This & That: Things Change Edition
Posted by Gail | Filed under This & That
M Wrote: So My wife and I we have a line of credit with bank R. which had low interest 2.9% until the bank decided that minimum payments were not enough and jacked the interest rate to 11.9% a clause that goes into effect if not enough principle is paid off after x amount of time. So we call they tell us to go in and THEY Offer us a consolidation loan, this is great! All our debt $27000 (minus the student loan) in to one steady payment. We fill all the paper work show our worksheet based budget…then we wait and wait and wait when we finally get a hold of our rep, we are told that the loan we applied for was denied. Ah crappy! But we have a second bank. Our main bank, which both our incomes go into. Bank S. offers us a Pre-approved consolidation line of credit. This is great! All our debt $27000 (minus the student loan) We fill in all the paper work….and then we wait and wait and when we finally get a hold of our rep; weeks after we told of pre-approvedness, weeks after debt that was to consolidated has been individually paid (interest and some principle), we are told it’s been denied. Super crappy! The question: if we continue to try and get a consolidation loan from other financial institutions will that damage our (pre-approved deniable) combined credit more? Are some other options you would recommend we and others like us could research?
Gail Says: I’ve been getting a lot of letters from people recently telling me that lenders are tightening up on credit, and that they are unwilling to do consolidation loans that would see them assume a hunk of debt (and risk) that might go bad as interest rates go up. You’ve been caught in a web of old versus new rules, and, unfortunately, with two credit applications already denied your situation is getting steadily worse. Those denials will show up on your credit history and make you look like you’re not credit worth, reducing your credit score and affect your debt by further raising interest rates.
Most people don’t know the rules for how interest will be charged on their LOCs and you’ve just fallen prey to one way lenders can jack up your rate. I don’t have any good news for you. If you want to get this debt gone you and your wife are going to have to find more income to throw at the debt and MAKE IT GO AWAY. There’s no magic, just a ton of hard work. You’ll have to cut out all your extra spending and perhaps get part-time jobs.
Start by deciding how long you’re prepared to take to get out of debt. 24 months would mean a principal payment of $1,125 + an interest payment of approximately $268 each month for a total monthly payment of $1,393. So that’s how much you’re going to have to come up with to get rid of that debt in two years. Start by going over your budget (you have a budget right?) with a fine tooth comb and cut out everything extra, throwing that money at the debt. Whatever you can’t come up with by cutting back you’re going to have to go out and earn. Good luck.
L Wrote: Can someone who owes $9100 on a $10K visa limit have the spending limit decreased to $5K?
Gail Says: I’m not sure if you’re asking me if they can do it or if you can do it. In the case of the latter, you can’t reduce your spending limit if you’re going to be over the limit. In the case of them doing it, they sure can! Since credit card (and line of credit) debt is callable at any time, they can ask you to pay up, or reduce your limit and start charging you over limit fees, if they wish. That’s just one reason why revolving credit is so dangerous.
M Wrote: I love your show, and find your advice really straight forward and helpful – thank you! I am hoping you can make this predicament straight forward for my boyfriend and me!
Currently I am a full time student in a program where I will leave school with a job offer in hand (about 9 months away). My boyfriend has a full time career, while working very hard at a second job on the side. We have been living together in his condo for about two years now. I say “his condo” because although we split the bills evenly, I do not pay rent/condo fees (something we discussed to great lengths before my moving in). As a full time student working minimal hours and with student loans it was a decision that worked for us. If things were to ever go sour between us, I do not feel entitled to any bit of the place we have been living (condo #1) as I have not contributed to it financially at all.
Recently my boyfriend put a deposit down on a second condo which is currently being built. The plan is to move into condo #2 while renting out #1. This is where things are getting tricky, and we would love some advice!
When we move into the second condo I will be working full time, and in a position to contribute equally to the mortgage/bills/fees etc. The problem we are having is that my boyfriend wants the second condo to be “his” place if we were to ever split up. He feels that as he put a significant deposit down, and because I will have lived rent free for over two years that this second condo should be in fact ‘his’.
The problem I have with this scenario however (and he agrees it is a problem), is that if we are ever to split up, I will have nothing to my name! We have thrown around the idea of my contributing (approximately) a quarter of the mortgage/bills while putting an equal amount (another quarter) into a high interest savings account. The idea being that when I have saved enough, I can put a deposit on a third place so that we would have two places as income properties; if unfortunately we split up, then we would each have our own property and would go our separate ways.
I realize there is a lot of talk of ‘breaking up’- I want to be clear that we love each other, and plan on being together forever… but both of us feel that this is a tricky situation and want to have our bases covered – just in case.
Is our plan realistic? I feel like there could be some speed bumps that we have not considered, and want to be sure that both of us are protected in the event that things go awry! Any thoughts or suggestions you have would be MOST appreciated.
Gail Says: Okay, let’s break this down: First, the fact that you lived rent free was agreed upon at the start of the relationship and should not now be held against you when it comes to the next place you are living. Second, if you are going to be an “equal” partner, then it should be “equal” in all respects, including ownership.
If you are only going to be “renting” from him, then you should pay considerably less towards the new condo so you can stash away some money of your own. Estimate that if you were renting, you would be putting approximately 25% of your net income towards shelter and pay him that. Put the difference in your RRSP/TFSA.
If it’s the downpayment that needs to be equalized then for him to feel comfortable with you sharing ownership then you’ll have to cough up your share of the carrying costs, plus a specific amount that can be used to equalize the downpayment. Let’s say he put a downpayment of $40,000, and you agree you’re going to take 4 years to equalize, then you’d have to come up with $833 a month extra to put toward the condo. (That’s $40,000 ÷ 48 months = $833 a month). You can now do your own math. You could store that money up monthly and make a principal prepayment against the mortgage until you equalized.
G Wrote: I am in the process of leaving a 22 year marriage. We own 2 houses. One worth close to $1 million. The other around $350,000.00. My husband will be coming into money through inheritance. His dad made sure none of the spouses (me and others) get any of his wealth by the way he structured his will, etc. I have been sole breadwinner for 12 years (entirely).
My husband refuses to leave the home. He says if I want out of the marriage, I can leave. He won’t. We have 2 kids still living at home (14 and 18). They want me to stay in the house but he refuses to leave. I told him recently that he could have the house and I would move into the smaller house. He seemed quite pleased with himself after that.
I’m not sure what to do with respect to other debts. We owe about $40,000.00 in credit card debt and $25,000.00 line of credit. Should this debt be split equally? Also, how do we go about putting the houses in each of our respective names? I don’t want his name on any of my stuff.
I have been 100% in control of the money. About 5 years ago, he was only responsible for paying the mortgage which was about $1000.00 a month. He had a job to do that. 6 months after that arrangement was made, I found out he had defaulted on the mortgage and it went to banks’ legal dept. He finally had to tell me as one day he “let” me get the mail (previously to that he had kept it secret and no one from the bank contacted me). Mortgage arrears and legal fees came to roughly $17,000.00 which I paid immediately using a bonus I had received from work. He contributed about $5000.00 to the debt. We had a discussion and he promised me he would take care of the mortgage. History repeated itself. He defaulted AGAIN, went to legal dep’t. Cost another $12,000.00. I paid it in full. I took over all finances after that.
I have stayed in this marriage even after all of that. He refuses to get a job because he says I make enough money. (Criminal Defence Attorney). He says it makes no sense for him to get a job as he is a great tax right off for me. I told him I could find other tax right offs, like RRSP.
Anyway, I’m exhausted and sad and he thinks I should shoulder all the debt in addition to giving him the million dollar home. He will probably get close to a million when he gets his inheritance.
Gail Says: You are crazy after being the sole breadwinner to simply walk away from your assets. Find yourself a really good lawyer and fight for what you’re legally entitled to. That would be half the matrimonial home for sure. As for the other assets, it would be dependent on how title is held and if you could demonstrate your contribution to the purchase and maintenance. You’re smart and strong. You don’t have to take this from him, and you should NOT roll over just to get out. Do not leave the matrimonial home until you’ve seen a lawyer.
L Wrote: I have recently separated. My question is, do you really need life insurance, or is it a waste of money? What else should I know about being a single mom? I have no debt, and want to stay that way. This is really hard to figure out. Thank God for my parents. I need to have a place for me and the kids, so I plan to purchase a condo in full, with no mortgage.
Gail Says: So if you don’t have life insurance and something does happen to you, who gets the financial responsibility of looking after your children? Would you really want to put that kind of stress on your folks? Life insurance does insure your life; you’re going to die eventually. It insures the income you would have to support your family. As long as you have dependents you need enough insure to make certain they are safe even after you can’t be here to take care of them.
R Wrote: We are in need of your help desperately!!! Our family is at our wits end because of our brother D (I will call him D to keep this somewhat anonymous). He is oblivious to his careless attitude and habits with money. These are the numerous situations he has put our family into.
1. A year ago, Dad co-signs for a large consolidation loan. So that D’s credit cards are paid off, and he has some left over to buy a used truck. D had his sights on a used truck that cost $6500. He was short $1500. So D went to the bank and got another loan on his own to buy the truck. The truck was a poor purchase because D did not have the money, as well as he refused to have the truck checked out by professionals before hand and it was a problem.
2. After D’s ‘new’ truck was stolen and broken he received an insurance cheque. We all assumed he would use it to get another vehicle or pay off a chunk of the loan he had. But no, he went out to a dealership and used the cheque as a down payment on a ‘newer’ (5 yr old) truck. This was around $40,000. Unfortunately D picked out something that cost so much his cheque was short and had to put down most of his paycheck the following Friday. Now he has a HUGE payment each month for his truck and insurance.
3. D has the desire to open a catering business. He has had the opportunity to cater for a few weddings in the past few months. We all support this and would like him to be successful because it is a good idea and prospect. Grandma has helped jump start this business by buying a few necessary items for him to pull a wedding off. This is all fine and dandy. However, D is not realistic with his billing when it comes to the catering. He barely breaks even or (as we see it) is in the negative after a wedding. The amount he gets paid barely covers food cost and the amount paid to his helper (sous chef). After all of that he barely walks away with anything. His sous chef is walking away with more money. That being said, I do agree with him when he uses some profit to invest and buy more catering equipment. However, he is not in the green enough to do that. If he buys these things, he doesn’t have any money for gas, or other expenses. D went to school to become a chef and graduated. However, 10 years later he has yet to get his red seal. Our family has mixed reviews about whether or not the red seal is necessary. I believe if he wants any promotion or pay raises at his current job he needs his red seal. Also, if he wants people to take his catering business seriously he needs it from a professional stance.
4. A part of the deal with Dad was that D would not get any more credit cards or loans. As stated previously, D got a second loan to get the worst purchase ever. The used beater truck. He also got one or two more credit cards. Which are now maxed.
5. D has a sense of entitlement and is very demanding. D constantly says that no one helps him out and talks as if the world owes him everything. The tip of the iceberg (that’s why I’m writing you now) was just the other day. Grandma took D out for lunch, which she does quite often (but is no problem). However, after lunch he asked Grandma to loan him the money to get an oil change (which was a month or so over due) and she agreed. While waiting for the truck to be fixed (estimated bill was $125), D and Grandma visited his brother at the pub. T (for short) offered to buy D and Grandma a few drinks and appetizers. T paid for their bill out of his tip jar ($30, which was all he had). After T had paid the bill, D asked for the jalapeno poppers. T declined saying he had no more tips to pay for them and that he had already taken care of the bill, suggesting he try them next time. D made a scene (an adult tantrum) and Grandma pulled out her wallet and paid for the poppers. After all of this, they go to pick up his truck. D is given a bill of $300 versus the initial $125. Why? Because his brakes needed to be done (after only having the truck for a couple of months…that’s how careless of a driver he is!).
6. This weekend, D was offered money by 3 different individuals to use his truck to go pick up top soil for their gardens this weekend. D declined saying he needed to go up to a lake and go camping.
7. D has verbally stated he has no intention on paying people back for the loans they have given him. He owes S (his sister) $200, $300 to his friend J, an unknown large amount to Grandma, and 3+ months rent to Mom and Dad (a mere $250 per month).
8. D has no manners!!! D invites any of us out to lunch or movies. When you arrive and it’s time to pay, he admits he has no money and you have to foot the bill. D will go to sushi, an affordable meal (you can easily eat for between $5 and $12). D averages $50-60 just for himself because he wants everything and always wants the expensive stuff! Even when you offer to pay for a meal because we know he is ‘broke’ he will order his usual amount. What makes it worse is he gets upset when you try to tell him to slow down or limit his order.
This is not the end of it, because list goes on and on. These are just some more recent examples. We are desperate for your help. We want to have an intervention or do something to stop his careless and reckless behaviour because he is affecting everyone around him who loves D very much. Please help!!!
Gail Says: You are all facilitating your brother’s selfish and self-centered behaviour. All you have to do to stop this is simply keep your hands out of your pocket. No bail-outs. No loans. No free meals. This isn’t actually your brother’s problem; he’s got it made. This is a problem you are all creating by letting him get away with taking advantage of you. No one can MAKE you pay for them, you choose to. As for his hissy-fits, why would you want to be around such a brat?
March 7, 2013 at 8:50 am
good stuff. With regard to the last one; the elderly are often a soft touch for people such as this (especially their own family). The family needs to get a backbone and they need to protect Grandma. They need to prepare for some serious drama when they do. He’s not going to let a good thing go without a serious fight. Some people never grow up.
March 7, 2013 at 9:17 am
People like D. in the last question drive me crazy, or rather their relatives and friends drive me crazy. I agree with Gail. Stop bailing him out. He is a user and never will grow up unless he is forced to grow up. I have had relatives like that – why change if everyone enables them? Give them the joy of accomplishing things for themselves – no matter how much they cry or take a temper tantrum.
March 7, 2013 at 9:30 am
Is D a good money moron ?
March 7, 2013 at 9:38 am
@R I have found that often the best learning experience is falling flat on your face. Stop catching D and eventually he will figure out how to take care of himself, in the process he might even become more enjoyable to be around.
March 7, 2013 at 9:58 am
@ Christine – I think D is possibly a money genius. It’s like that old saying, “If I owe you $1000 I have a problem. If I owe you $1M, you have a problem.”
The answer should be obvious – not only should all efforts to help D immediately and forcefully stop, but I’d recommend engaging in trying to recover the money actively. Even if you don’t recover any, your family will at least show you’re serious about not giving anymore out.
March 7, 2013 at 11:01 am
Good conundrums and good solutions Gail, especially the callable credit one. One of our cc’s just increased the minimum payment due. I’d say arbitrarily but I’m sure it’s in the fine print somewhere. It doesn’t bother us since we pay more than the minimum every month and plan to have the whole thing paid off in a few months but it is scary to think they’d call the whole thing in or change the interest rate. I’d hate to have to pay more in interest but there’s nothing we can do since we are in debt. Chalk another one up for the freedom of being debt free!
March 7, 2013 at 1:03 pm
G Wrote…I’m in the process of leaving a 22 year marriage. G…your husband is completely right…..he IS a WRITE OFF!!
March 7, 2013 at 1:18 pm
M should probably consult a lawyer as well. Common law spouses gain certain rights after 3 years of cohabitation, and that should be a consideration if you continue to live together. Also consider a cohabitation agreement if you can reach a comfortable agreement with the arrangements going forward – you can’t rely on love, it’s not legally binding.
March 7, 2013 at 2:40 pm
I’m wondering if you ask for separate checks at the restaurant and don’t offer to pay the brother’s what would happen? I mean legally, I know there would be a hissy fit to ignore and that’s okay. Time to let that stop controlling the whole family, you know!
March 7, 2013 at 3:53 pm
If I were G I would consider “giving” the house to her husband in the divorce, in exchange for him accepting NO spousal support. There is a huge risk that he will sue her for Spousal because she was the bread winner. He will have to, of course, re-finance the house in his name so she is not on the mortgage, which means he’ll probably have to borrow from his dad (reducing his eventual inheritance hopefully) and either get a job to pay that morgage or lose the house because he’s too lazy to get a job. Which from the description of her husband would be a “great” gift ! (She should of course take the kids with her)
March 7, 2013 at 8:15 pm
I agree with Chuchu, this is what my parnter had to do with his ex-spouse. He traded ownership of the house for no spousal support.
Regarding L’s question, when I was trying to pay down my credit cards, I called the lender and asked them to reduce the limit to something lower than what I currently owed and they were fine with that. It kept me from continually running the cards up again after I had paid some down. You can also close the account until it’s paid off – the lender said I could reopen it within 12 months without having to reapply.
March 7, 2013 at 8:17 pm
For “M” ~ if the down payment was $40K, wouldn’t she just need to come up with $20k to become an equal partner? Obviously if they were to put a combined 80k down it would make their mortgage shorter and their interest lower; but in the case of these 2 ppl, I feel 1/2 the down payment he initially made would suffice. They should also check the law where they live – in some places things become common-law after 2yrs
March 7, 2013 at 9:00 pm
M’s problem flags up issues that arose in my now ended marriage … my partner was forever viewing things as “his” and as he earned so much more than me (there was a big wage disparity in our incomes) it caused a huge amount of stress … and played out in all sorts of ways. For example, when I suggested we started a joint savings account together, he sneered and said “what with?” and said he would only have a joint savings account with me when I had enough saved up to start saving with him … so he devalued the smaller amounts I could have saved with him from the start.
I agree that as a woman you have to protect yourself financially from a relationship ending … I didn’t do this enough and am now paying the price for it as I’m having to restart my career at 50 in a new country which we moved to in order to further his career (and he’s done very well – my career tanked because of the location we moved to for his career and I’ve since had to retrain for a new career). We don’t have kids and although I’m going to receive some money from the property split (he’s buying me out) the spousal support isn’t going to amount to much and is up for review in 3 years.
I guess the reason why I’m posting is because for me, I still can’t figure out how couples negotiate money when there is great wage disparity and one person is fixated on keeping their pot of money and viewing certain things as theirs – I partly understand it but I also struggle with it because when things are just viewed in purely financial terms it negates anything else the partner who doesn’t earn as much money brings into the relationship – the unpaid stuff like cooking, cleaning, supporting one’s spouses career … my husband’s salary went from $50,000 to $134,000 in 10 years but my career prospects were completely stymied and, at the time, I struggled with it but tried to do the best I could by retraining and developing other sources of earning (though nowhere near his salary). I also did a hell of a lot around the house because he wasn’t willing to.
I don’t know whether I will ever pair up with another partner but I would be really wary of being with someone who is high earning … especially if they have a “this is mine” attitude all the time … the whole thing just seems a minefield to me. At our separation meeting my husband wanted the “pocket money” allowance back that he paid me over the 10 years we have been here – he had saved a chunk of his whereas I had used mine to connect with people and he resented that – this was a sum of around $9,000 total and it was like he was saying “I put $9,000 into this business and it’s now ended and I want it back.”
The whole experience has made me wonder how women ever get the balance right given that men tend to earn more anyway … or is the only solution for women to have a foot out the door of the relationship so to speak and plan savings in the event the relationship ends? And what does that do to a relationship emotionally if either or both parties do this? Is 100% commitment in a relationship just not possible anymore if a woman wants to be financially secure? And what do women do when they want kids and there’s huge disparity in wages and the spouse views things as “his” ?
When I look back now, money was used as a power dynamic in our relationship – and who had the most money made the decisions.
March 7, 2013 at 9:26 pm
@Ann
Good question Ann,
Try to ask this question to Gail please this is interesting
http://www.gailvazoxlade.com/question_form.html
March 8, 2013 at 11:23 am
Ann – your problem isn’t that your husband made more, your problem is the type of guy that you married. He wasn’t really your partner. If he was, he wouldn’t constantly have been viewing things as his.
There are different ways to deal with one partner making more but as Gail has often advised, one option is to split the expenses based on income. So if he earns twice what you earn then he would pay 2/3 of the expenses and you would pay 1/3.
March 8, 2013 at 11:43 am
@Ann
Congratulations for getting out of that marriage!!!! Your life is just beginning. Please, get some counselling, make new friends and BE HAPPY!
March 8, 2013 at 12:31 pm
@M
I think if you can find the cash to pay for the legal fees, you may consider getting a legal opinion as to what you would be entitled to under the law where you live if you would split up. Find out if you have any rights or obligations as a common-law couple. It may give both of you an idea of realistic expectations. The lawyer you talk to may also be able to help you create an agreement that will apply going forward so that you will both be on the same page. It doesn’t have to result in something incredibly formal or comprehensive, but it is sometimes good to get an expert opinion so it doesn’t turn into an argument about how you see each other.
Keep communicating with open minds and I think you can find an arrangement that will work for you guys. It is great that you are having these conversations now. But it sounds like you need some help coming to some common ground before this turns into a festering resentment issue.
March 8, 2013 at 5:09 pm
To Denise – I have got some counselling and yes, I am happy! (or working towards it!)
To Jennaw – re: splitting the expenses – yes, that’s what we did. The problem was he was always paid more than me … and so that carried weight in the relationship when it came to other household decisions.
I guess, in writing that quite lengthy email, I was just trying to figure out how people work it out as a couple emotionally with money – on the one hand one has to protect one’s income from someone who’s being irresponsible, but on the other hand, a relationship (i think) is at the end of the day, more than about who brings what in and how much they earn and yet, I see so many posts on different financial blogs about “his” and “hers” and “not yet merged accounts” and I just find myself wondering about the whole topic – I haven’t read todays post by Gail yet and maybe she covers it more there.
BTW getting out of the marriage was the best thing to do! But I’d like to figure more things out in my mind around relationships and money before I ever engage in another relationship.
March 8, 2013 at 5:47 pm
Keep in mind that you are not guarenteed anything if you are common-law in regards to separation or death of a partner (different story completely if there are children involved).
Taxes and government benefits are very similar to married couples but the separation laws are different and they also depend on which province you live in.
I looked into this several years ago when I was in Ontario. The only difference is if you have a contract signed.