This & That: Great Questions Edition

J Wrote: I recently got married, and my husband and I are in a reasonable position: we only have his student loan to pay off. We plan to devote 25% of our income to loan repayment, and we should have it taken care of in less than 6 years.

It’s the home ownership question that is a little more awkward. Currently, we are renting an apartment. I’ve been a homeowner in the past, and HATED every minute of it: the maintenance, the repairs, the expenses! My husband also has zero interest in being a homeowner in the near future (ie. over the next 5 years). He has said ‘Maybe later?’

We have no interest in buying a house. We love renting, and the ease of lifestyle it provides for us. Our parents and family are constantly pressuring us to ‘hurry up’ and buy a house — but we just don’t want to.

Is it acceptable in today’s society to simply rent and invest instead of buying a home? Every time I tell people that we’re not interested in buying a house, people look at us like we are freaks, and the inevitable speech about ‘Renting is simply throwing your money away!’ ensues……

Gail Says:  Home ownership isn’t for everyone. Some folks are happier and better off renting. There’s nothing wrong with that choice. And don’t fall for the crap that you’re throwing your life and money away. Just point out that of your best-friend’s $2,100 a month mortgage payment, $2,084 is going to interest at least for the first few years.

Peace of mind, ease of movement and a sense of balance are all important things to have too. And home-ownership as an investment isn’t a sure thing, no matter what the experts (or your family) say. Home ownership does bring the opportunity to grow equity over time, but if you rent and invest wisely, you can achieve much the same end.

S Wrote: We watch your show regularly and love it. We have learned a lot and will be debt free except for our mortgage by the end of February which leads me to my question. I am not sure if once we are done getting rid of our debt we should put our debt repayment money towards savings or paying down the mortgage faster? We just purchased our house in March 2012 and signed up for fixed five year for 2.99% interest. My initial thoughts are to pay down the mortgage faster but if we can invest our money for more than 2.99% than we should do that instead but curious on your professional opinion.

Gail Says:  You don’t say how old you are or how far from retirement, both of which factor into the answer. If you’re a young’un (less than 50) then concentrate on building your retirement savings. But you don’t have to do that to the exclusion of your mortgage paydown. If you make an RRSP contribution, you’ll reduce your taxes owed. Take that money and use it to make your mortgage paydowns and you’ll be achieving both goals.

Iffn you’re an older dog, get the mortgage paid off!

N Wrote: I watch your shows and can’t believe how much I don’t know. I made some pretty huge mistakes in the past but I am still in the process of growing up.

Now I am 34 and have my first credit card (seriously) with a $1500 limit….I am looking to purchase a home hopefully fairly soon with my boyfriend and need to know how to build credit.

Part two to my question…my 6 year old daughter said to me the other day…”mom when I grow up I want to be just like you”. That was the scariest thing I have ever heard…I want her to be better and not suffer from silly choices…how does a parent who really is still learning teach her child respect for money and her future?

Gail Says:  To have a good credit history and a healthy financial life you must use your credit regularly and pay it off in full every single month. And you should have a couple of different sources of credit; your credit card is one, another might be a very short-term loan to make an RRSP contribution. So you’d have the money in the bank for the RRSP, but you’d take a loan and then over three months repay the loan in full. That’ll register on the credit history and will cost you very little in interest.

As for your concern about your daughter, go and buy Money-Smart Kids, read it, do it. Keep in mind that she’ll learn as much from watching you as from what you say, so keep that in mind.

A Wrote: We are currently debt free having paid off our mortgage, line of credit and we own our vehicles. We have happily done without a lot of things to achieve this goal. Our biggest issue at this time is helping our teenage daughter to understand the value of money. We are thinking of having her manage a set amount of money to buy her clothes, pay for her cell phone, etc. Is there a formula for this based on the family’s income and guidelines that need to be set in place?

Gail Says:  There’s no formula or this. If you want your daughter to be smart about money your instincts are correct: you have to give her responsibility for managing money. As to how much money, it’ll be based a) on what you can afford and b) on her needs. When my daughter was 12 (a while ago now) I gave her $50 a month for clothing not including outerwear and footwear. By the time she was 15 or so, she was up to $70 a month.

Take a look at what you think is a reasonable amount for her to cover her needs and a few of her wants. Then set the plan in place. The important thing will be to keep your hand out of your wallet if she blows through her money and needs more for something “important”. That’s the tough part. But it’s the make it or break it part too.

N Wrote: I am a PhD student with at least 2 more years left in my program. I currently owe $10,800 in student loans (OSAP), which is not collecting interest because I am still a student. For Christmas this year my grandparents gave me an unexpected and generous gift of $10,000. My husband and I decided to use part of it (probably about $3000) to pay off some of his outstanding loans. I am now trying to decide what to do with the $7,000 remaining. I am wondering if you would recommend paying it immediately towards the loan (again, which is not collecting any interest at the moment), or whether it is better to put it in a high interest savings account (maybe a TFSA), which will collect interest until I graduate at which point I can pay down the loan in a couple lump sums. Basically, is it better to save it or put it towards the loan immediately?

Gail Says:  Since there’s no interest cost on the loan right now, find a high interest savings account and stick the money away until you’re finished school. Then apply it immediately. Don’t wait for the grace period to be over because the interest clock clicks on as soon as you graduate.

L Wrote: I love you and your shows! You’ve helped me pay off most of my debt. I say most because by this time next year I’ll be debt free! I’ve had to sacrifice a lot but it’s worth it.

I have a question if you don’t mind. Should I continue to pay off my debt on a weekly basis (my husband and I live pay cheque to pay cheque) or should I try and get a loan at a bank to pay off my debt. I owe at least $8k in back taxes. I don’t have good credit so I can’t go to any major bank. Actually, I am rebuilding my credit and TD bank approved my car loan in Feb 2012. I haven’t missed a payment since! Hmmm, maybe I should apply for a line of credit through TD or at least see how they can help me. I guess what I’m asking is this. Is it wise to apply for a line of credit to pay off a debt of 8K? Wouldn’t that be redundant?  Please help a sista out!  I look forward to your suggestions.

Gail Says:  It only makes sense to get a consolidation loan to pay off debt (be it through a line or some other way) if you lower your interest rate so that more of your money goes to actually paying off the debt instead of paying interest. As for the back taxes you owe, you can send the tax man post-dated cheques. Call and make and arrangement and then send 12 posted cheques (or fewer if you can) to get even with him.

Piling it all in one place doesn’t make it cheaper unless that interest rate comes down. Do the math.

P Wrote: My girlfriend and I (aged 22-21 respectively) are looking at buying a condo.  She makes just over $2400 a month and I make Just about $2000 a month (both with likely increase in the next year).  The condo is about $282,567 (GST in), condo fees at $390, Property tax roughly $1300/year.  We both have small car payments (mine – $320/mo with 2 yrs remaining)

and hers ($390/mo 6.5 yrs remaining).  We have no student or other debt what so ever, and have between 5-6% percent to put down (5% required in AB) with a mortgage rate of 2.94% 5 yr fixed. Lawyer and closing fees waved.  Being home broke and in debt is a huge fear.  Can we make this happen!?!?

Gail Says:  First I’m going to encourage you to put down a larger downpayment if you can. Next, I’m going to tell you that before you buy you should practise living as if you had bought. Here’s how:

You take your housing cost (mortgage payment, property taxes, condo fees, utilities, home insurance) and subtract your current rent to come up with the difference between what you’re paying now and what you’re going to have to fork out when you become home-owners.

I’m not talking about if you can THEORETICALLY come up with the money. I’m talking about taking that money and socking it away every single month for at least six months before you actually buy.

This will teach you to live on less disposable income. You better start practicing before you buy your home so you’re ready for the adjustment in your lifestyle when you do take the big step.

Loads of people buy a home and then keep on spending like they did before they became homeowners… racking up gobs of debt.

The difference that you’re saving is going to build your downpayment.

R Wrote: I’ve been a huge fan of your shows and of you for a long time! My question for you is.  I’ve been dating a wonderful man for about 1/2 a year. We have a great relationship, get along well, and have lots of the same interests. However, his spending habits TERRIFY me. I’ve been working my tush off *literally* to pay off my 20K in student loans (I’m 25 and recently graduated), and following a strict budget and debt repayment plan, so I’m not a financial angel by any means, but I closely monitor my finances, and hold no consumer debt at this time. He works a job where he is in camp one week in and out the next, makes great money, but spends frivolously on “stuff.” His excuses are always, “but it’s such a great deal!” I know he has debt (30K in consumer debt to my knowledge), and keeps joking how he plans to put money towards his debt, but then ends up spending it all ordering “stuff” online… Not really funny! He also doesn’t have any assets (i.e. doesn’t own a home in his mid-30’s). I know there wouldn’t be a chance that I would move in with him anytime soon because I know our financial differences would tear our relationship apart, but I feel since we are just dating and not sharing a home that I don’t have a say in his spending, so I keep to myself and just observe. He does talk about wanting to “start saving more in the New Year,” but every time he says that, I just come back to see a kitchen table full of parcels of “stuff” he ordered for himself while away at work. I’m worried that I’ll never be able to move our relationship beyond where it is now because I know I can’t share a life with someone who spends so much without second thought and seems to just ignore his debt. As someone who’s just dating him, is it better for me to express my fears earlier on in this relationship, or should I just run away from this before I invest anymore of my heart into it? What would you honestly tell YOUR DAUGHTER if she found herself in a similar situation?

Gail Says:  You have no control over who you fall in love with but you do have some say over whether you hitch your financial wagon to their horse. If you were my kid I would tell you:

a) Do no move in with him until he shows he’s serious about his money and about what’s important to you

b) Never sign anything with him: no co-signed loans, no joint credit, to supplemental credit cards

c) Always keep your personal financial id strong and flexible: good credit history, emergency fund, saving for the long-term, a balanced budget

d) Forget feeling “sorry for them” when they “need help”… people who make big piles of poop despite good advice need to feel the pain of digging out themselves

e) Don’t marry him unless (see a)

If you think that in his mid-30s he’s never going to learn this lesson then you have to decide if you want to be “single” and in a dating relationship for the long term, perhaps even being a single mom, or if you’re not interested in that kind of life biting the bullet, kicking him to the curb and moving on.

M Wrote: I am currently on CPP and a SunLife insurance payment every month. These combined payments are equal to 60% of my salary.

  • SunLife $2766.27
  • CPP $1255.67

How much should I be putting away for income tax? There are no deductions being taken off at all. I have been trying to get the answer to this but nobody seems to be able to tell me.

I currently have been taking off $600.00 a month and putting it into a separate account that I can not access easily. Is this enough of a deduction to balance my Provincial and Federal deductions? (I live in Ontario).  I am terrified of this tax season in Ottawa.

Gail Says:  The answer depends on whether your premiums were paid with before taxes or after taxes money. So, were the premiums paid with after-tax dollars? (Were those premiums paid with your after tax income or were they a taxable benefit on your pay slip?) If so then the income is NOT taxable. If it is taxable (which I strongly doubt) then you need to figure out how much your taxable income will be. Go to


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19 Responses to “This & That: Great Questions Edition”

  1. I think the value of your peace of mind as a renter cannot be downplayed. In addition to the costs new homeowners don’t consider (taxes, maintenance, etc.) there is also the stress of home ownership. Over the course of a year I had my A/C stop working and my hot water tank flood my basement leading to all the drywall and carpeting being ripped out of a (previously) finished basement. It’s not just the cost of doing repairs, it’s also the time spent responding to and managing crisis situations and the worry that goes with it. It wasn’t until I was homeowner that I appreciated being able to call a landlord as a renter and letting them deal with things.

  2. @ R – Take it from someone who is living it….Do NOT move in with him/marry him. So much angst to avoid…

    He’s older than you and still doesn’t have it together? -Think about where you’ll be in 10 years – would you put up with this type of frivolous behaviour in the future – or would you want to be getting your act together and start planning for retirement?

    I was over 30K in debt after school – and managed to pay it off after becoming a single mom; and save for a downpayment for a house. I hadn’t ‘met’ Gail yet before I met my DH…but if I had; well I like to think it would have taken a few more years than it did before any wedding bells were ringing. He got on board after a while – but 7 years later we still have his debt hanging around.

    If you guys is that wonderful – he’ll listen to your concerns about his spending…and if he doesn’t – then he’s not that wonderful.

    Good luck.

  3. Although I own my home I agree that there is nothing wrong with choosing to rent. I did that for eleven years and now, after having owned first a house and then a condo, have been seriously thinking of selling and becoming a renter again. I’m mortgage free so would have quite a bit to invest after selling.
    The only thing wrong with the situation that J put forth is the fact that family and friends are sticking their noses in her business.

  4. avatar rachael Says:
    July 11, 2013 at 8:18 am

    My sister rents and it is the best thing for her! She has lived in Europe for 3 years, and traveled for 2 months before that. Now, she is home again and waiting to get a Visa to go somewhere else. Owning a home would never make sense for her. All the money she saves on maintenance and taxes goes right into her travel pot. Here I am, on the other side of the fence, stuck with my house, wishing for some more freedom. I’m just glad our mortgage is only for $122,000!!!

  5. @J – It’s your life, live it the way you want. If you want the families to quit bugging you about moving into a home simply tell them that you’re saving for the down payment. They don’t need to know how large a down payment you want, just that you’re not there yet.

  6. Here’s the thing… Home ownership is expensive… I don’t have a mortgage and it still costs about 500/month in taxes and utilities. When I rented it was 750/month inclusive though that was for a basement apartment. Not much difference although having a larger house is more pleasant.

    BUT investing has risks too. Most people aren’t knowledgeable investors and can get into trouble with bad advice. If you buy a home you can afford, even if the value drops you can still live in it. The same is not true with investment income… Returns may not cover your expenses if your investments aren’t doing well.

    I’m only now starting with investing in non-fixed returns and the mantra is keep it simple, diy and no guarantees

  7. avatar Christine Says:
    July 11, 2013 at 9:05 am

    Great post!

  8. @ J – I agree with all the posters and Gail – you and your husband are on the same page, and that’s what’s most important. Personally I think home ownership is overrated. Anyone who bought with a 40 year mortgage is just renting it from the bank, and is throwing their money away in interest. I know people always say “but in 25 years, it’s yours!” but the reality is most first-time married couples stay in their home for less than 5 years. Some don’t, but statistically this is true.

    @ the 21 year olds who want to buy a condo together – My recommendation is simply don’t. You’re far too young to do this. I’m not saying your relationship won’t last, but why add the stress of this? Just rent and live together. Renting is not wasting money, it’s a learning experience and your buying freedom. Rent for 2 years and then see what’s up at least. I’ve never understood why people are willing to commit to hundreds of thousands in debt together, but not to each other (marriage) first.

  9. Home ownership is for me, I’ve rented so many times and when there’s a problem no landlord showed up for months. If we own the house then I know exactly where the landlord is, in the bed right beside me.

  10. Oh I forgot the poster asking whether to pay the 3% mortgage down or save for the future.

    When comparing your opportunities, remember mortgages are paid with money AFTER TAXES. So you need to find investments that pay about 6% before taxes to make it equivalent to the guaranteed 3% after taxes you’ll save by hammering the mortgage.

    What my wife and I do (38 year olds) is max out our employer matches for rrsps, but that’s it – and the rest goes to punching our mortgage in the stomach as it’s hard to find a guaranteed 6% return.

  11. @S who was talking about paying down the mortgage vs RRSPs.
    I’m personally in almost the same situation but with mortgage rates creeping up very quietly when I renew in Jan 2018 I’m expecting at least 4-5% interest compared to the 2.99% fixed rate I have now. So we decided to starting putting even more money down so when we renew we will be in a good spot even with a higher interest rate.

    We are fine with how much we are putting away for RRSPs but with 30+ years on our side before we retire I know I can let it ride out and let compound interest do it’s thing. My 2.99% interest rate will go away.

  12. @J Do what’s right for you and tell family thanks for the advice but that you are happy with your decision to rent.

    @N Money smart kids is a great resource. I auto-transfer $10 weekly into my 10 year old daughter’s account weekly and we track $8 spending $2 savings. She’s not a big spender but has taken money out twice so far this summer for day trips with her BFF. She choses her purchases wisely and always comes home with money left over – sometimes enough to ask me to redeposit it for her! If she can keep this up for the rest of the year, I think I will move her clothing budget to her and let her handle more of her own expenses in the new year.

    Our 5 year old is NOT good with money and could not hang onto so much as a quarter without it burning a hole in her pocket. Her $5 a week ($4 spending $1 savings) stays in the bank unless she has something on a “want” list for a few weeks to discourage impulse shopping. She’s made two purchases in the last two weeks using this strategy and she doesn’t seem to be forgetting about the item the day after she buys it any more so I think it’s helping her think more about where her money is going (and she has money left in the bank which is huge for her).

    Follow the tips in the book and make the adjustments you need to in order to set your kids up for success.

    @A Gail is right. Don’t move in with or marry him unless he grows up. My in-laws struggled financially for 40 years of marriage when FIL should never have gotten married because he didn’t want to work and took most of the money MIL earned for himself instead of letting her provide for the family. Some people aren’t cut out for the family life and if he can’t put himself aside long enough to think about your joined future, you aren’t worth it to him and he shouldn’t be worth it to you.

  13. @ Amelia
    I would hope that the person beside you in bed wouldn’t be your landlord, and I would think that as an owner you would be equally responsible for dealing with any problems that arise.

  14. I totally agree with Geoff! Why are people so willing to make a huge money investment with a person that they aren’t sure they want to marry?? Messy, messy, messy.

  15. @P Didn’t mention whether they live together currently or not. If you don’t you should rent somewhere for at least a year and a half to make sure you can live together. Just because you’re great together outside the home doesn’t mean you will be sharing the same space all the time.

    @R You don’t have a say in how he spends his money but you can tell him that your relationship cannot go any further until he works at better money management including paying off all his debt. Most people are in life to find someone they can share it with whether it be a partner or really great friends. You have to decide whether you want a partner and whether you’re willing to spend your time trying to rehabilitate him if he doesn’t want to smarten up or move on to someone who can manage himself and his money and how long you’re willing to wait to find out. This may sound harsh but I’ve seen way to many people waste years of their lives trying to change someone that doesn’t want to change rather than finding someone they’re compatible with on all levels.

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  17. Amelia,

    Glad to see you get along so well with your landlord;)

    Funny enough, but it took me becoming a landlord to see the value of renting. DH and I do a TON of work improving our place and providing a pleasant place to live for our tenants, and they express appreciation in-kind. I’m OK (right now) with assuming most of the financial “risk” in this venture but it certainly isn’t a passive investment. I envy my tenants’ freedom sometimes.

  18. @R – Have a lot of conversations about this. My husband told me less than 2 weeks before our wedding that he’d managed to accumulate a further $9000 in debt since we’d last talked about it. They’re the most difficult conversations to have but having them early in the relationship is going to save you a lot of stress. See if your guy would be willing to make a joint budget with you. If he’s serious about “getting serious,” then make him put his money where his mouth is.

    Believe me, if things do progress, you’ll only resent the fact that you’ll assume his debt even though you didn’t get to enjoy any of the luxuries that led to the debt in the first place.

    And honestly, he may never change. You have to decide if you’re willing to be with someone who forces you to be the “bad guy” when you say that you can’t afford something or that a purchase has to be postponed. Because he might never meet you in the middle on it.

    @J – There are a lot of people who have just been told their whole lives that grownups buy houses and that’s the end of it. If your life situation and goals are better aligned with renting than buying, rent away! The fact that you and your husband agree on it is what really matters. The only real suggestion I have is that since you’re renting and not dealing with home expenses, you might want to see what the absolute maximum that you could put towards debt is. Because we’re renting, my husband can put almost 50% of his income toward his debt. Knowing that we’re going to be out of debt relatively quickly (considering how long it could take if that repayment amount were lower) makes up for the tight budget. Take advantage of the fact that you’re renting!

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