Really? You’re never going to die? Or is it that God is holding YOU by your pompom? Grow up. Without a will you have no say on who gets your money. Without a will, you can’t plan to minimize your taxes. Without a will you’re leaving your family in the lurch. Suck it up and do the tough stuff. Make a will.
7. Buying too much house. The rule of thumb is to spend no more than 35% of your net income on housing expenses: mortgage, property taxes, insurance, utilities, maintenance. If you’re over your head on housing, it means having very little life. It can also mean you’re having to use credit to supplement your cash flow, digging yourself a hole that’ll just add to your misery. If you must spend more than 35% because home prices are so high where you live, you better have no consumer debt so you can use that allotment (15%) to make your home a manageable expense.
6. Waiting to invest. What are you waiting for? Do you think some magical can-opener is going to come out of the sky, open up your brain, and pour in everything you need to know to get comfortable with investing? If you aren’t putting your money to work, you need to find a course, read a book, follow a blog or three, and learn. Learn. LEARN. Remaining ignorant isn’t the answer. The two biggest things that affect how much money you’ll have in the future are:
how much time you have, and
how much return your investments earn.
5. Not saving. This may be the reason you’re not investing: you have no money to invest. If you don’t set something aside today for tomorrow, what are you planning to live on when you retire? It doesn’t matter how much you start with: $100, $50, $25. Open up a high-interest savings account and set up an automatic plan to have your “savings” deducted from your regular account. And remember, you can’t spend that money on credit or you haven’t saved a thing.
4. Using credit to scratch your consumer itch. You can’t afford to pay for that couch or vacation now, but you’ll be able to at some future date? Gosh, what planet are you living on? When you use credit to buy stuff, you’re spending money you haven’t earned yet. And it’s only a matter of time before all those minimum payments end up squeezing your cash flow tighter than a nun’s knees.
3. Not having enough insurance. The cheapest you’ll ever get your insurance is when you’re young, healthy and don’t need it. Buying life insurance when you’re 35 or 40 is expensive and narrows down your options. Buying disability insurance after you’re 30 is almost impossible: you’ll have picked up some physical disqualifiers and your premiums will be astronomical. Just imagine how you’ll live if you get sick, can’t work a full week anymore, and still have a family to feed and a mortgage to pay? Having enough of the right kind of insurance is the responsible, grown-up thing to do. Do it.
2. Not having an emergency fund. As your first line of defense against the unexpected things life will throw at you, an emergency fund is indispensable. Without an emergency fund, you’d have to turn to credit to fill the holes. And, no, a line of credit is not an acceptable emergency fund. It’s debt waiting to happen. You need to have cash in the bank. How much cash? Work towards accumulating six months’ worth of essential expenses. (Cable is not an essential expense!)
1. Not having a budget. If you don’t have a budget and you aren’t tracking your expenses, you have no idea how you’re using your money. You have no plan. You haven’t prioritized. You’re flying by the seat of your pants. And that can’t end well. Since you’re working so hard for all that dough, don’t you think spending a little time managing it makes sense? Nothing else about your financial life will work if you don’t create a game plan for the money coming in and going out each month. You’ll whine that you don’t have money to save for an emergency, to save for the future, to invest. You won’t know where to find the money for your insurance premiums because you don’t know where all your money is going. You’ll end up not even knowing how much house you can afford. And you won’t ever make a will because you can’t come up with the money for the lawyer. As for marrying the wrong mate, if you can make a budget together and live on it as a team, you’re almost certainly on the same page when it comes to the money.
May 4, 2011 at 6:43 am
Most provinces (check with yours obviously) will accept a holograph (hand-written) will if you can’t afford a lawyer to do it properly for you yet. It must be handwritten, not typed at all, signed and dated by you and two or three (depends on province) witnesses who are not related to you, in the will, or related to anyone in the will who is getting something. I believe that in Quebec the witnesses have to be Quebequers but I’m not positive. Like I said, check it out. The witnesses must see the will written and sign the same day as you.
If you’re married and croak, everything goes to your spouse. If the spouse croaks at the same time as you then your estate and progeny are up that well know tributary without a means of locomotion. There was a case here a few years ago of an unmarried old lady who died with no will. Once her estate was probated through the courts it was discovered that her closest living relative was a very distant nephew. He inherited everything and was left with the task of closing the estate by taking her death certificate to every bank in town and asking if his “aunt” had an account there because she’d left no paperwork at all.
May 4, 2011 at 6:44 am
What about Power of Attorney?
May 4, 2011 at 7:01 am
Re: Holograph Will
Long and the short of it is that it must be entirely hand written and there are no witnesses required. All other Wills require witnesses.
From: http://www.professionalreferrals.ca/2003/10/acceptable-forms-of-the-will-in-canada/
Holograph Wills
A holograph Will is a Will completely handwritten by the testator. It is subject to no other formal requirement ; the signatures or attestations of witnesses are not required for the Will to be legal (section 7, Wills Act of Alberta). Of those provinces that accept a holograph Will, some require the testator’s signature, others do not. The entire Will must be in the handwriting of the testator ; a typed Will with testator’s signature is not accepted as a legal holograph Will.
Holograph Wills are valid in Ontario, Alberta, New Brunswick, Newfoundland, Quebec, Manitoba and Saskatchewan. In Nova Scotia and P.E.I the use of holograph Wills are not permitted, although the law in P.E.I. was amended to permit a “substantial compliance” provision (Sec. 70 of the Act) to allow the court to recognize a holograph document if it is signed and judged to represent the testamentary intentions of the deceased. In British Columbia holograph Wills are not allowed, but the law will uphold a valid holograph Will made outside of B.C insofar as it applies to moveable property in that province. (sec. 40 of the Wills Act)
May 4, 2011 at 7:19 am
First post ever. Love your shows Gail.
Having been widowed suddenly two years ago. We had wills since we were 25 (now 60). Make sure you have everything registered jointly, house, vehicles, cottage etc. Then they do not have to be probated and no probate fees.
May 4, 2011 at 7:35 am
Re: #9 I married a money moron who, fortunately, loved me more than his bad habits. Before we married, he decided to pay off his entire credit card balance as a sign of good faith.
We still have different styles. But he will defer to my suggestions and trust me to keep us in good financial shape. And he is the one to remind me that sometimes it’s worth spending money to meet other goals.
I still feel very lucky that it worked out that way. Looking back on 22 years of marriage, I have no idea how to make an perfectly rational decision about love. <3
May 4, 2011 at 7:40 am
I’d actually love to know more about wills and if there’s anything that you should should do to protect loved ones after you die. I’ve also wondered if I need one – my partner and I have no assets beyond my very meager RRSP and investments, and my student debt would be dissolved on my death… so I figured we’d only need one if we had some major possession like a house or some wealth or a kid. Anyone have thoughts on that?
May 4, 2011 at 8:08 am
Love your show!!!Like the sites etc.-way too much stuff on Slice side,but hey it pays your bills! I need to ask for personal advice and look I don’t live in the Greater TORONTO area, but I still need HELP!!! Up here in Northern Ontario things are bad! No one pays attention to us!??
May 4, 2011 at 8:13 am
The holograph will is interesting… I am sure there are a ton of ’sample’ wills on the Web. I need a will, but I just never seem to get one done, and based on that list, I am a moron, but not a complete moron.
May 4, 2011 at 9:27 am
I have another bad money move that I see a lot of couples my age (35) making lately – buying a house in the outskirts to have lower mortgage payments but not properly costing in commuting costs. A TTC monthly pass costs $121, and from say Pickering to Toronto a go train pass costs at least $200. So that’s $321 – so if both spouses work downtown, that’s $642 a month. And that doesn’t include the cost of gas/wear and tear of driving to the go station, and in some cases having to pay an extra $70/month for a reserved parking spot at very busy locations.
There’s nothing wrong with the burbs – I love the burbs, grew up there – but I think some people ignore the commuting costs at their peril. (not to mention the time factor, but this is about the dollars. some people enjoy the time on the train afterall).
May 4, 2011 at 9:40 am
It’s no fun being a responsible adult and paying for a will and power of attourney, and watching all the dollars leave your account each month for insurance, retirement, and emergency fund. My BFF and I often say we could be having a lot more fun if we didn’t take care of such things, but having seen people left in the lurch without such items, I don’t want to be one of them! I’ll pay the premium for peace of mind thank you very much.
May 4, 2011 at 11:18 am
Jessie: Death is not the worst thing that can happen to you. A power of attorney is as important, if not MORE, than a will. Depending where your RSP is you can assign a beneficiary. If you are not married it might be taxable though. You should check that out. In the case of my late husband they just rolled over into mine and were not taxable till I take them out.
May 4, 2011 at 11:54 am
I recommend strongly that people consider shelling out for a lawyer to prepare a proper will. Holograph wills and other do-it-yourself options are all well and good, and can certainly provide evidence of your intent. However, most of us don’t know the applicable laws that might get in the way of what we want done with our assets when we’re dead (or for that matter our health if we can’t make our own decisions – get a livng will too!). If your situation is simple, it will not cost much money. If it’s complex, you really need a professional, and those cost money!
And no, I am not a lawyer – just want to be sure that my wishes are followed if I’m incapacitated or die.
May 4, 2011 at 12:19 pm
Gail,
It seems people are very interested in wills and ways to minimize your risk in case of your partners death (joint accounts, info on all accounts in a safe location + passwords etc). Could you make this a topic for your blog?
May 4, 2011 at 4:08 pm
Jesse
As mentioned… it’s important for you to have a power of attorney. So yes, you will need a will.. even though you have and RRSP and student debt.. regarding your statement of the student loan being dissolved.. upon your death the estate liquidates your assets then pay’s off the student loan.. so in your situation, your investments.
Holograph wills be cautious.. as they are the most easily contested all. What advice my clients is.. in the long run, it is more cost effective and less time consuming to have a professional help prepare your will for you then to ‘do it yourself’.
Thanks
May 4, 2011 at 6:09 pm
#8. Our neighbour (who worked at a cemetery of all places) died at 39. Last summer she succumed to her injuries after a motor vehicle accident — she was just a passenger, and then she was gone. She did not have a will. She left behind a young adult daughter, who is away at college, and a mess of confusion. Since then the house have been empty– no will means nobody owns the house until the lawyers and government are done looking at everything. The daughter is in limbo and it could have so easily been prevented with a notorized chunk of paper!
May 4, 2011 at 8:53 pm
I really would urged people to use a lawyer for their will/power of attorney/healthcare directive. It really is not as expensive as people believe and it could save them a lot of heart ache and possible lawyer fees at the end. This is especially imperative for anyone with a “unconventional” family (step’s, ex’s,etc). They will make sure that all the i’s are dotted and t’s are crossed, that way it cannot be contested or misinterpreted.
Our lawyer charged us $350 to do the will, power of attorney and healthcare directive for both of us. I can sleep better at night knowing not only our financial stuff will be distributed to the people we want, but also that our children will go to our chosen guardian. Plus your beneficiary will not have to pay probate or extra taxes, anything I can do to not give the government anymore money, I’ll do. I pay enough taxes when I’m alive, I don’t need to keep paying when I am dead.
May 5, 2011 at 12:48 am
I totally agree with you Geoff. We moved out to the country and knew there would be an increase in commuting costs. Our costs went up about 500 a month and we are now on a very tight budget. I get all the errands done in one day but am seriously considering selling one of our vehicles or at least parking it for some time to see if we (I) can live without it. When you purchase your own car in your teens it is really hard to give up the freedom of being able to come and go as you please. But with the extra costs I don’t feel “free” to enjoy life either
May 5, 2011 at 4:12 pm
@ psychsarah
I too have seen how damaging a lack of planning and the illusion of invincibility has when someone suddenly becomes uninsurable and passes away with no life insurance. (They viewed it as paying into nothing!)
I want to know that all those I leave behind are well looked after. Especially if I go before my husband and son.
Will, Power of attorney, and life insurance are all in place for us.
May 6, 2011 at 2:19 am
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May 6, 2011 at 3:50 am
[...] Gail Vaz-Oxlade pulls no punches with her 9 Money NOT to Do’s [...]
May 8, 2011 at 9:21 am
[...] Gail Vaz-Oxlade pulls no punches with her 9 Money NOT to Do’s [...]
May 25, 2011 at 12:06 pm
Not marrying a “money moron” is extremely important, so I think it’s good that it’s the top item (even though it’s number nine). Doing a budget might be the most important, but if one person is ignoring it, it’s not much good!
October 20, 2011 at 7:30 am
A Power of Attorney is a document that allows someone you select to make decisions for you (either related to finances or health care) in the event that you can’t make them for yourself.
I’ve found that PowerOfAttorneyHelp.com is a really good resource for understanding the in’s and out’s of what apower of attorney is and, since they are a registered legal document assistant, felt comfortable making mine on their site.
October 20, 2012 at 7:40 am
It is really important for us to have a will for future purposes and that is how we give importance to what we sow in the present and giving it to the right person for future preferences to to have a more secured assets. [ where to find sample wills dot com ]