This & That: Mish-Mash Edition
Posted by Gail | Filed under This & That
B Wrote: My husband and I are saving up to buy our first home. We have a 15 month old and would like for him to have some space to run around. We have no debt at this point but don’t have a lot of money saved to use as a down payment. If we were to follow your advice of putting at least 20% down, we would need to have a $70,000 down payment to buy a $350,000 home. I have $25,000 in RRSP’s that I can use according to the First Time Home Buyer’s plan. My husband is from South Africa and has no RRSP’s at this time. My question to you is this: Would it be better for us if we put all our spare money into buying RRSP’s for my husband (to be used as a down payment) or to put it in a TSFA?
Gail Says: If you can benefit from the tax deduction that comes with an RRSP, by all means use the RRSP and then use the taxes you save (don’t pay or get back) to boost your home savings account inside a TFSA.
D Wrote: I will just start by saying I was NEVER a financial Guru fan. Dave Ramsey and Suzy Orman have never appealed or inspired me. Then you came into my life with “Til Debt Do us Part”. You have really turned me upside down. My husband and I started our married life out in HUGE debt. Then we had two kids, assessed multiple medical bills (my oldest son and I both have extensive medical issues), confusion on the inheritance of some land lead to unpaid taxes, and we ended up with some serious unpaid credit card account’s. We tried hard to dig ourselves out of debt, but couldn’t. In 2003, we felt we had no choice… we filed for bankruptcy. We swore then that we would NEVER return there. My husband Greg began his obsession with finance gurus and I became the ultimate coupon/sale/repurpose queen. We have kept our nose clean and our only revolving debt is our house, our two cars and two credit cards that we don’t carry a balance on. However, we still found ourselves blowing through whatever savings we could put together and having overdrawn account’s a couple of times a month. My husband had taken over the bills and was handling all the money without me. It was always “my fault” when the account went overdrawn even though I only spent on the items we needed. It wasn’t until earlier this year when Greg DVR’d one of your programs and watched it while I was in the room that I became hooked on you! You just make more sense and don’t make getting out of debt more confusing then the Long Form for taxes! Six weeks ago, Greg and I began attempting your system. I took the last 12 months of expenses and reconciled them. We were both amazed at the amount of money that is unaccounted for or wasted and how much he has to share in the blame (winning moment for me!). We also realized we were grossly underestimating our budget line items. He thought that $75 a week was enough to feed a family of four, three of which are males! We then made a spread sheet of expenses per pay period and per month, took our income and budgeted it out based on the facts. We got out our jars and money was taken out of the bank every other Friday and divided into jars for their intended uses. Every transaction must have a receipt and we reconcile the receipt each pay period. This is the first time in 17 years we have done our money together! For the most part, it is working. However, we made an agreement to live on $250 less a pay period as that would go directly to the savings and remain untouched. This would give us $6500 a year into the savings plus the additional amounts we receive in gain share checks and tax reimbursements. We have a son starting college in a year and a half and we have nothing put away for him, so we feel the need to be more aggressive with savings right now to account for lost time. This is where my questions/issues come in. The first budget was lacking on the list of what to include and so the following pay period, I had to add additional line items. Now the list is complete, but we still seem to run into issues. An example would be a calculator my eldest needed. In taking his PSAT, they were only allowed to take in a specific type of calculator (graphing). We had chosen not to buy one at the beginning of the school year due to cost and have him use the ones provided by the school. The school failed to tell us that due to their limited quantity, that in order to bring the graphing calculators into the PSAT you would have to bring your own from home. This sent us scurrying to purchase a $104 calculator that was not budgeted. Another example is that both my boys play soccer. We received a message on Friday from the organization that due to the drought, they boys would have to wear turf shoes and would not be allowed on the fields with cleats. There was another $75 spent on getting the shoes for them by Monday. This pay period has been more of the same… we have to shell out an additional $50 for a tournament that we were told last week we were not participating in (no opt out… pay even if not attending), a broken computer (We both work from home at times and the boys do homework on it as well so it must be fixed), and a broken sprinkler head that had to be replaced. None of this is earth shattering, but each week we seem to fail at working only out of the jars! I just found out I am going to have to put my oldest cat down, I have to go into a gift with the ladies in my office for a baby shower and that we have to add a few more “random” expenses on for this following pay period. We each have a credit card, but we don’t want to use them unless it is really necessary. We are just now building up our savings and only have a couple of thousand dollars in it. We don’t want to use the credit card we each have as the intention of those is to rebuild our credit and not charge up like we did 10 years ago. I am just trying to find a better way to move forward and take the speed bumps in stride. Our current budget is very stretched to add anything else in it without taking out of the money going into savings. Should we just rebudget where $150 go to savings and $100 goes to an emergency account that dumps into the savings if not used? We have only a small amount in it for entertainment ($20 a week), personal spending ($20 a week), nothing for clothes or gifts unless we know something is coming up and the majority of the spending is all on utilities, gas and groceries. Please help me figure this out…. Thanks!!
Gail Says: Hey doll, thanks for your letter and congrats on taking control of your money and your life. Well done! Now what you need to do is set up (yes, yet one more account) a curveball account for those things that pop up and try to throw you off track. All the things you described in your note are perfect examples of what would be paid from your curveball account. This is not your emergency fund, which you need for major disasters. This is just a slush fund from which you can draw when unexpected expenses come whizzing at you at 60 miles an hour and you don’t want to end up using credit. Whether you deposit a little or a lot into this account every month, it can be a real budget-saver. And if you move all the money you “save” by shopping smartly into this account right after you haven’t spent it, it’ll grow even faster. So the next time you save 50¢ on a coupon, go home and drop that 50¢ into an I’m-a-smart-shopper Jar and then deposit all those savings to your Curveball Account at the end of the month. To give your curveball an initial kick, skip one month’s worth of serious savings to fund the curveball account. Next month you’ll be back on track and you’ll have a slush fund to take care of unforeseen expenses that crop up.
D Wrote: I am a 43-year-old woman rising from the financial ashes of a divorce. I make $60K / year (thank the Lord for a decent job!). I recently bought a 100-year old house. My mortgage payment is $251.15 every two weeks (2.41%, variable), and I am already paying an extra $100 on it with every payment. I dug myself a nice $40,000 hole on a LOC (6% interest) I used to make renovations on the house and furnish it. Should I cash in my RRSPs to pay off the LOC? Or add it to my mortgage? Or should I just pay it down over a period of time? Other than the LOC, I don’t have any debt, besides the mortgage. However, I don’t have much left in my savings either. I am saving $300/month, and putting $100/month away in a TFSA which is to rebuild my emergency fund. BTW: your show and book helped get me through my divorce more than you’ll ever know. I am grateful.
Gail Says: Do not cash in your RRSPs. You could add the LOC to the mortgage, or you could put every extra penny (including the $100 a month on the mortgage) to the LOC until it is gone. You’re paying about $200 a month in interest on that line, so you’ll need to make payments of about $1,300 a month if you want it gone in 3 years or less. Over 5 years your payments would have to be about $900 a month. I suggest you get a part-time job and put all your extra money to the debt. Pick something you can have some fun doing or will meet some interesting people at so you’re not slogging your way through that debt.
C Wrote: I LOVE you and your show!!! You’re tough as nails and I love it. Any time I get the urge to spend, I see if your show’s on, that way it scares me into not spending any money because I don’t want to end up like the folks on your show. Although, I will admit I am no financial saint. Which brings me to my question: I have $6,000 of credit card debt and right now it’s at a promotional interest rate of 1.99% until May 2012. But I also have $17,385.00 left in student loans at an interest rate of 5.5% (paid down from $52,000). So, should I be putting the bulk of my debt repayment focus on my credit card or my student loans?
I usually have around $700 at the end of the month to either put on student loans or my credit card. However, I always pay my minimum on my student loans which is $250/month, but still leaves me with $700 at the end of the month to either put on my credit card or my student loan….what should I do?
In March, I get 3 pay cheques so I have $2,000 to put towards a debt and in April with my tax return I usually get $1,300 back on taxes and I sling that on my debt as well, not including the $700 I would normally have at the end of the month in April as well, so in April I am also able to sling $2,000 total onto a debt.
I guess I just need your expert opinion on deciding which debt to pay off first. And since I am scared of you I will do whatever you say
Gail Says: Pay off the CC before the promo rate ends and your interest rate skyrockets. Once the CC debt is gone, snowball those payments against your student loans.
K Wrote: I am 43 and my wife is 38 and have been in touch with Equifax about our credit rating. They have informed us that there was two delinquents but that it has been paid off with a zero balance and we absolutely owe nobody except normal utilities and groceries. We always get denied for credit and Equifax suggested a secured Visa or Mastercard to establish a history and good credit rating but my father disagrees. My dad is a very smart man and says the interest is crazy and we shouldn’t do it, yet in my mind, if we use it for normal purchases like groceries and gas but pay it off within 21 days it would be a good thing for us. I want credit established for a future home and to ensure kids can go to college/university. We presently own our home outright, so we have equity but don’t understand why we get denied so often?
Gail Says: Your smart dad’s comments about the high interest rate are valid if you carry a balance on the secured credit card. However, if you promise to do as you say and pay your balance off in full before the due date every month; you won’t be paying any interest so the rate won’t matter. You cannot mess up. You must set aside the money you spend on your card each time you spend it so you don’t slip up. Do you currently use a spending journal? All you need is a notebook and pen. Put your balance at the top of the first page and then track every cent you spend manually so you always know exactly how much money is in your account. Whether you use a debit card or a credit card, deduct the amount you’ve spent from your balance so you’re feeling the “pain” of having spent the money and you’re not tempted to spend the same money twice. When your credit card bill comes in, check off all the transactions that have come through and pay the bill as soon as you get it.
D Wrote: I would like to consolidate my debt however I don’t know which debt company I should go with. These debt companies are popping everywhere a lot of them privately owned, and because they seem to be commissioned based I don’t trust them. Could you be please recommend a trustworthy firm? My debt is $20,000 I live in Canada and I’m interested in companies such as: creditcanada.com inchargecanada.ca iamdebtfree.com Canadian debt relief ccdr.ca. HELP ME PLEASE!!!
Gail Says: No debt company, that’s who you should go with! Do it yourself. Figure out a debt repayment plan, do the hard work yourself and you’ll be sure it’s done right. The next version of Debt-Free Forever has a debt settlement chapter in it. Or do some research on the internet. But don’t hand your problem to someone else to fix for you. It never works out the way you think it will.
J Wrote: I’ve been a fan since ‘forever’, and thank you so much for what I’ve learned from watching your shows and accessing the website. Here is the reason I am contacting you now:
Please see this web page (long url), from Suze Orman’s web site:
Once there, please click on ‘watch videos’ then watch ‘Overview’ … and others if you want
Finally, here is my QUESTION TO YOU …Would you please seriously consider putting together the Canadian equivalent?
I sincerely believe the response would be phenomenal! Were I an American, I would have purchased one on the spot because of who is offering it – she seems to be your American counterpart – and the comprehensive nature of the kit. FYI – I’m not much of a shopper and never do ‘on the spot’ purchases be it online or in an actual shop.
As it regards the CD updates she talks about, I do recognize that with a market 10 times smaller, it might be necessary for you to offer this aspect as an upgrade/membership-fee-required scenario. I would accept that and assume others would also – also assuming a reasonable fee .
Well, I’ll leave it with you. Thank you for taking time to consider my comments.
Gail Says: I’m sorry m’love, I’m not going to take your money and give you something that is less than you should have. No “package” can do the job an estate professional needs to do to make sure you’re protected properly. You know what they say, “You get what you pay for.” If you think Suze or I would settle for an off-the-shelf package to protect our families, you’d be very wrong. I don’t care who drew up those “forms”, they can’t take into account your unique needs.
And as for the box that turns into a desk, really?
People have been trying to convince me to create a Magic Jars & Budget Binder kit for years. Y’know what I tell them: rinse out your pickle and jam jars and buy yourself a notebook at the dollar store. I just can’t take your money.