My husband and I have been discussing how to go about making this work best for us and our future children. I am employed as a registered nurse and my husband is a teacher. Our gross income this last year was $110,000 dollars.

We have been very lucky as we currently have no debt, and are living in a condo rent free that my parents had purchased as an investment to rent out to future renters.

We have been thinking about the type of home we can afford to buy using my father’s gift. What kind of advice can you offer us in order to make the most of this opportunity? We are looking for a smart, long term plan as we are both 25 yrs old and have many things to save for.

We are interested in hearing what your thoughts are.

Gail Says: I’m sorry for the loss of your dad and hope you are in a good place now that some time has passed. You clearly make a good income, so my first warning is to not let lifestyle inflation blow your good sense up. To buy a home that works for you, keep in mind that you want something that meets all your needs, and some of you wants, but doesn’t eat up your whole inheritance. Keep in mind that by putting your inheritance into your matrimonial home, you husband will be entitled to split it should your relationship flounder. That being said, I imagine you’re both very excited about getting into a home of your own.

First, figure out what you think you can manage by way of monthly expenses for a home: property taxes, insurance, maintenance (don’t skimp), utilities. This should not be more than 35% of your net income, though with no mortgage I hardly imagine it would be even close to that. Add all the rest of your expenses. Stick 1 year’s worth of those expenses in a high interest (I know rates are low, but you want to keep it liquid) savings account for emergencies. That’s your emergency fund.

Now decide what you want to do with the rest of the money. How much house do you want to buy? Do you want to set aside a fund that will allow you to travel? Are you planning to have children? If so, why not set aside some money now for your mat leaves so you don’t end up having to scrimp when you’re off with babies? Then look at houses.

Hope that helps. Let me know how it all turns out.

D Wrote: My children, aged 11 and 9, have started asking me about whether we have a lot of debt, whether we have a mortgage (we do) and how much our house cost. I was concerned that they were worried about it, so I explained that we managed our money so that we could always make our payments. I then explained the concept of a mortgage. I think I missed a real chance to do a better job of talking to them about money. What do you suggest on talking to kids who raise these kinds of questions?

Gail Says: I don’t think you missed the chance at all. You reassured them, told them about how you prioritize your responsibilities and then gave them new info (on the mortgage) to walk away with. I think you did a great job. You’re not done. Clearly your kids are interested and smart enough to ask good questions. I suggest you keep talking about how you manage your money and what they can expect from life as they grow up.

S Wrote: My family situation is a little unusual and I need some advice on where to focus my financial attention. I am a 45-yr old woman with a PhD and a great public sector job with a good pension, my husband is 70 and retired with a good pension and we have a 9 year old daughter. We have two mortgages (house and cottage) that total $260,000 (paying it down at accelerated rate), we have maxed our TFSAs, contribute $2500/yr to RESP and I have no unused room in my RRSP (investments doing moderately well). No other debts. Question: Should we focus on paying down our mortgages while we have two incomes coming in or should we be adding to our savings? I am confident I am always going to have a well-paying job, even when I am on my own. By the way, we really enjoy our life and don’t feel financially stressed at all. We just want to make some smart decisions. Thanks!

Gail Says: M first question is this: Does your husband have sufficient life insurance so that when he dies the mortgages will be paid off? If not, then you need to get at least one of those puppies gone. If he does, then you should be focusing on building up your long-term savings, since the insurance will take care of the mortgages should you become a one-income family.  BTW, congrats on having your game together.

M Wrote: I have been addicted to your shows and respect you tremendously. You offer easy-to-understand advice to the average person regarding financial matters. I am a literacy worker and have used your recent book from the Good Reads collection to educate adults on basic financial literacy. I hope you can answer my question.

My parents are what you might call, ‘penny wise, pound foolish’ people. All their life, they have worked hard for their money, budgeted well and saved enough so we wouldn’t live paycheque to paycheque. They earn below average earnings and live within its means. No lavish spending or fancy trips.

Three years ago, my dad’s friend at work told him about an investment broker who was promoting a leverage ‘scheme’ which would guarantee my parents a payout or dividend, bringing in extra income allowing my parents more financial freedom. Of course, we didn’t have the money to invest so the broker ‘encouraged’ my dad to borrow $100k to invest into the leverage scheme. My parents were assured that borrowing money would not affect their credit and that the stock prices would only fluctuate somewhat but not drop tremendously. Someone like my dad, who didn’t know much about investments or stocks, clearly fell for it, especially since his so called friend at work also signed up for this type of investment. Not a wise move.

Right after the market crash of 2008/2009, we discovered that the independent broker who approved my parents’ applications had fled to Pakistan. He had been charged for fraud, and that he approved several hundred leverage applications based on fraudulent numbers and inauthentic tax return slips and income statements. Based on my parent’s below average income, they would have never qualified for this investment in the first place.

So my parents have been paying a major interest payment (they each have a leverage account) from their pockets every month for the last two years which is putting them in a hole. The stock portfolio has dropped to a 2 star rating for a 3 star rating and the stock is 50% down.

They will be retiring in 5 yrs. Should they sell the stocks and cut some major losses now before it’s too late or ride out the market for another 4 yrs (it’s a 7 yr term), hoping to see an increase in value of our portfolio?

Gail Says: I’m very sorry that your parents have been through this. They can either sell the investments and take the loss, using the proceeds to pay off as much of the loan as they can, and then pay the rest from cash flow, or keep paying the interest on the loan and hope the portfolio recovers. At this point they should probably have a professional look at what they’re holding to see if there is hope. I can’t tell from where I’m sitting. This is a perfect example of leverage going bad, and I’m sorry it has happened to your folks.

C Wrote: You have been a tremendous influence on our household. My wife and I married 4 years ago and assembled a combined debt of +$40,000. After spinning our wheels the first year of our married lives, and not having much money to spend or save we came across your show one night while flipping through the channels. It was life altering. Within 2 years of watching our first ‘Til Debt Do Us Part’ show, we are now debt free, have a wonderful baby and have managed to save enough for a down payment on a new home which we will be moving into at the start of 2012.  That’s our story and here is our question:  We are debt free now, but do live in a tremendously expensive city – Vancouver.  Our new home is almost completed and we are now looking ahead to the future. This means creating 2, 5 and 10 year financial goals, but we are a little stuck on how to successfully set goals for the future. Our plans include a new vehicle, a 2nd child, possibly a larger home, and of course retirement. Do you have any recommendations on how to set up realistic and therefore successful 2, 5, and 10 financial savings goals?

Gail Says: As far as the timelines go, it is only relevant that you have those dates … very specific, not 2-year goals, but by June 2013… As for how to set goals, I have an entire process outlined in Debt-Free Forever, beginning with figuring out what’s really, really important to you.  In short-form here:

Your goals should be so obviously clear that any Tom, Dick or Harriette could look at what you’re trying to achieve and be able to measure your success. After all, if you don’t know exactly where it is you’re going, how will you know when you get there? To be a SMART goal, it has to be:

Specific – You are much more likely to accomplish a specific goal than a general goal. A general goal would be, “Pay off my debt.” A specific goal would be, “I want to be debt free so I will pay off my debt, repaying my most expensive debt first, and having all my consumer debt paid off in three years or less.”

Measurable – Establishing concrete criteria for measuring your progress will help you to stay on track, reach your target dates, and experience the exhilaration of achievement that spurs you on to continued effort required to reach your goal. To determine if your goal is measurable, ask: How will I know when it is accomplished?

Attainable – If the goal is too big, frustration will get in the way.  Planning to have a million dollars in savings when you make $10 an hour may be unattainable?

Realistic – You must be both willing and able to achieve the goal. You are the only one who can decide just how high your goal should be. Your goal is probably realistic if you truly believe that it can be accomplished.

Timely – A goal must be grounded within a time frame. With no time frame, there’s no sense of urgency. If you want to save $1,000 for an emergency, when do you want to lose it by? “Someday” won’t work. But if you anchor it within a timeframe, “by August 1st”, then you’ve set parameters within which you’re working.

Gail Says: I’m surprised your accountant isn’t suggesting ways for you to minimize your taxes. With a combined income over $260 K, you’re paying a lot of tax. I would make sure you’re paying only as much as absolutely necessary. I would, however, also make sure to get rid of the consumer debt (that line of credit). So why don’t you (and your accountant) a) figure out how much to put into the RRSP so that your refund, in combination with whatever is left of that net gain, does away with the $60K line. Having freed up cash flow (no more LOC payments), use that money to a) maximize your TFSA and b) continue to grow your RRSPs, with future refunds going to principal repayments on your mortgage. How does that sound? (It won’t be a matter of just throwing $60K at the line. You’ll need to figure out the right RRSP contribution to use the refund to supplement the LOC payoff.)

H Wrote: My husband and I are opening our own business (a health clinic). We understand the importance of having a credit card and bank account that is only used for business, and to keep those separate from our personal bank account and credit card. For our business, it is necessary to have a BUSINESS credit card and BUSINESS bank account? Or can we simply get another personal credit card and bank account that we will only use for business? I find bank fees for business bank accounts can be quite high when the services offered are no better than that offered for a personal bank account with much lower banking fees.

Gail Says: Business accounts cost a fortune, don’t they? It’s like the bank is punishing you for daring to take on the risk of being a small business owner. If you’re not incorporated, you don’t have to have a biz account, you can go with a personal account that you use only for biz. Ditto the credit card.

S Wrote: I am a big fan of you and your shows. I have seen most episodes at least twice. I have a question about RESP’s. My daughter is 13 yrs old and we currently have just under $50,000 in RESP’s set aside for her education. Unbeknownst to me my husband stopped contributing the RESP in March of this year. I was wondering if the amount we currently have in is sufficient or should we start contributing to it again? We had been putting in $167 every month since she was born.

Gail Says: You are allowed to contribute up to $50,000 per child to an RESP. Since you’ve been putting in $167 a month for the past 13 years, you’ve contributed just over $26,000, which means your investments have done very well. It is your choice to continue to contribute to a plan for your daughter. Right now mine’s in university and it’s costing about $18,000 a year. I can’t imagine it’ll get any cheaper.

R Wrote: I noticed that you said a good amount to save for home maintenance is 3%-5% of the value of your home, per year.

I own a condo valued at $340 000 (I paid significantly less though). 3% of that is $10 200. Even after subtracting maintenance fees ($368/month) I would still have to save an extra $482 to meet the minimum requirement. This would put me far over the 35% recommended housing costs when you factor in mortgage, taxes, insurance.

My partner and I make over $100 000 per year, so if this is the case for us, how does anyone afford to own a house in Toronto, let alone a condo? Are they lying to themselves? Is 3%-5% towards maintenance actually realistic?

Gail Says: Because of the huge property increases we’ve seen, I’ve been telling people to use the “replacement value” of their property in their insurance policies as opposed to their market values. The 3-5% isn’t just for “major repairs”… all the ongoing things are also included: repainting, outside maintenance, and the like. I think it is more important that people pay attention to their own individual needs and circumstances. The 3-5% is a guideline. Sometimes, depending on the age of the property, it isn’t enough!

R Wrote: I recently discovered that I can have my own mortgage in my RRSP account. What do you think?

Gail Says:  I like self-directed mortgage and have had one myself. Be prepared for the industry putting up huge barriers. With all the fees involved, you’ll need a mortgage of at least $200,000 (so you’ll need that much in cash in your RRSP) to compensate for fees and today’s low interest rates.

S Wrote: I am going to be getting about $55,000 in a severance package in December 2011. At that time I would have already made $80.000. I know I will have to pay at less 30% tax. Should I put all the money in RRSP? I have enough room for RRSP contribution, but I will need the money to live if I don’t get a job. I thought of withdrawing about $3,000 a month to meet my expenses, and continue to do that until I get another job. I really do not have a lot of savings. I have a line of credit at an interest rate of 7.7%, should I use that instead of taking out from the RRSP daily savings? Maybe I should just pay the 30% on the severance upfront and not put it in RRSP. My concern is if I am so lucky to get a job quickly then not putting the money in RRSP will be a big tax lost. Please let me know what the best thing to do is.  Thank you very much in advance. I know that you get many letters but I am praying that you will choose my questions to reply to. God bless.

Gail Says: If you receive your severance before the end of 2011, your income will jump to $135K and you will very likely be in a higher tax bracket. You should roll as much as you can to your RRSP to protect it from being eaten by taxes. Once the calendar rolls over, you’ll be in a new tax year and any withdrawals will be at a lower rate because you’re still not working. If you get a job right away, your severance will have been protected.

If you make withdrawals, do so in denominations of $5,000 or less, on which only 10% tax will be withheld. But keep in mind that your taxes may end up higher than that if you pull a substantial amount from the RRSP.

I hope you’re planning on finding even part-time work while you look for a full-time job. You should strive to keep as much of that money in the RRSP as possible. Having used up the RRSP contribution room, if you pull the money out of the RRSP, the contribution room will be lost.

P Wrote: First of all let me just say that I LOVE YOUR SHOW! I presently live in Toronto and I am awaiting my permanent resident documents. When I first came here I applied for a bank credit card and the limit is $7500. So I have three questions. 1. How was I allowed to be given a credit card in that amount without being a permanent resident and not having a social insurance number? Question 2…do I have a credit score without a social insurance number and when I am issued a social insurance number would my credit be transferred to that social insurance number? Also, would I have to apply to the credit bureau to have my credit card amount added to my new social insurance number when I do get it? Question 3, would my credit score be really messed up by this?

Gail Says: You don’t need a SIN number to get a credit card since you aren’t earning interest, you’re paying it. In fact, credit granters aren’t authorized to collect SIN numbers, so it should not be given.

L Wrote: How should one handle the benefits from a plan when doing up the jars? We pay nearly $400/month in prescriptions which then gets reimbursed. Do we add that amount to the medical expenses portion and then count the reimbursement as income? I’ve never seen the topic of benefits handled in one of your shows.

Gail Says: Set up a separate budget line or jar. Fund it with the $400 you know you spend. Then just rotate the money in and out of it. When you get your money back, refill the “jar” (or credit the budget line). When you spend the money, debit the jar. It won’t affect the rest of your budget.

I have been remarried for 4 and a half years now, and almost two years ago, I had mono and could only lay on the couch and watch TV for a few months. I mostly watched your show. I couldn’t believe the messes you got people out of. My husband thought it was the perfect time for me to educate myself about our finances and he quit the budget. I bought your book and began the process. It was painful and delightful at the same time. This year, we sold our house and paid off all our debts, including my $60,000 debt from before we married. Thank you so much for giving me a clear guide I could follow.

So we were all out of debt in May 2011, but we had to pay lawyers for a custody case which we won; my 21 yr old son moved into our downsized house and took over our wreck room; my oldest daughter is getting married in El Salvador in December and my 19 yr old is moving to Toronto in January to attend college. We still have a 13 and 15 yr old at home. There is also Christmas coming. I am not working this year but am collecting some EI. We are renting our home until we can afford to save up for another one but at this rate, it may be a long time. We have gotten back into debt $6,000.00.

QUESTION: I can pay back $4000.00 before the wedding. My husband says if the debt is not all gone, he and the 2 kids at home won’t come to the wedding. I really want them to come. I know I can pay back the other $2000.00 and the cost of the flights and stay in El Salvador by April 1st, 2012. He says no wedding if it causes more debt. Does debt free come before big events in life? Am I being unreasonable? Do you have any advice to help us?

Gail Says:  Let me get this straight: You’re not working, you had to sell your house to get out of debt, and you’ve gotten back into debt to the tune of $6,000. Why?  Didn’t you learn from your past mistakes? I don’t blame your husband for saying no debt or no wedding trip! He’s absolutely right. And so what if it’s Christmas? If you don’t have money, you can’t spend what you don’t have. Using credit is just plain dumb. If you are determined to have money to do the things you want to do — like the wedding — then get to work earning money to pay off the debt and save up for the trip. Is your 21 year old working? He should be paying rent if he is. And you need to put the needs of the younger children front and centre. For goodness sake, think!

D wrote back: Well Gail, I appreciate your honesty. I think you should know a few things:  Getting back into debt wasn’t just my doing. My husband has one son who is almost 13, and he moved in with us this year.  My husband has insisted we buy him everything he had before, that his mother wouldn’t give him such as computer, snowboarding equipment, iphone, etc.  My husband likes his child to have good stuff. I understand where my husband is coming from, but it was money we didn’t plan for. We also put him in a private school which is almost $600.00 per month. I assure you, that our younger children are a lot more spoiled than any of my 3 other children were. I went back to school for 5 years as a single mom. We lived on little and I was happy that fun was free. I have already paid back $2000.00 of the $6000.00. I am used to saving and he is used to having what he wants. We are doing our best to get along.  I do have an issue with my 21 yr old that moved back in around June of this year. The conditions were that he must have a job, he has to respect the rules, he has to keep the house clean and he is not to ask us for any more money. He got a summer job in which he got to choose his hours and didn’t go in but once or twice a week. We had several discussions with him and he still didn’t take more shifts. Now that college has started again, he is supposed to be tutoring 15 hrs a week, but he has not started yet. We believe he is addicted to gaming. Still we had a few discussions with him and there is no change with work. I am happy to have him back home to restore the relationship but he is not integrating into the family and he is not working. Simply it seems we should kick him out. I do want him to graduate. He has two more years of school. Any suggestions?  I love and appreciate your honesty. Keep it coming.

Gail Says:  It is always hard with “adult” children who are not acting like responsible members of a family. I always told my children that I would never kick them out. My mother kicked me out (for disrespect… me, imagine!) and I would never leave my child to the vagaries of the world. I have a roof, they have a roof. But that does not include “fun.” So I would disconnect all the gaming, television, internet (except for work/school, which would be where I could see it) and if you want to do nothing but stare at your navel, have a great time! A child who was not “contributing” to the household (cleanliness, pulling weight, fulfilling responsibilities) would also not be entitled to any of the pleasure of the household: cook your own food, do your own laundry, and if you leave a mess in the common areas, expect to find it in the middle of your bed! It’s tough, but sometimes tough is necessary.  Good luck.

L Wrote: I want to send you this e-mail to tell you, a wonderful experience I am having with my girls.  I have been married for 19 years and we have 2 wonderful girls 6 and 8 and we been watching your show for a while but only in the last month due to your book “Kids and Money” we have involved them in the money matters.

I have to confess, yes we are in debt, and thanks to your “Gail’s tip” found on your website we want to get out of debt in 3 years.  I told the girls there will be a lot of hard work and commitment, and no trips or extras until this happens.  We told them they need to help and pay their dues.  Today we did not have any money in the jar for food, so no money to buy groceries so the girls had a garage sale, (too bad no pictures) they picked the toys did not play with anymore and I picked up clothes and shoes they did not wear anymore and sold it.  The girls made $29.63.  Later that day, my oldest did a list with all the things she thought they needed for lunch for the week and we when to the grocery store and got $29.59 worth that the oldest pay for herself, she was very proud of herself, we are even more proud.  She asked me to send you’re this e-mail and the pictures of to prove it. She has also open he own bank account, she also wanted me to show you that.  Thanks Gail for helping us to put our lives back together, but the most important my kids is learning a bigger lesson thanks to you.

Gail Says:  Tell your daughters I send them the biggest hugs ever. Congrats to you all for recognizing how important it is to share your journey back to financial health. Remember to always reassure your girls that you will do whatever you must to take care of them so your 6 and 8 year olds aren’t worrying about money.

M wrote: When do you know it is time to leave a job? Do you think you should keep a job because you have debt (less than 10K) even though it makes you miserable, physically gives you headaches, everyone in the building is on edge as they are laying off and firing almost weekly. We were told that we will all be replaced as soon as they find full time replacements for us (most of us are moms working 24-30 hours). We work hard. (Therapist and assistants) I loved my job and thought only 2 months ago that I would be there until I left the field. (Therapy is a time limited career boy I wish I knew that in college 22 years of lifting people is starting to hurt me) My coworkers are like sisters to me but the overall environment is so unhappy. I have been following you for years and have been working on balance in my life. Christmas is coming and I was trying to hold out but now I dont think I can. I had bought plane tickets to take my kids away next summer as a holiday gift. I would still have 8 months to save for the hotel. The tickets are Paid in full (thanks to you). I have been carrying around my letter for days to hand in but have not had the guts. Any advice?

Gail Says: You NEVER quit a job until you have another one in hand unless you know you can provide for your family in the meantime — meaning a big fat emergency fund with gobs and gobs of cash sitting in it. I know it’s hard to stick it out. But that’s what responsible grown-ups do. In the meantime, take your sick days, your unused holidays and any other time you can, and get busy finding another job.

M wrote back: Update: One of my co-workers did quit last week.  I decided to listen to your advice and stick it out.  My new boss is temporary til they find someone. I hope that is soon but we will see.  In the meantime, I look everyday for a new job and til I find one I will stay at my job.  I do have a second job as a fill in and did check there but it would be unreliable.  I will save the money to pay off my bills and some for my vacation next summer.  My daughter (12) and I have been watching you for years.   She said exactly what you said.  Curious isn’t it?  You already made an impact here.  Do you think it would be possible to sell me an autographed copy for her for xmas given we live in the states we would never be able to see you in person? My son , funny boy, thinks he will have a Lamborgini and lots of money with little effort.  I have some work to do with him.

I have truly learned a lot from you.  Prior to show I had not saved, charged everything, and had no emergency fund.  Now, I have an emergency fund.  It gets used every 3 months with hubbies blood disorder.  Without you, I would not have that.  I contribute to a Roth weekly and 12% each paycheck goes to retirement.  I pay weekly on all debts and hope to have them paid off by summer.  I have a xmas club and vacation club.  I even have a 529 for kiddos.  I wish my parents taught us money.  There was no money education growing up.  I am glad I am teaching my children as I learn myself.  Thanks again.

B Wrote: I didn’t know any other way to get in touch with you so I’m sending a huge thank you your way. My hubby and I are both on our second marriage and both and have exes who don’t pay child support or financially support our children in any way, because they are “broke”. I just read your article (kick your bad habits-Moneysense). I Love, love, love, you for the bottom paragraph, “You can’t say you don’t have money to save if you smoke, drink booze, buy lunch, purchase lottery tickets, use an ATM that isn’t your bank’s or carry a balance on your credit cards. Since you have the money to waste on bad habits, you’re just making excuses for not saving.”  These are all bad habits of the exes. My kids and I read your posts together and you just confirmed what I have been saying for years. You are helping to reaffirm the money lessons I teach and negate the bad influence from the other side. Thank you isn’t enough, but it is from my heart.

Gail Says:  Hi B, thanks for your note. I truly do appreciate hearing from you. Keep teaching those solid money lessons. I’m happy to help bring some of them home.

Gail Says: At your age and with retirement around the corner (and with today’s low rates of return and very volatile markets) get your mortgage paid off.

S Wrote: My husband died in April this year. I have been offered his pension of $2800 a month for life, or take a lump sum 480K and invest this capital to live off. I don’t know which works out the safest route.  Would kindly be able to advise me or direct me to some articles on this please.

Gail Says: You don’t say how old you are, so I don’t know how long the pension might have to pay out to do the math for you. Take the monthly amount and multiply by the amount of months you’ll receive the pension (your best guess). So if you’re 45 now, and you think you’ll live until 85 that’s 40 years x 12 (months a year) x $2800. That’s what the pension would have to pay out to you.

Next, think about your experience in investing the $480,000 to get an income of $2,800 a month or more. $2,800 a month works out to $33,600 a year which is a 7% return on your money. (33,600 ÷ 480000 x 100) so you’d have to do better than 7% return on your money to beat what you’re getting from the pension. Could you do that?

Are you getting any additional benefits from staying in the pension plan… things like medical or insurance coverage… that’ll you’ll opt out of by taking the payout?

L Wrote: I’m working through Never Too Late now, thanks so much for writing it and I have 2 questions.

On page 70 in the book, you list several examples of how your net worth should be the equivalent of so many years of annual salary depending on your age and amounts saved – should the salary figure used for a year be a net or a gross salary?

In calculating your net worth, on the “what you own” side – you list company pension – how do you figure out the value of your pension? I know what my monthly defined benefit would be for some estimated ages I’ll be when I retire, but I’m not sure that’s the figure you’re asking for in that exercise. Many web sites say it’s quite complicated to estimate.

I’m lucky to have a DB plan that is supposed to pay 70% of my average salary and the monthly benefit, depending on the age I’d retire at would be somewhere between $4700-$5300/month.

Thanks for all the great work you do.  You’ve helped me finally get my act together on debt and the beginnings of real savings.

Gail Says: Re: your income, this is an example of where gross is usually used. As for valuing your DBP, use lower figure multiplied by the number of months you’ll likely be retired. So if you’d get $2,000 and would expect to be retired from 65 – 85, that’d be 240 mos valuing your pension at $480K. Keep in mind that this will only be true if you stick it out with your current employer, so don’t get complacent. If you change jobs, you have to revalue your net worth if the pension goes away or you take a payout.

R Wrote: I am a single mom that has worked very hard to become consumer debt free; my only debt is my mortgage. I put money every month into an RSP and into my pension fund through work, and by next year I will have $20000 in a TFSA because I have been putting $600 a month into a savings account and transferring it when I had $5000 saved up. I have been on trips and bought vehicles with cash and have been so focused on getting to this point the thought of getting into any kind of debt scares me to death. My question to you is this; I will need to buy a car next year, do I use the money in my TFSA (which I put there as my emergency fund) so I don’t have any payments or do I get a new one with zero percent financing (I am going newer because I have always bought older ones and am tired of the headaches that seem to go with them)? This may sound like a trivial problem as I have no other debt but if I make car payments I don’t really have anything left for savings which means no more vacations or anything else fun until the car is paid off. Thanks for your time. PS. I am a big fan.

Gail Says: You really should NOT exhaust your emergency fund for a car purchase. If you can get a car with a zero percent rate, the car is costing you no more than buying it with cash… you’re just spreading out the payments. Do that!

A Wrote: I have been scouring your web site/articles and TV episodes for advice and learn something new every time I watch your programs – whether new or a re-run.  I loved the follow-ups that you did with those TDDUP couples – helps bring into perspective that these changes are life-long if they are going to be successful.

For 20+ years, I have lived pay cheque to pay cheque only managing to avoid consolidation loans and bankruptcy by sacrificing “having a life” and continue to suffer from debt fatigue!  It is only now, in my mid-40s that I am focusing on establishing a financial security blanket.  Past contributions to RRSPs had to be withdrawn to pay for school (LLP – in 2001) and my home purchase (HBP – in 2009).  So, here I am, single and 43 years old with only $12,000 in RRSPs (from the past year), $2000 in TFSA and about $20 as a floating balance to avoid relying on overdraft protection.   Thankfully, other than my $80,000 share of a home mortgage, and a small consumer debt of $2400 which is deferred for the next 12 months (for a small fee), I have no other debts to speak of.

Since you cannot provide individual financial advice I recently met with a financial advisor to help me deal with the nuances of my particular situation.  I have a number of questions in relation to whether this advisor is working for me or him.  First off, he indicated that he “wanted to have control over my money” – in the wake of the Edward Jones situation in Quebec this is ringing alarms bells.  Am I being unreasonable in my lack of trust?  Do you have any hints for picking a FA?

This advisor also wants to totally restructure my money to his vehicles – by removing my RRSP funds from a mutual fund at my bank and placing it into a segregated fund at an establishment I have never dealt with which he says is more secure than mutual funds.  In your “greedy” article you said “If you don’t understand what you’re buying, you shouldn’t be buying it.”  How do I find out more about segregated funds – and specifically the one he is recommending (is there some peer review literature that would be best)?  Shouldn’t he have encouraged me to get this info before making the suggestion?  This advisor is also recommending that I close my current VISA account and move instead to a secured(?) credit card – in which the money is already on my card and therefore not subject to interest.  Does the fact that I have been with this creditor for 20+ years not have a negative impact on my credit rating if I close this VISA account?  As mentioned, my years are ticking away and I can’t afford to make a financial mistake!  Please help!

Gail Says: No one but you should have “control over your money.” He may make recommendations to you for what you may consider doing with it, but you should not give him discretionary control. As for moving all your money to his vehicle, how is that in YOUR best interest? And why should that be necessary? I strongly recommend you find an advisor who is willing to move at your pace, explain why and what he or she is recommending, and is working to make your comfortable with your decisions.

Go read this: http://gailvazoxlade.com/blog/archives/1296 and http://gailvazoxlade.com/blog/archives/1302

C Wrote: I have been looking for additional employment lately to boost my income, and I’m noticing that a few prospective employers want to do a ‘credit check’ as part of the hiring process.  WHY??  None of these particular jobs have anything to do with cash or finances.  Can you possibly enlighten me as to what my credit history/score has to do with working for someone?

Gail Says: This has been an American thing for years. I totally disagree with the credit score being used in this way. If you really want the job, you may have to give permission. I would not. It’s none of their frickin’ business and makes no never-mind to your ability to do your job. Only you can decide though.

Have you seen this letter. Consider sending one to your MP.

Gail Says: Why don’t you sit down and have a heart-to-heart about the disparity in your incomes, your individual and joint goals, and how you can close the gap so you aren’t frustrated by high spending expectations, but he doesn’t have to give up on some of the stuff he loves, like travel. I often recommend that partners — you’re in this for the long haul, right? — split their expenses on a proportional basis based on their incomes. It’s more “fair” when it comes to ensuring both people get a bit of what they each want. I commend you for being so determined to get your schooling without taking on tons of debt.

It’s important that you get on the same page if you plan to make your partnership more permanent — living together or marriage. You have to be able to talk about the money, about what you each want as individuals and about your joint goals. This is, perhaps, the biggest thing people don’t do before they hook up, leading to all sorts of problems down the road. If you can’t talk about the money, how you feel about it, and what you want to do with it, there will be problems down the road. So time to make a date and have a chat.

S Wrote: I’m a big fan of yours! I’ve seen all your shows and I read your blog consistently. I hoping you can help me out with a little problem I’ve created. My husband and I are 24, have a 4 month old, and are in great financial shape (no debt besides mortgage, contribute to our long term and short term savings, have a RESP we contribute to for our daughter, etc). The problem is my brother’s attitude towards money. He is 18 and just starting a 2 year college program with good job prospects upon graduation. We come from a very poor household (welfare, low income housing, the whole bit) and I’ve been lecturing him since he was about 16 about money. I showed him how much he could save if he got a part time job and how that was a much better scenario than relying on debt to get him through school.

My lecturing worked. He was able to save more than enough money to get him through his first year and he is still working through school to cover his monthly living expenses. However, I fear I may have created a monster. He is paranoid that he will end up in the same financial position as our mother and will not spend any money. I’m usually all for saving money, but he refuses to spend money to go out with friends, and he’s making himself stick to an unrealistic food budget so he can save money. I know exactly how much he has coming in and going out, and he doesn’t have to sit at home every night and eat nothing but KD to meet his goal of graduating debt free. How do I convince him that although being fiscally responsible is important, it is also important to have a life and maybe eat meat every now and again?

Gail Says: Time to get out your lecture-voice again, and this time focus on the fact that it is a balanced life that is a life worth living. Having swung all the way to super-saver, you need to entice him back to the middle. Talk about the fact that the money itself is of no value if the life he’s living is so spare because he is afraid. Get him to work through the numbers so he can see that he can spend a little of what he has to eat well and have some fun, even as he works to meet his goal of graduating debt-free. Point out that being poor in the pocket is only one way to be poor; being poor in terms of life and experiences, joy and relationships can be just as sour. And tell him how proud you are that he’s taken your lessons to heart and that this is another lesson you want him to hear.

K Wrote; I love your show and have been watching faithfully, vigorously taking notes and trying your techniques. I even bought 2 of your books (and am sharing with my mom).  I know you hear this a lot, and have many other people to help as well but I really need your help. I don’t care if I’m on TV, I just need someone to help me get through to my husband.  I’ve tried everything I can and money is tearing us apart I don’t know where else to turn if he doesn’t change his behaviour soon I’m packing my bags. If you could find a minute in your busy schedule to email me I would greatly appreciate it. I’ll tell you all I’ve tried and maybe I could get some more advice.

Gail Says: If you can’t get through to him, you need to follow the lessons about creating a firewall between yourself and him when it comes to the money so you won’t be dragged down (pg 234-237 of Never Too Late). If you do decide to leave, make sure you take your time, plan ahead, have some cash in the bank, and get your name taken off ALL the joint credit.

A Wrote: I moved into my boyfriends 80 year old farmhouse 2 years ago (his mortgage is $80,000). We have done quite a few renovations but we still desperately need a new roof, new kitchen, siding, insulation etc. He’s mortgage is up for renewal in 2 years and we were wondering if we should take out a line of credit to pay for those things now, or wait 2 years to re-mortgage the house? His step-mom told me that we should re-mortgage now because the interest rates are so low. I’ve been told that if you re-mortgage before the 5 years that we will have to pay a penalty?  Are we crazy to re-mortgage for $120,000 to cover the costs? Will the house even be worth that in the end?  We eventually want to build a home behind us (on family land) and we’re wondering if we should fix up the house and stay in it and have  an affordable mortgage payment or sell it and build brand new? We could never build a house of that size for $80,000. The house has so much potential; it just needs a lot of work.  Also, his father co-signed for the house and I was wondering if I should add my name instead since I am putting a lot of my money into fixing up the home or should I wait until we get married to do so. Please help.

Gail Says: If you are going to put money into your boyfriend’s property your name should definitely be on title since the matrimonial home rule doesn’t apply to people who are living together but not married. As for whether to fix up the existing property or build new, sweetie, there’s no way I can answer that. You have to do a pros and cons list for both options and see which comes out ahead. You definitely should NOT renew early if you have to pay a penalty. Take out a LOC (get the lowest rate going, or wait) and then when it comes time to renew the mortgage, roll the LOC into the new mortgage.

P Wrote: First off, my fiancé and I love your show! With that said, I am not one that is good with financial numbers and saving. We are engaged and planning a wedding for August 25, 2012. Kyle has been employed with his company for 5 years and I am a new graduate about to start my career. I am blessed to say after 8 years of school, I do not have any debt (I can thank my wonderful parents and scholarships for that!) and neither does my fiancé. We are in the process of looking for our first home. We are over our head with trying to budget what we can afford, how to forecast what our future bills will be, how to save money, and afford our wedding. I’m hoping Gail that you can help guide us how to start as I feel I am drowning in numbers that don’t balance!! I want to ensure we can live comfortably within our means, which can be difficult because I have always have had champagne taste on a beer budget! Thank you so much Gail and we hope to hear from you soon!

Gail Says: Start by making a budget. Use the interactive budget on my website for your calculations since that’ll show you what to put into the jars if you decide to live on cash. I know you don’t have any debt, but if you get a copy of Debt-Free Forever, it’ll take you through the process of making a budget, setting goals and figuring out how to find the money to save. I also have a wedding budget worksheet on my site under resources that you may find useful.

A typical week for a typical mom and Woman of Independent Means! Well, maybe a little more than is typical. Although I managed to screw up by not pre-posting my blogs for last week (sorry if I scared anyone). This is the second time my posts have gone off schedule (the last time was a technical problem), and I’m hoping the last. Thanks for putting up with me.

BTW, I loved reading about your favourite posts.  Kathryn won the four books, but I thank you all for your lovely comments. It means a lot to me that you get so much from the blog. While I was speaking in Winnipeg and in Toronto, I also got to meet a lot of people who have taken my message to heart and are living The Gail Way. Very often people tell me how much of a difference my message has made in their lives. It is an honour and a privilege to be a part of your transformation; I am so happy that you are achieving new goals and creating a new sense of independence for yourselves.

So here are some of the lessons I’ve been reflecting on over the weekend:

Friday I discovered that you can survive on one protein bar in a day! Friday morning I flew back from Winterpeg… it was -45 there when I got in the car at the hotel at 4 a.m. Friday morning. Landed in Toronto, bought the hugest Timmie’s tea I’d ever seen. Finally found my car in the airport parking lot. Ate a protein bar. Drove to Oshawa where I did some grocery shopping. Drove home, unpacked, checked my email. 168 entries later headed to Tom’s for my scheduled (oh, yeah) massage, picked Malcolm up at school, came home, had a nap, started my mega pot of chilli. Hit bed at about 10:30, and realized all I had eaten was a protein bar. Too tired to get up. Tomorrow is another day.

Thursday I discovered that when someone else changes the rules, you only have control over how you react. When I was originally booked by a speaker’s bureau to do the gig in Winnipeg, it was for Junior Achievement. When I got there, it was to discover that Junior Achievement was being investigated by the government for allegedly stealing money, and the talk I was giving was now being sponsored by a whole bunch of other people, including a “lender of last resort”… OMG! I stayed true to my message, and when Mr. Won’t-shut-up wouldn’t, I bullied him off the stage and got back to the business of talking to my peeps. I suppose I could have refused to speak, but that would have left over 750 fans disappointed. I did the next best thing and made what I could of the event.

Wednesday I learned that sometimes even when people say something is really, really important, it isn’t. I was disappointed.

Tuesday I learned that there are organizations that do very good things just to do very good things. When I visited my first ING Café, I was pleased with the gestalt of the place… from the fair-trade coffee from which all proceeds go to charity, to the green walls (walls of plants) and no-bottle water (low garbage location, I was told as I was offered a GLASS of water.) Thanks to ING for hosting me, and to all who came to hear me speak.

Monday I learned that idiots sometimes get to make the decisions and you just have to take a deep breath and make the best of it.

So here we are, it’s Monday again, and I think I’m back on track for another week and the job of slaying new dragons.

Now it’s your turn: What lessons have you been learning of late, and how do you feel about those lessons?

Gail says: The risk with any variable portion is that as interest rates start to rise, your mortgage interest rate will go up. If you’re not paying close attention, it may go up before you even notice.

The normal variation between a variable rate mortgage and a fixed rate mortgage is about 2 points. I don’t have a problem with split mortgages overall if they are working in your favour. But as with everything else financial, whether a particular strategy will work depends on the situation at the time and what you need.

There is one theory of mortgage management that says if you go with the three year rate consistently, you’ll win on rate. I’ve never tested it.

Georgina wrote: My husband and I have been living in Canada for three years now. We haven’t bought a home yet, but we hope that we will in about two or three years. When I finish my education I will have a higher income. Currently I am making 23k and my husband is making 55k. We have a savings account, each of us has a TFSA and RRSP accounts, and we are saving toward a down payment for a house. However, I am not sure if we should put the saved money (for the down payment) into the RRSP accounts only instead of putting it into savings. How should we optimize our savings?
Gail says: Welcome to Canada! And congrats on taking it slowly so you can do the home-buying thing right. As for how to save for your downpayment, using the RSP Home Buyer’s Plan may work very well for you.

I think using the HBP is a good idea, given your limited resources. Make sure that you put whatever you get back in taxes (if you do) to good use building up your savings for things like closing costs on your home purchase.

Jackie wrote: Will reducing my credit limit on my credit card affect my credit score or have any financial implications on me? I used to have a $20,000 limit, and I’m hoping to get that down to $5,000 at the MOST. Having that much available credit didn’t do me any favours!

Gail says: Reducing your credit limit will affect your score if you’re constantly bumping up against the limit. The rule of thumb to keep a shiny credit score is to not go any higher than 50-60% of your limit. Of course, if you’re paying your balance off in full, and you’re not credit seeking, you can say screw the credit score and just do what’s good for you. You’re right about having access to credit creating the potential for debt! If you’re likely to fall to temptation, lower your limits.

C Wrote:  Hi Gail! I love your attitude and you work! Here is my question in 2009, I was young and stupid and didn’t pay a cell phone bill due to “bill amount discrepancies”. I ignored the bill collectors until 2008 when I matured and realized I needed to clear my credit. I settled with the creditor and paid my dues. When I entered into school for fall 2010, I thought it would be a good idea to see how much my credit has grown. I was shocked to discover that the cell phone company never closed my account and it was still listed as OPEN and under collections. I phoned Rogers and then the creditors and they both blamed each other. When eventually the creditor admitted they forgot to send a note to Equifax. They said they would close it within 30 days. That was about 10 months ago now, and I am disgusted to say it is still listed on my credit report as open and leaving a long black mark even though it has been paid for over 2 years. What do I do? Is there someone who can deal with this for me whose voice actually matters? Can they compensate my 2 years of broken credit? Please help Gail!

Gail Says:  I’m sorry that you’re having such a tough time with this. Your question highlights one of the biggest flaws with the credit reporting system. Lenders and agencies can say anything they want about you and it goes on your credit history. If you dispute it, and they deny it, even if they are lying like rugs you’re the one who gets hurt. And if they don’t take the steps to fix the problems they’ve created in a timely way, there is no consequence. I’ve heard horror stories from bodies whose credit histories (and credit scores) have been trashed by incorrect information. I’ve even had a black mark placed on my credit history for charges that went through on a card that was reported lost.  And since there’s no main credit adjudicator or ombudsman, nothing ever seems to be done to fix the problem. You must keep insisting that the incorrect information is removed from your credit record. While you’re at it, tell the world just how much trouble you’re having. Maybe people will learn from your mistake and bring some pressure to bear on a system that does not function efficiently because it requires no “proof” from lenders before adding a black mark to accounts.

BTW, for those not yet bitten, the worst offenders of incorrect credit history information are the department store credit cards and other retail credit cards. Cut ‘em up. Cancel the accounts. If you must use credit, only use a card issued by a Canadian bank.

B Wrote:  So I was trying to look up information on OPD’s (Orderly Payments of Debt), unfortunately I don’t think you have any (you probably mentioned it once or twice if I recall), but with this OPD (my husband is on) we currently owe $18,000 left at 5% (started at $52,000 end of 2009) so we are going by smoothly and hopefully have it paid by next Aug (July if I can squeeze in extra payments towards it) anyways questions:

1. Being on OPD that does affect his credit rating, so would it stay at a very low number? When we got it checked online (Feb 2011) it said he has a 580…so that’s not bad being he has paid the monthly payments on time since we been on it, but assumed it stayed lower?

2. After the debt it gone (OPD) how will this affect his future credit applications? I’m worried banks might see it as bankruptcy?!?

3. Our mortgage gets renewed next July (Aug is when the last payment should be made to OPD) how will this affect our ability to get a lower interest rate on our mortgage (currently 6.39)?

4. When does this, if ever leave his credit report?

Thank you I really appreciate all the Gailism’s you have given throughout your blog, TV, radios…in person (one day I will see ya).

Gail Says:  An OPD is viewed similarly to a consumer proposal. Available only in certain provinces (Alberta, Saskatchewan, Prince Edward Island, and Nova Scotia) and Orderly Payment of Debts is a consolidation order and will most certainly be viewed by lenders as pretty close to a bankruptcy (it’s an R7 instead of an R9, but the distinction is minor in the eyes of a lender). An OPD differs from a consumer proposal in that you cannot freeze the interest or negotiate a reduction to the principal so you end up paying off all the debt over a longer period of time. In all likelihood, your mortgage interest rate will go up if your lender bothers to check your credit history. Assuming you’ve paid your mortgage on time without a problem, you might squeak by with the rate renewal being pretty typical if they don’t check. The OPD will stay on the credit history for six years from the date of completion.

C Wrote:  I love your show and watch it while I work out in the morning!  My husband and I are 50 years old, and my husband just left his job of 25 years to begin a new career elsewhere, similar pay. He can pull his pension out of his company, which amounts to about $400,000 before taxes. We have an enormous mortgage of $700,000 and although we are making the payments and living fairly comfortable, we have no money left over at the end of every month. My husband wants to invest the pension money with our financial advisor, I would like to take the pension money and put it towards our mortgage, even though we will have to pay taxes if we pull it. I realize interest rates are low, but in this economy I still think it is better than risking it in investments, even if they are fairly conservative investments. What do you think?

Gail Says:  Frankly m’dear, I think you’re nuts. You’ve lost sight of the forest for the trees. If the debt is driving you wild, get rid of it. What are you doing with a $700,000 mortgage at your age? For heaven’s sake don’t pay half of his pension to taxes for the sake of your need to get that mortgage gone. You’d have just over $200,000 to apply to the mortgage leaving you with half a mil in debt. Sell the house and get something that’s more in keeping with your income. If you’re determined to keep the house, you better find a way to make more money.

N Wrote:  I was just watching the baby version of Til Debt do us Part and there was this formula of how to figure out what your monthly payment should be for debt. You put the debt and the interest rate. Then you figure out what the monthly interest is, etc etc. I wanted to know how you figure out what the monthly interest is and what the rest of the formula is.

I know there is the debt repayment formula sheet available that tells you what the monthly payment has to be to get out of debt in 12, 24 and 36 months but this other one seemed more specific about how you figure out the interest.  Does this make any sense?

Gail Says:  Take the balance, multiply by the interest rate, and divide by 12. That’s the monthly interest.  Take the balance; divide by the number of months in which you want to be out of debt. So if your balance is $13,500 and you want to be out of debt in 24 months, it’d be $13,500 ÷ 24. That’ll give you your monthly principal repayment. Add the two together to get your monthly payment. If it’s too much, extend the number of months for the principal repayment calculation. Or make more money.

T Wrote:  We have an $800.00 overdraft on our account how do I budget for that on my budget sheet? We use this all the time and our account is always in the negative. Until our next pay which brings the balance back again. It’s a vicious cycle and I don’t know how to stop it.

Gail Says:  If you want to get out of overdraft and back into the black, it’s gonna take some belt-tightening for a few months. First, list your monthly Fixed Essential Expenses. These are the bills that you have to cover every month like your mortgage and car payment, your minimums on your debt and your childcare expenses. Total it up.

Next, list your monthly Variable Essential Expenses…The costs that you simply can’t avoid, like food and gas — we’re talking the bare minimums to get you through the month. There’s no clothing, no movies, no extras at all on this list. Total it up.

Subtract these two totals from your income. How much do you have left? (If you don’t have enough to cover the unessential expenses in your life – cell phone, satellite service and the like, you can see your problem.) Now it’s time to cut back on the nice-to-haves until you’re out of the hole. Change your services to the most basic you can get away with or ask that they be suspended for a couple of months.

Get ready to live on this very harsh, very tight budget for a month.  Just one month. Take all the rest of the money you make and stick it in an envelope, a jar, or a high interest savings account… as long as you don’t spend it.

You’re not allowed to use your credit during this process. You are, in essence, having a No Shop Month.

At the end of the month, add up how much you’ve got left after all your bills have been paid. Is it enough to cover your overdraft? If it isn’t, then you’ll have to live through this belt-tightening horror for another month (or three) until you’re back in the black.

This week starts the new Other Voices blog on gailvazoxlade.com. I’d like to welcome six bloggers who want to share their journeys with you. I’m going to briefly introduce each to you here, and then post their big intros as their first blogs on their given day of the week. I had loads and loads of people who wanted to have a voice here. I tried to choose people who I though were smart, funny, and easy to relate to, as well as people who would broaden the experience for you. I hope you’ll have a great time listening to some Other Voices.

Welcome Beckie. In her late 30s, with a husband aka “good guy” and two small children, she lives in the ‘burbs of Toronto.  A public librarian, Beckie currently works part-time, about 20 hours per week.  In her free time, according to Beckie, “I am a chauffeur/part-time cook (“good guy” does lots)/boo boo kisser/housecleaner and laundry lady extraordinaire.  Oh yeah, I do most of the household shopping and financial planning.”

Welcome Richard. Thirty and married, Richard and his wife, Jane, don’t have kids yet, but are hopeful. Currently renters, Richard and Jane are saving for a place of their own. Richard recently lost his job. “This was a hard blow to take.” He’s since found a new job. Yeah Richard!

Welcome Jess. A twenty-something full-time university student and wife from the wonderful west coast of Canada, Jess’s husband is also in school full time. They are both part-time coffee slingers at Starbucks. Not surprising, they are in debt. As Jess says,  “We love to say yes to each other, so instead of leaving the store with one book or one movie, we leave with two, or four, or more when there’s a really good sale.”

Welcome Arianne. A single gal who just turned thirty and a first-time home- buyer, Arianne is trying to defeat the monstrous debt she accumulated in her twenties.  “That debt is the result of my biggest and most dangerous vice: Shopping” says Arianne.

Welcome Victoria. Working on finishing up a PhD in Medieval Studies, what Victoria really wants to do is walk around the world and write books. Twenty-nine and single, Victoria lives in Halifax and is trying to balance work and life. She’s lived in sixteen different towns, cities, and hamlets, mostly in Canada, from the High Arctic to Toronto.

Welcome Midwest Mom: A stay-at-home mom managing the family finances, Midwest Mom is our New Voice from south of the 49^th parallel. Married for 19 years with two boys, 11 and 9, she considers herself “a self-help junkie.”

So there they are, the Other Voices, in their own space and with their own stories. Enjoy.

My financial issues have lead to medical issues. I suffer from migraines everyday and the meds, although they help the pain and get me through the day, they make me drowsy. So I am fighting to stay awake. I am tired of being tired, and of being stressed out. My partner is great at placing blame, and not so much at trying to resolve the issue. So I feel like I am basically on my own.

I have school to pay for. Work reimburses only after you complete the courses. With courses costing around 2K each and trying to take 2 per term to complete the program in time, it is expensive. I am now behind on the mortgage and have bill collectors calling me at work and at home at all hours. He works nights and having people coming to the door wakes him up which makes him even more unbearable.

We both work and I am trying to complete school in order to increase my earnings. I am working 2 jobs at the moment. I was working 3 jobs and found that it wasn’t worth it. The more I made, the more I had to give to Rev Can so working 70 hours a week was a waste of time, the only debt I was helping to pay was the governments. By the way, I owe them too now.

This will be our third winter without heat. I can’t do this anymore. We have spent so much money on legal fees and brokerage fees and might have well just put the cash into the fireplace. We are desperate for some help.

With the dogs, there is no way to move to an apartment, and with my credit rating I cannot get refinanced to get a smaller house. That leads to the next dilemma, there are items on my credit report which are incorrect. There is one item that should not be there at all, and there are several items which have been paid in full many years ago which still show outstanding. Everytime I ask how to fix this, I keep getting told that the creditor has to provide them with proof, and of course now that the debts are paid, the creditors don’t care and won’t give me what I need.

I don’t know where to start. Feeling like the walls are crashing down, pretty much sums it up. I would love nothing better than to be able to answer the door, the phone without having my heart pumping. I would love to be able to sleep through the night, and would love to be able to just come home from work, do homework, houseclean, walk the dogs and not enjoy it instead of continually worrying about this crisis which is always on my mind.

What advice do you have for this young lady?

Gail says: You can receive a survivor’s pension at the same time as a retirement benefit and CPP will combine the benefits into a single monthly payment. However, the maximum combined CPP benefits is the maximum retirement pension paid which in early 2010 is $934.17. In other words, she won’t receive a full survivor’s pension while also receiving a full CPP retirement pension.

Peter wrote: Can you help with a basic question re RIF withdrawals — everyone gives me a different answer. If you withdraw only the minimum from RIF spousals are you exempt from the attribution rule of two years? We need and are considering changing several RRSPs to RIFs and withdrawing the minimum from each.

Gail says: As long as only minimum amounts are withdrawn from a spousal RRIF then no attribution rules apply and all income is attributed to the planholder. However, if a withdrawal in excess of the minimum amount is made within three calendar years of a spousal contribution to ANY spousal RRSP, then that income will be attributed back to the spouse who made the contribution.

Jeff wrote: My wife died last year and her employer sent me a cheque representing her unused “sick leave” pay for some 200 days. Will they send me a T4 for this as income, or can it be used as a supplementary income item for her last tax filing?

Gail says: I’m sad for your loss and hope that things are getting easier for you as time passes.

More than one tax return may be filed for a deceased taxpayer, allowing that income from the year of death to be split among different returns.  An “ordinary” return should be filed for January 1st to the date of death but there are up to 3 additional tax returns that can be filed as if the taxpayer is “another person”.  These returns can reduce or eliminate income tax in the year of death, because certain deductions are allowed to be claimed on the ordinary return as well as the optional returns.  The most common extra return is the return for  “rights or things” – income earned but not received at the date of death.  These rights or things include salary and vacation pay owed by the employer at the date of death, for a pay period that ended before the date of death and unpaid employment bonuses.

Sick pay, on the other hand, falls into the “death benefit” category and how it is taxed is based on whom the payment is made to since the death benefit is income of either the estate or the beneficiary who receives it. Up to $10,000 of the total of all death benefits paid  (other than CPP or QPP death benefits) is not taxable. If the cheque was made to you and you are the sole spouse and beneficiary, you get the whole deduction. You must attach a note stating the amount of death benefits you received but did not include in your income to your paper return. If the cheque was made out to your wife or her estate, then it get’s more complicated. Here’s a link to the tax man’s trust guide you might find useful.

Eric wrote: I am 56, own my home (no mortgage), no debt, I have pension (which will be indexed at age 60), which is enough to live comfortably on and will continue till my death. In 4 years, my income will be increased by early Canada Pension.  I have about $150K in my RRSP. I would like to start spending it now on travel and upgrades to my home.  How do I get it out without triggering those massive penalties I hear about.  It seems RRSP is a great idea when you are making the money to save, but at the other end, when you want the money, it is not such a great idea.

Gail says: There aren’t any massive penalties, just tax. Since you put the money into the RRSP on a tax-deferred basis, when you take it out you must pay the tax you owed way back when you earned it. The rationale was that you likely had a higher tax bracket back then AND the money could grow on a tax-deferred basis, which — believe me — makes a huge difference in your growth. Now, when you take it out it’ll be taxed at your marginal tax rate. And if you take too much at once, you might push yourself into a higher tax bracket, and end up paying more tax. Your trick now will be to pull enough for your needs without pushing yourself too high up the tax scale. Find an online calculator and play with the numbers till they work for you or go talk to a tax specialist.

Phillipa wrote: What happens to credit card debt when you die?  I know it is unsecured debt, but will the credit card companies come after your estate or heirs to recover the amount owing?

Gail says: If you die with debt and you have assets in your estate, your creditors have to right to collect what is owed them. If you have no assets in your estate — if for example your life insurance is paid directly to your children and don’t form part of your estate — then the lenders have to eat the loss. Your family/beneficiaries cannot be held responsible unless they signed on the credit as a co-signer or a joint borrower.

Sam wrote: I have recently relocated to a new city and been trough a period of unemployment and now I have three part time jobs.  It is great that I am working but I am trying to figure out what my gross and net income would be but finding it a challenge.  I do support work and the hours are only guaranteed to a point; 2 of the 3 are support work and the 3rd is retail.  Each job pays me a separate rate of pay, on separate pay days in two different accounts.  I have only just started these jobs so I am not sure what the annual numbers will be. Is there a formula to determine these numbers (math and numbers are my nemesis, so this simple thing is a huge monster for me learn and work with, but it is time to fight back)?

Gail says: You can either:

Jocelyn wrote: My father is dying. He has no savings or insurance. What are the costs of burying a loved one? What happens to people who don’t have a penny to their name when they die? It’s their family that foots the bill right? My siblings and I are still young and struggling with our own debts. We’re the only family he has and we don’t have much to offer up to cover these costs. But we love him and he deserves a proper send-off. How do we discern the “wants” from the “needs” in this case?

Gail says: For an adult, full-service funeral, you’re looking at spending about $5000. This includes a professional service charge, transfer-of remains, embalming, other preparation, use of viewing facilities, use of facilities for ceremony, hearse, limousine, and casket. Vault, cemetery and monument charges are additional.  Or you could go with a cremation, which will cost somewhere around $1,000, and then deal with the ashes later. (This is what I’m having done with my body since I think funerals suck!) As for the question of wants versus needs, you only need a pine box. People often want a much fancier coffins so they can travel across the River Styx in style.

You may get some help from the Canada Pension Plan death benefit, which depends on how much, and for how long, your dad paid into CPP. Canada Pension Plan first calculates the amount his retirement pension would be. The death benefit is equal to six months’ worth of this “calculated” retirement pension, up to a maximum of $2,500.

I’ll try this to the end of the year and if you like them, and the readership finds them interesting and useful, I may continue this through 2012.

Here’s the first one:

Hi, Gail. I have read your book Debt-Free Forever and I want to make changes with money. I have graduated from university and have not found a job in my field of study. My fiance and I are currently living together. My fiance has graduated as well and wanting to go to chiropractor school. I currently have $47,000 in student loan debt and he has $40,000. He wants to move to a different city, which is 3 hours away to where the school is located, and it will take him about 4 years. We are planning a wedding that we can not afford and we would have to finance about $10,000. I have tried to live on the jars and really enjoy it, but we have no plan to get out of debt sooner, and it will take us 10 years if we continue to pay the minimum payment, which is about $1,000 a month, and we are living paycheck to paycheck. I am afraid, and worried all the time about our debt, and the debt of our wedding. My fiancee will inquire more debt going back to school as he has no means to pay it outright. He seems to not worry about our debt and tells me to stop worrying about our finances, and believes that it will all be okay, and that I am negative about his decisions. I would love for him to do something he loves but I feel that he doesn’t see my point of view about our debt and he just believes, if he earns more going back to school, we should be able to pay it off. We are currently renting, have $3000 in CC debt and his truck loan is $10,500. No emergency fund. I have tied to talk to him about coming up with a plan to pay for the wedding and pay our debt but he is not interested. I’m also not looking forward to moving. I am really stressed, your book has made me realized that we need to make serious changes, and his solution to our problem is that, we need to make more money. I need advise?

What advice do you have for this young lady?

The job jar is a way to get kids working for money above and beyond the allowance you’re giving. You would create a list of jobs you need done and an amount you’d be willing to pay for each job. (It doesn’t have to be a jar; it can be a list on the fridge, for example.) So, maybe you no longer want to clean the kitty litter and for that you’d be willing to pay $10 a week. As long as the job is done, you pay at the end of the week. Or you need the grass cut, and you’d be willing to pay $20. When the grass is cut, you pay up. Ditto loads of laundry, vacuuming, meal prep, weeding, bathroom cleaning, garbage collecting, dog bathing, garage cleaning, car washing…the list can go on forever… anything you wish someone else would do. Create the list of jobs you’re willing to pay for (this should not be the things they normally have to do as chores because they belong to the family and have responsibilities around the house) and post the list or cut it up and let kids pull it out of a jar for a more random experience.

As for as helping your son plan his spending, get him to commit to something he wants that will take a few weeks’ worth of money and make up a chart with a picture of the thing he wants. Then draw on boxes that represent the money he’ll save each week. So if he wants a new game for this DS, that game might cost $40. If he’s planning to save $5 a week, you would draw on 8 boxes (40÷5). Then each week as he sets aside his $5 (in a jar?) he can check off one of his boxes.

Jen wrote: On your show, you often recommend giving little kids $2 to buy 2 things at the dollar store.  I think it’s a terrific idea because they have to learn to prioritize.  My question is about dealing with sales tax.  In Ontario, one item at a dollar store would actually cost $1.13, and two would cost $2.26.  Would you still give them the $2 but say “you can only pick one item (or spend $1.50 if you can find something for 50 cents)” or would you give them $2.30 initially?  Or, would you let them pick two items and then wait until they get to the register to find out they might have to put one back? (I can hear the tantrum as I type that!) I think tax is something that people (including myself) forget to budget for.  I taught a personal finance course where we had a budget project; some students forgot to account for deductions and sales tax and very quickly found themselves in a deep hole.

I certainly wouldn’t let them find out at the cash register. I’m a big believer in kids succeeding and that would be a failure. Tax is not usually something that very little kids — dollar store shoppers — can wrap their heads around. If you want to introduce the idea of tax, then I would point out the tax I pay when I shop. Since they likely can’t do the multiplication to figure tax out, this would just be an FYI discussion. As they get older and develop the skills to do the math, I’d ask them to calculate the tax on various items I was purchasing so the point would be brought home even further.

As for shopping at the dollar store, let them choose two things and you cover the tax… but point it out to them. “Hey, there’s that tax again. When you’re 10 and can do multiplication, you’ll be able to figure that tax out for yourself.” Something to look forward to!

Calie wrote: I was brought up by parents who didn’t believe kids and money mixed. Family finances were never discussed in front of me. I would love to get some more info on children and money. My four kids (13,11,9,7) have their own saving accounts, however, I have control over these accounts. At what point do I let them control their own money? Is it a good idea to give your teen a credit card (a very small amount of course) so that they learn early on in life on how it all works?

Loads of parents wonder a what point do let their kids control their own money? ?As far as I’m concerned, from the very beginning. If kids don’t have control over their money, it’s not their money, it’s yours and you’re just playing a game. Your job as a parent is to set some expectations, and then take the opportunities to teach the lessons that come from the natural consequences.

As for the idea of giving your teen a credit card so that they learn early on in life on how it all works, it’s a good idea. I’d start young kids (age 12+) out with a credit card on the Bank of Mom. You charge the item for them, you issue them a “statement”, they have to pay you on time or you charge interest and/or repossess their stuff. Later – I believe they have to be 19 — you help them get a credit card with a really low limit so they can build some real experience.

Charlene wrote: You often give percentages for what people should be spending on things like housing and transportation. How much of your income should go towards your child’s extra curricular (e.g., music lessons, figure skating lessons)?

As much as you want and can afford. I don’t think it’s any of my business to tell people how to spend their money. My thing is that people have a balanced financial life, covering all the bases, and not going into debt for crap. As long as you have no consumer debt, are setting aside some money for savings, and are living on a balanced budget, if you want to spend all the extra money that available on your child’s extracurricular activities, have a blast.

Donna wrote: Gail, we’ve successfully implemented the kids’ allowances using the 3 jars (spending, sharing, & long term saving). Our 11 & 7 year olds just love it! Now the question is where should we put the “savings” portion? They only get a penny a month interest while it’s sitting in our bank’s savings account. Where’s the best spot for these kids to leave their money for the next 10-15 years? Thanks!

Have you tried ING?  I believe they were offering a bonus for new chidlren’s accounts. And whatever they pay, it’ll be better than you can get at a bricks-and-mortar bank. Once my daughter had accumulated $1,000 we switched to using GICs. Eventually, when she goes to work, I’m going to have her put the money in her RRSP, and invest it as part of that long-term portfolio.