This & That: Money & Relationship Edition
Posted by Gail | Filed under Relationships, This & That
For those of you who live in and around the Toronto area, remember that the Potluck Picnic in High Park is set for this Saturday (permit or no permit!) For more info, go to the Gail Clubs bulletin board and click on Pot-luck in the Park. Thanks again to Saver Queen for being the point girl on this. See y’all there!
We’re all trying to figure out how to manage our money. Sometimes we have the help of a good partner. Sometimes our partners are the problem. Sometimes they’ve got it right and it is we who are offside. Relationships are tough. When you mix in arguments over money, relationships get tougher!
M wrote:
How do my partner and I get on the same page? He is a spender and I am a saver. I work two jobs and he works one. We are on a DMP where I was told to make a little bit more to help pay debts that were mostly his (but jointly in our names) I’m really frustrated and tired and when I talk about money he says I’m nagging and getting upset over nothing. Any advice? I just want him to step into my shoes for a day.
Melissa, hand him the money to manage, put in your fair share, and stash away everything you can to build up your own safety net. Make sure you’re not jointly signed on the credit. If you are, get your name off. There’s no way to change another person… they have to want to change themselves. If he’s not willing to work towards common goals, you need to make sure you are stashing away a load of cash to take care of your needs in the future. Love is fine, and you should love him all you want. But don’t be blind to the impact his financial mistakes can have on your financial future. Protect yourself.
J wrote:
My boyfriend of over three years and I have started to talk more seriously about marriage and our future. I want to marry him but am nervous about his huge debt load and the possibility that it will take so long to pay it off that we will not be able to afford to have children or own a home anytime soon- he is just finishing up law school owing about $100,000 in bank, student and personal loans. With this economy the big law jobs right out of school are nearly extinct which will make paying off the debt that much more difficult. I’m a first year teacher with no debt whatsoever but again with the economy my job is not secure. As well may parents, who have worked very hard to teach me about being responsible with money and not getting into debt are nervous that if we were to get married I would legally assume half of his debt and that it would work against my excellent credit rating.
J, you are not legally responsible for his debt unless you sign on the dotted line for it. So don’t take it on. However, his debt will also affect your ability to borrow to buy a home, and may affect any assets you build together. So until the debt is paid off, don’t build up a lot of home equity, and don’t share your investments. Keep yours in your name. As for paying off his debt, he needs to find a job (or several jobs) that pay enough to repay that student debt. Because he has a professional degree, he should amortize the debt repayment over 10 years…That’ll cost him about $500 a month in interest, and he should put a minimum of another $900 a month to the debt for a total debt repayment amount of $1400. He may want to consider not only getting a job with an established firm, but going into business for himself. If he has the get up and go, he can create a good income and get that debt paid of lickety-split.
D wrote:
My husband and I make about 135000$ a year. We have 2 kids and no debt and no credit card balances. We put 15000$ a year in RRSP and I have a pension fund since I work for the government. We also have a college fund for our kids in place. We have a modest yet very satisfactory home and 2 used vehicles, which are paid for. Our problem is that we have very different views on budgeting and spending money. For example, I want to travel, my husband sees spending 5000$ on a trip every 2 years a waste. I find him to be very frugal with expenses pertaining to other members of the family, but he wants no limits on his own and gets upset when I question his spending. My husband finds I overspend. We recently renovated our home since we were having a second child it bumped our mortgage from 27000$ to 122000$ (this is the ONLY thing we owe anyone). I don’t think the amount is unreasonable, my husband doesn’t often let me forget that the renovations were for me and only me when we discuss budget allocation. Our problem is communicating about the finances without it being confrontational and accusatory. It seems it always ends in an argument. I thought that if we had money, made smart choices, and saved, money would not be an issue in our marriage. It turns out I was wrong. We have recently adopted your jars as a mode of controlling our budget. I’d hoped it would make a difference in our relationship with money. It has made me think twice about buying non-essential items. However, it has not helped us discuss family finances more effectively. Do you have recommendations on how we could sit and discuss our finances without it turning in an argument? I just want the constant power struggle to end.
I don’t often recommend this D, but it may be what you guys need. First, figure out what it costs to carry your monthly essential expenses… mortgage, utilities, saving for your children’s education, groceries,… you get my drift. then divide the cost proportionately… if you make 100K and he makes 50K you would split the expenses 2/3 you and 1/3 him. Put your “budgeted” amount into a joint account to cover everything for the “family”. Keep the rest of your money separate and do with it as you wish. Now there’s nothing to argue over.
Roxanne wrote:
My brother and his wife are bleeding my parents dry! After an early teen pregnancy with another woman (he has full custody), he never moved out of the family home. Meanwhile, he tried to start his own business, but it’s never really taken off. He doesn’t make enough money to pay for his rent-free lifestyle. A couple years ago, he and his new wife got pregnant. So now he has himself, the wife and two kids living in my parent’s home, he’s 33 and no intention of getting a job that will pay the bills and moving out. Plus, he and his wife are now having problems and most of the fights are cash related. My parents do make a lot of money and have been able to subsidize his life of slacking thus far, but they are moving towards retirement and should be finalizing those preparations, not bailing him out every time. How do I make my brother and his wife realize that they need to grow up and pay their own way?
Sorry Roxanne, I don’t think you can. And I don’t think it’s your job either. Clearly your parents are willing participants in this scenario, and you have no part in the whole thing. They get to say what to do with their money. And if they’re happy to have a son who can’t be responsible for himself and his family, that’s something they will end up paying for. You, m’love, must find something else to focus on. This one you can’t win.
Sandy wrote:
My husband and I have the same argument about our debt. We own a home and RRSPs plus RESPs for the children. When you subtract our liabilities from our assets we have almost $250,000 in equity. Would you still consider us to be in debt??? I say no. My husband says yes because we still own money on our mort. I would like to stop fighting about this!!
Sandy, the purists say all debt counts. According to The Book of Gail, if the mortgage is well in hand and on it’s way down, (you have to live somewhere), I count debt free as being “consumer debt free”. I am not a purist. I’m a pragmatist. That being said, the objective should be to have ALL debt gone by the time you’re approaching retirement (so I do have provisos) and if that’s not happening, I’d suggest it’s because a body isn’t taking the mortgage debt seriously.
J wrote:
My husband and I have separate bank accounts. He makes about 4x a year more than I do and has a wonderful savings account. He believes that we should split all expenses in half. I don’t think that is fair. What is a fair percentage for a husband and wife when paying bills/household expenses/travel, etc.? (we don’t have a mortgage, just property taxes.)
J, I believe equal is not fair when there is a discrepancy in income. You should be splitting your expenses proportionately to be “fair.” Combined, according to what you say, you have 5 units of money: You bring in 1 and he brings in 4. So you would split your expenses with you paying 1/5 and he paying 4/5. If he finds this intolerable, then you’ll have to negotiate.
Mary wrote:
My husband and I are DINKS in our 50s. We have been together for 20 years. We started watching your show quite a few years ago and you make a lot of sense. One thing I love is how you get couples working as a team on their finances. I used to work for a bank so it seemed natural for me to look after the finances. He always told me that numbers made his eyes glaze over and his head hurt. I started showing him our budget and our bank statements and he would just nod and tell me how good it looked (pat, pat… good girl! Grrr…) I have tried to simplify things and automate them as much as I can and he says that if anything happened to me, he would ‘muddle through’. But I’m tired of doing it all. I want to get him more involved and have him take on a share of the responsibility too. We have a consistent debt repayment plan in place (about $8000 owing on credit cards) and are slowly building an emergency fund. We were a little late getting started on RRSPs but are finally tackling them as well. We have a mortgage and I keep an eye on what percentage of our take-home pay goes where. I know we will be working past age 65 because of our late start and I am starting to research jobs we can do at that age and beyond. How can I get him involved and thinking about the big plan including our future and whatever retirement we can manage?
Mary, it’s pretty tough getting the guy who wants to ignore the money to pay attention. But you’re right, it is exhausting always being the dog on duty. You could:
- Tell him just how important it is to you that he get on board and start participating in some of the decision making,
- Pack it all up and hand it to him and say, “Honey, it’s your turn.”
- Keep doing what you’re doing because, while you’re tired, it’s working.
Only you can decide what will work. Taking all your clothes off and refusing to get dressed until he has this conversation with you might work. But you may not be comfortable with that strategy. This is the part of my job that’s the hardest: trying to help people from afar means I know very little about who “they” actually are. What might work for Joan, won’t work for Harry or Betty. I think the important thing to remember is that if this is really important to you, you need to signal to him that this is really important to you. You have to grab his attention. What’ll work? You know better than I.
ML wrote:
My husband is a clergyman, so we’ve always had to live very frugally. I went back to work 3 years ago after 10 years as a stay at home mom. We manage our money very well and after years of living in church owned housing, we saved and had $60,000 to put towards a down payment on our first home (we’re in our 50’s). But my problem is that we are TOO frugal. We do all the things you recommend. For years we have kept the sort of budget sheet you recommend and we try really hard not to go beyond the limits we set. But we are constantly stressed about going over and rarely go out and enjoy ourselves. I feel guilty every time I spend a penny, and feel that with all the hard work we do at our jobs, we deserve a break every now and then to go out for a nice meal or see a concert. But we almost never do anything like that. In spite of working hard at my job, I still make every meal we eat. So my question is: Can you be TOO good at managing money and never allow yourself any fun?
ML, you can be so focused on staying on track that you don’t allow yourself the fun that is part of what makes a life worth living. I’d recommend that you and your hubby go over that budget of yours and carve out $100 a month for fun: dinner out, a movie with the works, a trip to a concert or theatre, whatever pulls your crank. If you make the $100 work, and still have wiggle room in your budget, make it $150. The idea is to move slowly from saving every penny to having a little fun.
R wrote:
I have an interesting question for you…
- Stats:
- Male 45 – income 55K$
- Female 36 – income 32K$
- Mortgage – 6.35% – 117K$ – 16 years left – 480$ bi-weekly – house worth 300K$ [lots of equity]
- Line of credit – 2.50% – 11K$ – will be paid off in 1 year – mainly deck and home improvement projects.
- VISA – 6500$ limit – average 2K-3K$ – paid off every month – we buy all on VISA
- No interac fees – no bank machines fees – no bank fees.
- 1998 Honda Civic SI – 0$ owing – great shape
- 2000 GMC Safari SLT AWD – 0$ owing – great shape
- Kids – 1 – 16yo boy, 1 – 8yo gal
My wife is an accountant and keeps me in line, but she thinks we are in bad financial shape, and I disagree. We do not live beyond our means, but we have an opportunity and I ‘d like your opinion. I have always wanted a pool and now we have an opportunity to get one. We are renegotiating our mortgage early, as the rates have drop dramatically recently. We had 6.35% [8 years left] and can now get a 4yr @ 3.79% [saving 9K$ in 4 years after the 6K$ penalty -15K total]. Due to the fact we have a ton of equity and our line of credit is secured to our house, we have lots of flexibility available with this renewal. Right now we have 137K$ available on line of credit or for other loans. What I am proposing is to get a 35K$ increase on the mortgage at the new rate to cover a pool. This will almost exactly maintain our current amortization period and payments, due to the drop in interest rate. Here’s the question: Would you do this or say “pass” on the pool and get your debts/mortgage paid off sooner? Keep in mind that I and my kids will be too old to enjoy a pool when all the debts are paid off [mortgage].
Okay, it’s your turn to weigh in with all your wit and wisdom. What would you tell R?
July 8, 2009 at 8:03 am
Ok, I don’t have a mortage and know very little about that but I am assuming that now the monthly cost on the mortage has gone down. So why couldn’t you save up the money you are saving on your monthly payments and build a planned spending fund for a pool? OR you could continue paying what you are paying for your mortage, assuming the payment has decreased you will now be paying more towards the principle. Get an extra job, and have your kids do some things to earn some money and everyone works together to save for a pool. You will appreciate that pool a whole lot more. Paying cash is the way to go!
July 8, 2009 at 8:07 am
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July 8, 2009 at 8:08 am
I think this family is doing great. Personally, I’d pass on the pool and instead use community pools (e.g. Parks & Rec, YMCA, etc.). But then again I don’t know this family. If I was them I’d weigh the amount of ‘real’ time they’d actually use this pool. Another possibility would be to get a much more economical above ground pool. Something worth exploring.
July 8, 2009 at 8:09 am
I would say yes!!…get the pool…it’s a luxury you can afford as you are on well on track…the maintenance fees can be part of your entertainment budget and if you want it so much I am sure you are willing to do the work..enjoy!!!!!!!!!!!
One other thing…”Make sure you’re not jointly signed on the credit. If you are, get your name off”…this is not as simple as it sounds…the person remaining on the debt has to reapply and qualify to support the debt on their own before anyone can get their name off…not always so easy to do as usually both names are on in the first place becuase both incomes were needed…another reason to be sure before you get any joint debt in place….
On a joint line of credit though, ONE person can have the line suspended but it will take BOTH people to have it reactivated….you are both still responsible for paying down the debt but it can’t be reused unless you BOTH agree…( you should also both agree on the suspension as well unless the circumstance is extreme..i.e. marital breakdown etc)
July 8, 2009 at 8:17 am
The total debt (mortgage + LoC) isn’t huge. It would appear that R can afford the extra payments on the pool.
That being said, nowhere in his ’stats’ does he talk about how much retirement savings they have, or if they have liquid savings in an emergency fund. I’d definitely want those to be in good enough shape before spending on the pool.
July 8, 2009 at 8:22 am
It’s hard to say, I think it depends on how much one would use the pool. Is it really worth $35,000?? Why not get an above ground pool?
And it isn’t just the cost of getting the pool… then there’s the up keep, the new toys, patio furniture.. it all goes together
At the end of the day though, if savings are in good shape as well and it is important to you and it will actualy be used then I guess go for it.
I know personally I would choose to have the mortgage paid off sooner rather than add on to it.
July 8, 2009 at 8:22 am
I say don’t get the pool. Why? The pool might be a great thing to have at home, but are you going to use it a lot? I live in a condo that has a pool, and I told my wife, “the day I have a pool I will use it everyday”. This is a pool that is indoors, so technically I can use it everyday… do I ? I don’t… The pool will bring you problems, a pool needs a lot of maint. If I were him…. I would build up a vacation fund (that will include money from everyone) so that they can go on a vacation 3 or 4 times a year and pay cash (or with CC to get the points). They can go to visit a lot of different places, and enjoy it out there, instead of using just a pool. That’s me though, so I can’t force anybody, but if they will have enough money to make, upkeep, and use the pool, I definetly think they can have money to go out on vacation more often… Again, that’s me.
July 8, 2009 at 8:22 am
Get the pool – your kids are only young for a short period of time and it is a great way to enjoy your family and is also great entertainment value.
The other option (not sure if it is or not) is to get an above ground pool rather than an in-ground. It would only set you back about 10000$ and would still get you wet
July 8, 2009 at 8:45 am
As I am one of those people who’s head hurts with numbers, I will only say that they seem to be doing well (I agree about the savings, tho’) and if it doesn’t add time to their mortgage and it really would be used, then sure get the pool. They have lap pools now, so perhaps that could be a less expensive choice than one that takes up the entire yard.
To some of the other women, the problem with their husbands seems to be a control/abuse issue, more insidious than the money problem. I like the Gail’s idea of keeping your money apart to do with what you will. But these ladies may want to take a harder look at their partner’s behaviour and rethink how things are working within their marriage.
July 8, 2009 at 8:49 am
I say a big fat no to the pool. What about RESPs for the kids? Everyone seems to forget about that. I believe that kids should take on part-time jobs in order to help pay for it but I also believe that parents should help as much as they can. Kids today are graduating with BA’s with $40K+ in student loans. If you’re lucky, you will get a job that pays $40K a year when you graduate and it will take a long time to get the debt paid off. I remember on Gail’s show, there was a couple who lived in the parent’s basement as their student debt was so big that they couldn’t make ends meet after an unplanned pregnancy. The parent’s house is massive and there is a swimming pool. Why is there student debt at all when the parents live in a place like that? I am not saying that parents should pay for the entire education; however, I do know parents that give up luxuries such as vacations, swimming pools, fancy clothes, weekends away and fancy cars so their children will have at least the tuition paid for.
If there are no RESPs set up yet, no pool!! Added to the fact that pools are incredibly expensive and time-consuming to maintain.
July 8, 2009 at 8:51 am
I would not get the pool.
The amount of RRSP/savings is not mentioned, curiously, which leads me to believe there may not be any. If this is the case, then you really need to start thinking about saving money for retirement, not living for today buying a pool with money you don’t have.
There is no mention of an emergency fund. This is a necessity.
If you must have a pool, consider above-ground. Much, much cheaper.
The ownership costs of a pool are large, as Sarah F mentioned. This is an additional drain on the monthly cashflow.
You will spend more time maintaining the pool than enjoying it.
Both of your cars are aging, and will need replacement in perhaps 5 years. This will not be cheap. Start saving for those future purchases now, and avoid more debt down the road.
Use the additional cash flow from the mortgage re-negotiation to build up emergency fund, pay off the LOC, and save for retirement.
July 8, 2009 at 9:11 am
I am going to assume that what info is provided is all there is…that is that there aren’t any savings or RESPs for the kids. I am also going to estimate that with an annual salary of $87,000 a year that you net approximately $5800 a month, as we don’t know what province you live in and I think that $5800 is generous.
Your current mortgage of $480 bi-weekly is approximately 17.93% of your income. But, as your LOC is secured against your house, and you plan to pay it off in a year, I would also consider this payment as part of your mortgage. To pay it off in a year you would have to pay about $920 a month. This means your total housing costs for a year are 33.73% of your income. This is a little high.
You suggested breaking your mortgage and adding $35,000 to it for the pool. Your new mortgage would be $117,000 + $35,000 + $6,000 (penalty) = $158,000 or a bi-weekly payment of $506.03. Not much higher than your now current payment. (Keeping the 16 years amortization and the new interest rate). This brings your mortgage payment to approximately 18.90% of your income and if you tack on the LOC then the result is 34.70%. Higher still.
A third option would be to roll your LOC into your new mortgage resulting in a mortgage balance of $169,000 and a bi-weekly payment of $541.26 or a low 20.22% of your income. This would allow you to have the pool, take advantage of a lower rate and have just one payment.
There are several red flags though that you should be aware of. You stated that you spend approximately $2000 – $3000 a month on VISA and that you pay it off each month. At an average of $2500 a month, that represents 43% of your income that is being spent most likely on life. That appears high. But let’s assume that you continue with this spending, that still leaves 100% – 43 – 20.22% (option 3) = 36.78% of your income left. And you are going to need it.
You haven’t any retirement savings. You haven’t any emergency savings. You haven’t any education savings for the kids. You have two older vehicles that need replacing soon. I would immediately start socking away money for each from what is left.
July 8, 2009 at 9:13 am
Listen to your wife. Right now, you make (gross) only $87000 a year, with $11000 in consumer debt (even though it was house maintenance, you still didn’t pay in cash, so it’s debt). Your mortgage is well in hand, but right now you’re proposing to not only add $6000 (to save $9000 long term, I know, but you don’t have $6000 cash) but then add another minimum of $35000 to your mortgage.
When you say things like “I have $135000 in LOC and mortgage that I can use”, it’s kinda scary. Because this isn’t money that you’re taking from your house and putting it somewhere else, it’s a loan from the bank with your house as collateral. Also, you don’t make anywhere near that much in a year, and you’re proposing to go another $41000 in debt, for something a) unnecessary and b) that can negatively affect your property values (yes, a pool often times LOWERS the appreciated price of your home). Also, in case you haven’t noticed, the economy isn’t the best. Although your house has significantly appreciated in value, that means nothing if no one will buy it at that price when you have to sell. It’s theoretical money, not cash.
Listen to your wife. Don’t do it!
July 8, 2009 at 10:43 am
Hmm….I agree with Jay – there isn’t any info on levels of savings, retirement (RRSPs etc.) funds, RESPs, emergency fund…
I don’t own a home and am very far from being an expert on these sort of matters – however, building a pool sounds like something expensive that should be a project for planned savings.
I guess the dilemma is that this individual wishes to build sooner rather than later – ie – while his children are young enough to enjoy the benefits. This is a hard call…but without the extra info regarding savings, education money etc., it is hard to say. My tendency is that it is best to pay down debts ASAP (one does not know what is around the corner, after all!) and pay for expensive luxuries through planned savings.
July 8, 2009 at 10:46 am
No pool. He says he has a LOC for $11K and then says they live within their means…..no they don’t. If they needed to borrow because the money wasn’t in the bank then they are not “living within their means”. If they can pay off 11K in one year then they should do that and then start saving for the pool. If the kids are going to be too old to enjoy it in 4 yrs then why put it in?
I do agree that a mortgage is a different kind of debt.
Also, their vehicles are in good shape now but they are pretty old. How much longer will they be that way? And that is assuming they don’t have any accidents. With vehicles that old the insurance company is only going to give them what they are worth – not enough to replace them.
July 8, 2009 at 11:01 am
First of all, why does your accountant wife think you are in bad shape? Is there something in your finances that needs to be addressed before she would be more comfortable with the pool idea? I agree that it might be a matter of savings/RESPs/RRSPs but you haven’t specified her concerns.
Second of all, keep in mind that a pool likely WILL reduce your chances of selling your home in the future and/or reduce the selling price (assuming you can sell it at all if the market’s bad when you need to sell). As a couple with young children we would NEVER buy a home with a pool for safety issues, and if my children were older I’d be looking for other features in a home besides a pool. Our taxes already pay for the community pools, after all. LOL
And lastly, in order to avoid the maintenance, extra costs, furniture, etc, etc that would come with having your own pool, I would also suggest saving some money toward vacations or “stay-cations” as they’re now being called (i.e., staying near home for vacations). Getting the kids day passes every month or two to a huge waterpark nearby, and maybe letting them bring a few friends too, might create an even better memory for them than dredging the pool and helping with other maintenance.
If you absolutely MUST have a pool, then I would certainly (a) make sure all your other ducks are in a row, i.e., savings/RESPs – especially for your son who’s nearing the age when he’ll need it/RRSPs/paying off LOC if not rolled into your new mortgage/etc, then (b) going for an above-ground pool to lessen the expense and the future hit to home value. You can always situate it in such a way that, with a bit more decking and a few stairs, it looks/feels like an in-ground pool!!
Good luck!
July 8, 2009 at 11:33 am
As someone who grew up with a pool and then had one for my family to enjoy I think they can be a great way to spend family time…as long as you take all the costs into account. Not only is there an increase in hydro bills for running the filter, but to get maximum usage in Canada you really need a heater (we went without for years but found there were many days no one would go in because it was too cold) so there is extra on the gas bill, you will also pay more for your home insurance (you MUST inform your ins. co. as not doing so may void your insurance). There is also the cost of proper fencing furniture etc…Another thing that will cost you is the extra entertaining that comes along with owning a pool
…when you have a pool you will have more visitors and it can really add up, also be prepared to have lots of neighbourhood kids at you house! Chemicals for the pool, new solar blankets, pool toys , you get the drift. People sometimes think a pool adds to the value of their house actually the opposite is true many home owners do not want the extra cost/work and if you have small kids it requires constant vigilance.
Having said all that I still think owning a pool can be great, but its always best to understand all the costs.
July 8, 2009 at 11:45 am
[...] Excerpt from: This & That: Money & Relationship Edition [...]
July 8, 2009 at 12:03 pm
Okay – I read what everyone else said. Everything else from the practical (financial) to the emotional memories that we all had of growing up swimming in the summer. Everybody has their pros and cons.
I think the make or break for this pool would to calculate the monthly costs if you got the pool – inground or above ground (as others have suggested). We all seem to be assuming that you live in Canada since it is not mentioned otherwise. Kim mentioned specific equipment due to the climate, and others have mentioned the decreasing property value and increasing insurance. Take everything into account and divide it by the number of months that you will actually use the pool (will you really use the pool in April?).
Once you have the costs figured out – ask yourself and your wife if you can justify spending the money on maintaining the pool for those few months out of the year. Could the money go somewhere else (such as the non-existent savings or RESP?). If the answer is yes, don’t borrow the money. Earn the money and then spend it. Who knows, by the time you have enough money in your pool fund, you might change your mind in the three years (or however long it takes) for you to save the money.
July 8, 2009 at 12:32 pm
The pool? It depends. The stats look good from a consumer debt perspective, but as reading Gail’s stuff has taught me, there’s more to the total picture than that! As others have mentioned, are there RRSPs, RESPs, an emergency fund? Are you adequately insured (life, disability) so that if something happened you’d be able to meet the payments you currently are making? How secure are your jobs? The other big concern I’d have is that as the stats read, pretty much all the net worth is coming from the house, and houses can depreciate. If you are thinking of eventually selling your house, keep in mind that a pool is not an attractive feature for most buyers (according to my realtor friends). And I’d think twice if increasing the mortgage meant I’d still have a mortgage once retired.
But if these pieces are in place (savings, insurance, emergency fund) and no one has a competing “life dream” that would cost similarly (e.g., family world travel before the kids move away), I’d say go for the pool. Life is meant to be enjoyed.
July 8, 2009 at 12:44 pm
R, you don’t mention whether your income is gross or net. If it is gross, then given your $2 – 3K household expenses every month and your bi-weekly mortgage payment, I’m guessing you don’t have a lot to send to savings or an RRSP. Perhaps you have company plans that contribute on your behalf? Either way, my suggestion is:
First: I would recommend getting that line of credit paid off without borrowing any more. Congratulations on your 2.5% interest rate, but keep an eye on it. Banks are now bumping the rates up with no warning. They claim they are not covering their costs.
Second: Build emergency fund of at least six months total living expenses – lines of credit don’t count. I think a bank can call in a line of credit anytime it chooses and yours happens to be secured to your house. If something should happen to your employment or ability to work (for either yourself or your spouse) you might be forced to sell your house to pay off that debt.
Third: Max out your RRSPs. At your combined income rate you will get a good tax credit back. Perhaps use that $35K you can borrow at a low rate and invest it at a higher return in your RRSP. Then you might even be able to write off the interest that you’re paying on the $35K since technically it’s an RRSP loan. Use your tax return towards your “pool” fund.
Fourth: Pay off the mortgage as quick as you can and here’s why I think it’s a better choice: You have kids. When they enter university either you:
a. saved all the money they need to pay for it.
b. They are truly wonderful children immensely gifted and they won full scholarships and saved their own money.
c. You won the lottery
d. You were too busy feeding and clothing them to save for their education.
If you pay off your mortgage as soon as you can (by NOT borrowing the $35K and throwing everything you have at the $117k) you will be mortgage free and can use the $480 bi weekly to support your kids in school until they can manage on their own. After that you now have $480 biweekly to help pay for your pool.
Fifth: If you have your future well in hand then buy all means – buy a pool. They’re expensive and can be a real pain. If it’s indoors the heating bill will be a nightmare, but what the heck, you only live once right
July 8, 2009 at 12:53 pm
Roxanne,
When I was in Fort McMurray I saw lots of moochers still living at home. But McMurrayites are a smart bunch. They retire and downsize (sometime even moving to Edmonton). No room for the kids anymmore. Perhaps it’s time to extoll the virtues of small condo living (“think of how great it will be travel worry-free Mom & Dad!”) to your parents. Encourage them to downsize. It might even force your brother into realizing that he had better start planning.
July 8, 2009 at 12:59 pm
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July 8, 2009 at 1:01 pm
[...] This & That: Money & Relationship Edition « gailvazoxlade.com [...]
July 8, 2009 at 2:03 pm
R~
I’ve read all the comments here and on thinking it through…I’m afraid I’m on the side of those saying ‘no pool’. 16 yo boy may well be off to post secondary schooling next year and 8 yo gal not far behind. Please don’t ever think of a LOC as your own $$. Having the family save up for the pool if that is what you really want is viable…cash in hand the answer!
July 8, 2009 at 2:28 pm
I’ll play the devil’s advocate here.
If your accountant wife says there is a problem, then why would you not listen to her? Why do you need an outside opinion? Are you really a team? Have both sides been truly listened to?
Is one member a saver and the other a spender? Is one enabling the other in this marriage to keep things going along okay knowing that in the future this decision will come back to haunt you both?
Could you not go to a hotel for a staycation in town or in another town for special occasions and use the community facilities otherwise? Are there community facilities or would they be inconvenient to use?
A house with a pool is harder to sell (people see maintenance $$ and the fact that they don’t want a pool in their yard). Will you want the pool forever? Will you want to downsize at some time in the future? How many years from now? Is building a pool worth it?
For how many years will the kids remain at home? Will they go away for an education – marry and stay away? Will they live around the corner and return to swim each day?
I see that there is a time for a pool in a family’s life but then it passes when the children leave home. Is having the pool right now that important to the family or to you alone? Why is it that important? What have you done up til now to make a pool that important in your life? Is this a want, a need or a dream of what might be a family’s memory of happiness?
Family friends of ours filled in the pool about six years after the kids married and moved to their condo where they swam each day. No more work, no more costs.
Deal first with retirement issues, emergency funds, regular savings, planned savings and educational savings accounts. Get a plan of action started.
Be very clear about why you need this pool at whatever cost before you build it.
July 8, 2009 at 2:43 pm
Coworker of mine was debating about putting a pool in his backyard – mostly to keep up with the Jones -until he found out that the Jones are paying $1500 a month to enjoy said pool.. that’s the equivalent of a mortgage .. for something you could enjoy less than 1/2 the year?
We took my kids on a vacation this week and after 4 days of non stop access to the water the novelty wore off.. they were just as happy to ride their bikes.. kids interests are fleeting.. it’s sort of like when your kids talk you into getting a dog.. “I promise Dad i will walk him.”. and they will for the first month..and then soccer/baseball/friends etc interfere..
July 8, 2009 at 5:12 pm
That’s crazy. He needs to listen to his wife. He shouldn’t increase his mortgage, start contributing to RRSPs, and an emergency fund and go buy some disability/life insurance (or tell his wife to do it, since he’s obviously the spender).
Then they should enjoy their summer at a nearby beach, lake or rec centre. This is Canada, water is everywhere – you don’t need a pool to give your kids great summer memories. In any case, as the parent of a 16 year old, I doubt the son is really hanging around the family all that much. Maybe this was a bribe to get the kid to spend some time at home? Careful what you wish for….LOL
July 8, 2009 at 6:24 pm
Re: pool
Didn’t see this mentioned : Mortgage rates will not always be this low.
What will they be in 5 yrs when you re-new ?
It’s going to take some time for the economy to adjust and folks are still saying to hold cash and not buy equities etc.
Good point about insurance for loss of income/disability for both parents.
A realtor friend has an acreage with a pool and is filling it in and not with water………
How about moving ? Buy a house with pool ? Avoids the construction/destruction of the yard ( further landscaping costs ) and that new deck you are still paying for (if it’s in the way).
July 8, 2009 at 7:04 pm
Thanks for the encouragement Anna. In fact, that seemed to happen all on it’s own. It was actually a few months back that I posed the question to Gail (she answered right away, but it didn’t go on the public boards til now). Since then they have bought a retirement property that they now rent. It only has two bedrooms. Suddenly there’s less money for extras and they’re moving in a few years.
July 9, 2009 at 6:13 am
Thanks for the encouragement Anna. In fact, that seemed to happen all on it’s own. It was actually a few months back that I posed the question to Gail (she answered right away, but it didn’t go on the public boards til now). Since then they have bought a retirement property that they now rent. It only has two bedrooms. Suddenly there’s less money for extras and they’re moving in a few years.
Sorry, forgot to add great post! Can’t wait to see your next post!
July 9, 2009 at 8:16 am
@ Anna:
“Third: Max out your RRSPs. At your combined income rate you will get a good tax credit back. Perhaps use that $35K you can borrow at a low rate and invest it at a higher return in your RRSP. Then you might even be able to write off the interest that you’re paying on the $35K since technically it’s an RRSP loan. Use your tax return towards your “pool” fund.”
Anna, you can only write off against interest on a loan if the investment is not inside a “registered” account (such as RRPS). So that means that if you borrow money to buy a GIC outside of an RRSP is ok… but otherwise you can’t borrow for an RRSP and get a deduction and interest write off… that’s a big no no…. (I would love that though, a deduction plus a write off the interest, we would almost pay no taxes…. )
July 9, 2009 at 11:37 am
Emiliano,
You’re right. I wasn’t thinking that one through. Thanks for the correction. You can only write off interest for a non-registered investment. My apologies to anyone I’ve confused!
July 9, 2009 at 3:39 pm
Re: Getting a pool
Talk to a lot of people who have one. I had one in my last house and never again. We live in Vancouver. It always cost $250 to start it in May and the cost of chemicals and testing and maintance just continued on and on. Because we travel alot there was also the concern of trespassers and liability insurance; even though we had a locked fence. It was quite the draw for the entire neighbourhood, and there was always someone wanting to use it; whether we were home or not! On the other hand, we have always had a hot tub and I wouldn’t do without one of those. We kept the temp lower so our kids and grandkids could use it safely, and they come with locking covers; so safety isn’t a concern.
Good luck with your decision.
July 9, 2009 at 10:51 pm
Don’t buy it until you have the money in your savings account.
It doesn’t sound like they’re in a bad financial situation but I wonder if the situation would hold up if there was an emergency? Count an income out for whatever reason and can they still tackle it? I don’t think it would be healthy to do so.
…
And where the HECK did this 35k for a pool come in? That seems awful steep!
July 12, 2009 at 12:03 am
Re: Buying a pool by increasing mortgage amount
We have a beautiful inground pool it costs approximately$250 per season upkeep in Ontario, Our 16×32 pool did not cost 35,000.00 I can guarantee you it was half that amount with the pool, pump, vacumn, decking, cement and fencing along with safety gates!!! We got a great deal because someone ordered the wrong size liner for a different pool and timing was everything!! It has saved us alot of money in vacations and I always know where my kids are (at home around the pool) The grocery budjet had to go up though because of the extra friends around (its okay they are here in the winter to and I like it that way) I say pay off the existing line of credit, reduce your mortgage rate but don’t increase your mortgage to include the pool purchase (the amortization is to long) after your line of credit is paid off and you have established RRSP’s if you don’t have a great company pension (I get an amount taken out of every pay and I do the same for the RESP’s), live with that for awhile and once comfortable decide after your LOC is paid off for awhile if the pool is the right thing for your family. Then save at least half the pool cost (jar with pool fund or a tax free savings account could work or high interest savings account) find a great deal, do your homework then you could use the LOC for half the pool (making sure you could pay it off in 6 to 8 months). Remember the bells and whistles on the pool sound great (lighting, music etc) these are huge repair bills later on if something should go wrong), I suggest get a ladder for the deep end if one (ours is 8 feet deep – kids will always jump in head first – always) and the built in stairs are great for the shallow end (grown-ups) and children and wusses who have to get in slowly, skip the slide(biggest reason for injuries around a pool) and the same goes for the longer diving board) think safety first because your house insurer is and so will the chief building inspecter when he/she comes to okay it. Your hydro bill will be large because of the pump running so prepare for that as well. I say go for the pool if you skip renting a cottage each summer (700-900 week) and go on winter vacation every 2-3 years instead of every year it will pay for itself your kids will enjoy it Ours did and our pool paid for itself within 5 years actually, whoever said it affects resale is right only people who want a pool will look at purchasing your home so as for a selling point it could help or hinder ( our pool only takes 1 hour a week for upkeep, vacuming, chemicals etc.). And we enjoy it, instead of cranking on the central air we all go for a swim before bed and we sleep great!!! We enjoy our outdoor space and swimming is great exercise for everyone, now our kids help to vacumn it and all their chores are done without asking twice (rule is no friends till chores are done). I personally wouldn’t be without a pool now even when we are empty nesters!!!
July 14, 2009 at 3:09 am
I’d say this: pay off the consumer debt (line of credit) of $11 K, and once paid save that $11 K each year (plus the interest you aren’t paying) for the next 3 years. If you want, re-negotiate the mortgage anyway to save over the long term interest and take the money saved bi-weekly on the mortgage payment and add it to the pool savings. Regardless, you will have enough to pay for the pool outright in 4 years. That’s not bad! The house will still be paid out before you retire.
Of course, I am assuming there are RRSP’s and an emergency fund? If not, forget the pool – you need to worry about retirement planning…
June 5, 2010 at 1:36 pm
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