July 2009 Questions & Answers



Hi Gail! I have a question for you about how to attack our debts. My husband and I are 24 and 25. We've tackled our credit card debt and now we're onto student loans. We currently have 3. His has only $2500 left as we've been working hard to pay it off. We chose his first because his mother co-signed it and she preferred we pay it. So that will be gone in about a month or so (we have an EF in case to cover emergencies so debt reduction isn't as affected). Now, the question. The remaining loans are mine. One is an OSAP loan of about $8500. The other is a student line of credit, which my dad co-signed, for $15,000. There are three options that I can think of. One, consolidate into one big loan (rather than LOC) and pay it all down. Two, pay off the LOC (do I leave it as an loc or turn it into a loan?) or three, pay off the OSAP (cause the interest is really high compared to the other) and let the LOC sit (paying minimum). I'm not sure what I should do in this instance. Any advice?   


You’re right that your OSAP loan is more expensive... but the interest is tax-deductible on your tax return... make sure you've been claiming it. If not, see a tax person and put in for past years unclaimed. My rule is to always pay the debt with the highest interest rate first, so make the minimums on the line, and throw everything you've got against the student loan. Once the student loan is gone, snowball that payment with the one for the line of credit and pay off that sucker.


Hi Gail.  I am a huge fan of your show.  My hubby and I are wondering what to do...we have $3000 on a line of credit with a 9.5% interest rate.  We make monthly payments ($300 - $500) on it but can't seem to just plain ol' get rid of it.  We also have $10 K in ING for a "rainy day".  Should we use this money to pay off the L of C? Thanks!  


If your line of credit is in fact only $3,000, then $23.75 is going to interest and all the rest is going to principal, so it should only take about seven months to get the debt paid off. If you're not making any headway it's because you're putting as much on the line as you're paying off... you need to stop using the line completely. Make a budget. Start living within your means. And get that sucker paid off.


Hi Gail, My husband (32) and myself (29) just got married last year, and he really wants to have a baby soon. However, being the one handling bills/paperwork at home, I know that we won't be able to afford any more expense. We've been arguing a lot due to this--that I don't think we're ready financially to have a baby--my income will be cut in half, childcare, diapers.. 
He just ignored my comment and insist there's never be a good time financially to have a baby.

We are currently 20K in debt. We only have 1 aeroplan credit card now for every expense and to collect Aeroplan points. However I ensure to pay off the balance every month with our line of credit to avoid hefty interest fee. whatever that's leftover in my paycheck after the necessary car payment, condo fees, i pay down the line of credit. We only eat out once or twice a week and tried bringing lunch to work everyday. We are pretty frugal in everyday spending--we think.

I know it's not easy to control budget by putting almost all expense via the one credit card in order to collect plans--but we really need those points.

My whole family is in Malaysia and my parents couldn't travel to visit me. So we usually travel back to Malaysia in annual basis. It's not cheap, and the Aeroplan points have been helping us a lot in ticket fare. I know going home every year is not helping us in paying down the debt.

I miss my family a lot, but I'm also weary of feeling guilty when traveling home to visit them due to my financial situation.

I did your budget sheet with our current spending, including trips to Malaysia annually and we barely balance with your budget sheet with our current spending--we're over spending 200 bucks every month--that includes estimation of $800 to LOC monthly.
I don't know how we could tackle this situation--I'm very worried and weary of these everyday, yet my husband is pretending everything is ok and he thinks we should have baby soon!

I don't want to stop paying back debt because of baby, where my paycheck will be cut in half.

I know instead of happy with the baby, I will be devastated with the money situation--my husband probably won't face the truth about this.

I know a lot of my stress is caused by my stubborn husband, which you cannot help me with. But I really hope, maybe you can shed some lights with other financial advice. :)

FYI: my hubby and I make about the same amount, which is why living on one income has become quite scary to me. We're pretty frugal now, I'm not sure what else I can do to reduce cost of living if we have a baby. Please help. Many thanks,

Name Withheld

You can't afford to eat out. You can't afford to go home this year. You can't afford to have a baby. Your #1 focus has to be on getting out of debt and learning to live within your means. It's fine to use a card to collect points for a future trip, but that doesn't mean you have to carry a balance on that card. You're living beyond your means now and if go off on maternity, and watch your income drop, you'll be worse off, not better. So your instinct is good. Now what you have to say to your husband is this: "Honey, let's pick a day for being debt free, and then get busy making a baby." If the baby is really important to you both, then you'll do what it takes: cut your expenses way back, work harder. It'll be good practice for when you have another little body to be responsible for.


I am employed by one of the large banks. My employer offers a plan that allows us to purchase up to 6% of our income in bank stock, and the bank will purchase 3%. This program is suppose to be used to save for retirement. This is really the only long term savings I have done. I am 20 years out of retirement. My question  is this. Does it really make sense to have my nest egg all wrapped up in bank stock?  I have a very low risk tolerance. Thanks for your time Gail.

Name Withheld

You answered your own question when you said, "I have a very low risk tolerance." I'm sure your bank also offers a pension plan of some kind that you can opt into that would give you more security. Go talk to your HR department and see what all is available for retirement planning.


Hello Gail,
I am sure that you are currently being bombarded with questions about the recession and preparing for lay offs.  That said, I haven't seen a question or a post about it, so I thought I would throw this out there.

The company I work with is touting the line about how this recession is actually an opportunity to refocus efforts... yadda yadda yadda and that because we are a private company we are safer than some of our competition.  While that might be true, they are slowly but surely going division by division and group by group assessing business need and letting people go.

I do have a budget which I am pretty good at sticking to which includes an emergency fund (building slowly at about $600 right now), and a debt repayment plan (owe about 2500 on my visa and have 10,000 plus in student loans), as well as long term savings (RRSP).

So for the person(s) who have things on the right path, but just aren't there yet in terms of preparedness (3-6 months of savings and zero debt would be my goal).  What should we do to prepare for a possible lay off, reduction in pay, or reduction in hours.
I have read in some newspapers and other sources, that while employed, people should seek out a line of credit.  Is this something you would advise?  It doesn't seem right to me to seek out credit when that is what got us in this mess in the first place. Thank you for your sound and quality advice,


Jessie, the line of credit is BAD advice. Let's say you decide to take out a $20,000 line of credit. You lose your job, exhaust your emergency fund and savings, and tap the line. Your bare-bones budget is $2,000 a month. You're out of work for five months. When you finally get a job, you're relieved, only to find you're now $10,000 in debt! 

If you think there may be the likelihood that you'll lose your job (which, by the way, there ALWAYS is), then you should brush off your resume, and start looking at what other opportunities may exist. You might look at ways to work part-time to supplement your full-time income and build up your emergency fund faster. Or you might look at skills or talents you have that you can turn into a small biz... every penny counts.

Good luck. This is a tough time for lots of folks, and I suspect it'll get tougher before it gets better.


Hi Gail, I am coming to the end of my University career and I am now faced with paying off my student loans. I owe approximately $20,000 in government student loans and $12,000 in a student line of credit. My debt from school is my only debt so I am wondering if I should try to pay it off as soon as I can (i.e. I expect a signing bonus of some kind when I start working after graduation) OR, since I can claim the interest I pay on my loans on my taxes (is this true?) should I just pay a set amount each month? What percentage of my paycheck should be that payment and what percentage should I pay into RRSPs?

I know it's a lot of questions but I am quite confused and overwhelmed because I am just starting out. Thank you!!!  

Name Withheld

Pay off the student loans as soon as you can. The tax write-off is okay for people who MUST carry the debt, but it in no way pays to keep the debt to get the write-off.

Hi Gail! My husband and I are huge fans of your show. Thank you for providing great information and savings tips!

Right now, we are making bi-weekly accelerated payments on our mortgage above the minimum rate. Our mortgage allows us to pre-pay at any point during the year multiple times. This January, we each transferred $5000 to a TFSA which is earning interest. We also have about $1500 (and growing) in another joint savings account.

My question is this: should we continue saving in the joint account so that we can max out the TFSA next January or should we focus on making pre-payments to our mortgage? The interest on our mortgage is higher than what we make in the TFSAs. Right now, we are doing a bit of both but focusing more on the mortgage. However, if we keep this up, we will not have the full $10000 to max out the TFSA in January. We are also both contributing to RRSPs and would like to know if the refund should be put on the mortgage or in the joint savings account? We really want the mortgage paid off quickly but want to make sure we have cushion in savings should something happen to either of us.Thanks!  


Laura, it makes sense to use the RRSP refund to pay down the mortgage, and then use the money you are saving for the TFSA, right up until you have six months of expenses covered. At that point, you might want to focus on the mortgage.

Hi Gail, I love 'Til Debt Do Us Part' and have learned a great deal. My question... my wife and I have been living together for 5 years, married for 6 months. We have never really had a budget, we previously lived in a condo which was very cheap to live in and maintain and always seemed to have extra money to throw around. We recently bought a home and have composed our first budget.

Now to the question...
I like the idea of money jars and living off cash, however, my wife and I have a VISA card which gives us 1% cash back at the end of each year. We have always received 3 or 4 hundred dollars back (or off our December bill) at the end of the year. My wife is very opposed to living off cash jars because she believes that we will be throwing this "free" money away. We always pay our VISA in full at the end of each month but my impression is that we are spending more on VISA than we would with real cash.
What are your thoughts on this? Thank you very much;   

There's nothing wrong with using a card for points as long as:

  1. you're paying it off in full every month, and
  2. you're not spending impulsively because you have a card easily available.

Why not go through your last few months'  Visa statements and see where your money has been going. Then you can set a budget amount for each category you usually charge and once you hit that, you stop using the card for the month.

Hi Gail, I LOVE your show and watch as often as I can.  Since getting married 2 years ago (we are in our mid 30's) and buying a home, I have been obsessed with keeping a very detailed budget plan in an excel spreadsheet.  I keep ALL our receipts and update my budget regularly.  However, my husband hates the spreadsheet because he thinks it's too complicated.  He doesn’t care to follow it and he spends frivolously.  He says he works very hard (and he does) and when he wants something he just buys it without thinking and then he gets upset with me when I 'nag' about his spending. We are $15,000 in debt and he says not to worry it will eventually get paid off...but he keeps spending money on 'crap' that we don’t need.  I am a worrier by nature...

I'll get to my question...Since finding out about your budget worksheet (which I LOVE - it's so easy with the formulas already calculated out for us)  When calculating the Debt portion of the spreadsheet,

  1. would I need to add up the TOTAL debt we owe (i.e. from all credit cards) and divide by 12 or
  2. would I use the monthly dollar value that we pay each month TOWARDS our debt and use that number? Just as an FYI-some of this monthly debt is 'revolving' and what I mean by that is that we pay our gas via credit card (but we always pay that in full each month)
  3. would the gas expense be considered a debt if we pay it in full each month? Should I still be using the gas expense in our debt calculation?

I know you are SUPER BUSY with answering questions, but I would VERY MUCH APPRECIATE if you could reply so that I can show my husband our budget in your simplified spreadsheet in hopes that it will knock some sense into him...BEFORE we plan to have children.

I sincerely thank you Gail and may GOD Bless you for helping so many families with their financial burdens. Sincerely,

Name Withheld

The amount that goes into the "debt repayment" column is the amount you are budgeting to repay the debt each month -- so it's the total of all your payments (and these should be more than the minimums or you'll never get out from under).  The "debt" is what you owe... not current charges that are being paid in full each month... When you use your credit cards and pay them off in full every month, you're using them as a bill payment tool, not as a source of credit. Keep  up the great work!

Dear Gail, I've discovered your show by accident on TV (I never listen to TV) and have since seen most of the episodes online. Since we live in Quebec and can't be on your show, we've done what we could using the information from your website and from your shows.

My boyfriend recently finished school and has landed a job making approx 32000 a year, whereas I still have 2 yrs to go before I finish my PhD, I have a scholarship for 21000 a year until next year, then I could be around 18000 (or whatever my professor will give me to live off of). We are in debt basically because last year my income was basically the only one, my boyfriend's student loan gave us 6000 only, so we used credit cards. We've recently consolidated all the credit cards into a student advantage bank account at 4% interest (thanks to your advice on the various shows you did).

MY QUESTION: I need to have a better understanding of how to invest the savings and emergencies you speak about in all of your shows. You say to put the emergency fund in an RRSP along with the savings portion. If an emergency occurs, is it wise to cash in RRSPs? I have this preconceived notion that RRSPs should sit there until you're ready to retire. We have set the variable expenses to be at 316$ per week. So far we have a budget that will allow 100$ savings and 88$ emergency every month with a debt repayment plan of 495$ a month over six years, but this will change in two years when I start making money, at which point we plan to re-evaluate how much debt we can afford to pay when I finally know what I'll be making. It could be anywhere from 40000 to 65000, at which point my boyfriend will also have to find a new job because we will relocate after my studies are over. There may be a baby and a mortgage around that time. So the near future is uncertain, there are too many variables to predict what a good amount would be for us to set aside each month into savings and emergencies and if all of this is in RRSPs, can I with draw from RRSPs the emergency amt for let's say the car breaks down and is sent to heaven (we have an old old old car). We are both 32 yrs old. Thank you Gail! Have a wonderful day. Cheers from poor students from QC city ;-)

Name Withheld

The new Tax Free Savings Account is the perfect place to put your emergency fund. You can each put in up to $5,000 a year (which I doubt, in your circumstances, you'll get close to) and if you need to use the money, you can put it back in a future year. I have a blog on it which you should read.  The longer term savings money should go in an RRSP. Don't claim the deduction while your income is low, just put the money in. Later, when your income goes up, you can claim the deduction and get a bigger bang for your buck tax-wise.

Hi Gail, I would like to know if it's a good idea to take out a loan to pay the penalty on our mortgage to change from a fixed rate to the much, much lower variable rate. It won't save us anything the first year, but will shorten our amortization and save us money in the following years. the fixed rate right now is set at about 4.14% so I know what we would have to lock in for if the variable rate goes up.

Our penalty would be $6250.
Our mortgage amount is $358,040
The length is 33 years, 6 months
The interest rate now is 5.757%
The variable is 3.3%
we both have school loans of $5000.00 each
Credit card $7200.00 (will be gone with tax refund from farm-should get back around 8500$)
We put $500 a month into savings.

Our home is on Agriculture land so changing mortgage companies is out as no one will take us. I estimate that the lower interest rate would save 140$ ish dollars a week, but we would have the extra loan to take out and that's if we keep the same amortization. My husband makes 86,000 dollars a year and it goes up 5 dollars an hour a year for the next 3 years or so, next increase will be in June and gets about $4000 bonus take home once a year for plant shut down. I make around $29,000 a year.
We also have a truck lease of $690 a month for another 3 years, which we will not be doing again!

We are in the hole $300 a month after plugging in all the numbers on you on line budget, and now have jars on the go to save us from over spending and now we are doing well. Your advice would be greatly appreciated.

Name Withheld

I'm not a big fan of early renewals that come with an interest penalty. And if you have to borrow to pay the penalty that's even worse. Why don't you see if your bank will let you do a "blend and extend" so you don't have to pay a penalty, but get to capture the current lower interest rate for a nice long period of time. that'll help. As for just moving from fixed to variable to save money, and paying the interest cost, the only thing you can compare your interest penalty to is the interest you'll save on your remaining term... not on the whole amortization. So if you have 3 years left on your mortgage, the savings is the difference between what you're paying now for those three years and what you'll pay on the lower-cost mortgage, less the interest on the loan you're planning to take to cover the interest penalty.


Hello Gail,
I am writing you with a question that is actually concerning my sister and her family. I am truly stressed out and very, very concerned for my sister, her husband and their three children. When I watch your show, some of the suggestions for your clients are for them to consolidate their loans and this seems to help them get a good start on their financial recovery.

Now here is my question... what happens when your clients credit is not good enough to get a consolidation loan? This is the case with my sister, she and her family have truly reached their last straw and are at a total loss as to what to do. Our family is very concerned for them and we are at a loss as well, they have no "extra money" at the end of the month. What would your suggestion be for them? I don't know if you are able to help my sister and her family, it seems that they have reached a dead end and have nowhere to go. If you are able to send some advice I would greatly appreciate it.

My sister doesn't know I am writing you this email but I will let her know... I have strongly been thinking that she should fill out an application for your show and have spoken to her about it and she is willing. All I want is for my sister and her family to have some peace of mind. Please help. Thank you for your time,

Name Withheld

If consolidation isn't an option, then your sister has two choices:

  1. she can find the money to pay off the debt by selling stuff and making more money (get an additional job), or
  2. she can visit a bankruptcy trustee and discuss bankruptcy as an option. 

There is no magic to fixing a mess... it just takes hard work.