May 2008 Questions & Answers


I have a question that I have not seen addressed yet on the show or on your website - what about making financial donations to charity while one still has bad debt to pay off? Many organizations depend on donations to good work and often they left those who are less fortunate. On one hand, if I have debt hanging over my head I try to justify to myself that any extra money that I can afford to give away should first go on my debt. On the other hand, I feel guilty and selfish when, for example, I decline to participate in the United Way drive at the office since I know that even with my debt, I am still far better off than many others are. What are your thoughts on this?


Good question, and one I’m very happy to weigh in on. Don’t feel guilty or selfish digging yourself out of a hole before you begin to share monetarily with others. Feel guilty spending money stupidly when so many others could use your help.

Confused? Don’t be. Focus on paying off your debt first. If you want to do some good while you get well financially, then become a volunteer, using your time and energy to do good. Save the money for the creditors.


In the USA, there is a right to have a free credit report every 12 months. Is there such a right in Canada?


You can get your credit report free of charge providing you ask for it by mail. If you want it faster, you can use a credit card and get it instantly. Here’s a link to find out more: Credit Report Score


I owe $7K in credit card that charges 21%. I owe another $71K in a Home equity line of credit charging around 5.8%. Should I pay for my credit card using the Home equity line of credit being that it charges me less interest? My outstanding mortgage is $250K and paying around $1700/mon. I'M A TOTAL FAN. I LOVE YOUR SHOW and it's so true that couples grow apart. I'm at that point now and I'm very disappointed in how we handle our finances.

Name withheld      

You should absolutely use your line of credit to pay off your expensive credit card. Then you MUST cut up the card. If you keep the card, and run up the balance again, you’re a dope.


I'm trying to figure out my jars for the first time and from watching your show, I notice that the # of jars varies. I know my variable expenses should include food and transportation, but can't really see the others as being applicable. Also where do the after school sitter expenses go? I think fixed but it does vary week to week? TTFN


The number of jars are usually fixed at 5 (yes, sometimes they vary, when I’m trying to make a point) and include: Food, Transportation, Entertainment (you have fun, right?), clothing & gifts (if you have kids, you need this jar) and other, which includes everything from medical to pets to bank charges… all the things that are not in the first four jars.

As for your after-school childcare costs, those are fixed expenses and go under childcare. If they vary, then take the most you pay and use that as your budget amount so you don’t go over-budget.


We currently live with a parent and have no mortgage payments. We pay moms monthly expenses as well as our own personal debt. Our credit is not very good and I personally have a line of credit (our only means of credit). It has been at the max 18,000 for the last three years. We make payments on it but always seem to dip into it. My question is should I give up my line of credit and turn it into a loan or just tighten up my belt and get serious. My husband and I would like to purchase a home one day and we both have great jobs. I do not understand how we can move forward and become debt free... We are both becoming quite stressed and are losing sleep. Please help.... We love your show and watch it always.


Nella, it's a funny thing about credit. Some forms demand that we pay them back, removing temptation. Others leave it up to us how much we pay off - providing you meet the minimum payment requirement. If you've been living with this line of credit for a long time and can't move the balance down, you may be one of those people who just shouldn't have revolving credit. Installment credit is more your ticket.

That being said, you also say you have lousy credit, so the interest rate offered to you on an installment loan may be more than you'd be willing to pay. The credit market is changing because of the economy and credit is getting more expensive for people who may default.

I'm going to tell you stick with the line, tighten your belt and get that sucker paid off, I don't care what it takes. To have it paid off in 3 years would cost you just over $500 a month. Since you're not paying a mortgage/rent, you should be able to swing at least that. I'd like to see you do three times that - yup, that's $1500 a month - and then, once you're debt is paid off, use $1,000 of that money every month to save for a downpayment on a home.


Hello! First of all I just want to say that I love your show. My question is: Is it better to have a whole bunch of small loans (i.e. car, truck, line of credit and bank student loans) separately OR one big loan to cover everything?

Name withheld    

Managing a whole bunch of loan payments can be a pain, but it can also be useful. It means scheduling payments for different times of the month, but it also means that you’re not laying out one big, honking loan payment amount all at once, leaving you with almost nothing to live on for the next two weeks. It’s not a matter of better or not better, it’s a matter of what works with your cash flow.

I am a single woman who is making a good salary of 78,000. I would like to purchase a home in the next couple of years, as I have a consumer debt of $20,000 and would like to pay off that first. Would you recommend that I pay the entire amount before I buy a home? I do not own a car and I thought that most people spend 500 dollars or so a month and that is equivalent to the amount I pay each month towards my debt. I have a secure career as a school teacher. So in a nutshell, should I pay off the entire debt before purchasing a home? I currently have 10,000 saved. Thanks so much for your advice and you are a wonderful financial expert!

Name withheld    

I believe in having a balanced life, in making small advances over all of your financial plan, not in doing one thing to the exclusion of another. My question is this: If you are a single woman making $78,000 with great benefits, why are you in debt at all?
Okay, assuming some mistakes were made in the past, here's what I'd do if I were you.

  1. I'd take $7K of the $10K and pay down my debt. (The other $3,000 is a good start on an emergency fund.)
  2. I'd add whatever you were using to save for the house to my debt repayment, and bust my butt to get that sucker paid off in the next 10 months.
  3. Then I'd take all the money I was using for debt repayment and save it for the downpayment on the home.

You will have eliminated your interest costs as quickly as possible, and you'll have conditioned yourself to live without the money you're using for debt repayment, so it'll be no test rebuilding your downpayment amount.

I'm thinking of buying a townhouse that is part of a complex that's going up very close to the downtown area of the city I live in. (It's being built on reclaimed land.) I believe the resale value of it is going to be strong because of its location. I'm thinking that I'll live in it for 5 or 10 years and then sell to buy a more rural property. My question is, how long should I make my mortgage for? 25, 30 or 40 years? I know 25 years is the best for paying it off, but since I know I probably won't live there for that long, would taking a longer mortgage be okay? I'm bringing a downpayment of 41%. I see this property equally as a home AND as an investment.

Name withheld  

I don't like the longer amortizations. Nope. I don't.

Since you're putting a whack of cash into this house, your payment isn't going to be huge, so a shorter amortization shouldn't be too painful. Even if you don't plan to stay in the house till it's paid off, lowering your payment shouldn't be the only consideration. And you know what, you might end up staying in that house longer than you initially planned.