August 2010 Questions & Answers

 

 

 

 


M wrote:
After spending years of living on credit, paying off masses of debt only to repeat the same cycle again, thanks to you (and your jars!) my family is finally on the road to financial freedom. for the past couple of years we have been living off cash, tracking every last dollar and accumulating savings for a variety of different categories to avoid having to fall back on credit cards.  so far everything is going well and to add to our success we have recently signed up with a manulife1 account; a mortgage,savings and line of credit all in one! unfortunately i have yet to come across any financial literature providing any advice on this amazing product along with tips on how to maximize its benefits. also, is it more beneficial to continue to invest in mutual fund (as advised by the wealthy barber) or should we concentrate on investing every possible dollar back into our manulife1 account to reduce debt asap.some financial goals include paying off our mortgage in 10 years and purchasing a second home (chalet) in 5. if you could please advise, i would be greatly appreciative.

Gail wrote:
I'm very pleased for you. You must be proud of all the progress you have made. I've blogged about the ManuLife One product here: http://gailvazoxlade.com/blog/archives/59

As for whether to focus on investing or strictly on debt repayment, you need to do both. If you stop putting aside money for your future, you'll get to the end with lots of property but no cash. You can't eat floors and walls m'dear, so unless you're prepared to sell or you have a nice comfy pension at work, you need to keep socking some money away for the future.

 

Lisa wrote:
I just wondered how to thank you for bringing my selfishness to the surface and opening my eyes to my bad overspending habits. I am a very spoiled wife and did not realize how much stress I was continually putting on my husband. We have 3 boys, 2 of which are in college and the youngest is a freshman in highschool. I love your show and did not know what I was doing until I faced it in every family you helped. We have successfully paid off $5000.00 since Feb. of this year, and I have to tell you it feels better than anything else I could have purchased.  I just want you to know your show and your words of wisdom is what pulled my head out of....lets say the clouds.   Thank you again, your devoted fan.

Gail wrote:
It was a pleasure to receive your letter today. I am so pleased that you were able to recognize what you were doing wrong and find a way to make it better. Good for you for waking up and being honest enough to tell yourself the truth. You are a good woman. 


 

D wrote:
Read your book and have the jars going for the last month.  Could use some advise however.  I lost my job of 5 years and it's been 3 months of looking for a replacement.  When I did my budget I got 30% for transportation when it should be 15%.  Much of this expense comes in lease payments and of course gas.  There is no way out of the lease for another 8 months and I live in the suburbs where a car is 95% a necessity.  Is there anything I can do to bring that category into a more reasonable range?   
      

Gail wrote:
The only way to make the percentages change is to cut costs or increase income. Hey, it's not magic. If you're looking for ways to make your car generate it's own income, consider offering to drive friends and family around for a charge, or carpool and have other contribute for the ride. Think of other ways to use your car to make extra money to pay off the car. 

 

Dustin wrote:
I'm 39 living with my 13 year old son in  a modest nicely decorated house in the south shore of Montreal. I'm one of the few that has zero debt. I bought my house at the age of 29 and paid it off in 7 years, I net about 70k a year and my monthly house expenses are only 500.00 for everything, taxes, elec,phone, etc......

I don't eat out much at all and don't spend money on clothes, you know that is just not my thing. And my house is nice and very affordable I have 2200 square feet on a beautiful street in a very nice area. I don't desire more house, I also don't spend more than 2k a year on vacations.

However I do have a passion.....expensive cars.....now I have an Audi A6 which I bought 6 months ago and love it paid 20k cash, I will keep this car a very long time. I also do most of the mechanics and all of the maintenance on my vehicles. I have a Bmw Z4 convertible which I bought 3 years ago and would like to trade it in with 20k in cash for a Porsche.

I have zero debt literally, and 75k in cash.

Should I full fill my dream and by the car of my dreams. I told myself that I would never borrow on my house that is my nest egg for living rent free for the rest of my life and I told myself that at the age of 40 I would seriously start saving for retirement.

So what do you think Gail, I mean had I never bought expensive cars I might be looking at a piece of paper that would say maybe......125k instead of 75k but I would of had a crappy car....remember I love to look after my cars, and is a huge part of my happiness shall we say, some people like to look at a bank statement with a large sum and never and can't spend it for whatever reason. I feel at 39 I've reached the crest in my life.....nice house luxury car, what else is there, like I said, could not care less what brand of jeans I wear or that my sunglasses don't say Prada on the side, and I eat in most of the time, don't spend more than 100 bucks a month in restaurants if that much and I don't drink or smoke either. I actually take my bicycle to work 8 months  of the year and the bus the other 4 months.

I have a ing account with 25k and put 1500 a month into it, so in 4 years I will have over 100k.

So Gail should I go for it and get the car of my dreams by spending 20k, then start to get busy saving for my retirement. Remember I have no debt do not need a loan and already have my house paid in full......

Gail wrote:
I'm not going to tell you to buy the car or not buy the car. I'm not Suze Orman so i don't do that schtick. You're a grown-up. You can decide that for yourself. I'm a big believer in people living their dreams. I also believe if you have the money and you want something you can have it, as long as you're aware of what else you're giving up. What you don't say in your letter is whether you have a company pension plan or any retirement savings. You say you have 75K in cash and that you save 25K a year... which is great. So when the time comes to hang up your spurs, will you have enough to continue to live comfortably, or is this purchase going to have big consequences down the road? Look at the now and at the future and then YOU decide.

 

J wrote:
My husband and I love your show.  We follow the jar system.  My husband had an auto accident w/ his truck and the insurance totalled it.  We received the insurance pymt after they paid off the loan and we get the remaining $4000.   My question is should we pay off a debt with high interest or save the money for a good payment on the next vehicle?   Would really love to hear from you. When we got the check my husband and I both said  "what would Gail say?"   We love you!  
      

Gail wrote:
If, as you say, you have high interest debt, you should get that paid off first. And when you go looking for a vehicle, look for one that has little or no interest cost, so most of your money goes to paying off the truck, not making a finance company rich. 

 

C wrote:
I've watched your show religiously and it has been invaluable in providing us with the resources and information we needed to pull ourselves out of the debt we had incurred. We are not quite there yet as we still have some debt left but as we negotiated a consolidation loan with a low interest rate we are making a huge dent every month and plan to have the debt paid off within 2-3 years. We have also managed to build up a solid emergency fund that we do not want to touch except in a real emergency as my husband is in the trades and also has a chronic illness. We are also contributing to RRSP's monthly which supplements my pension plan for retirement. As we just had our daughter six months ago the remainder of our income after fixed and variable expense, which are in line with the recommended guidelines (ie, housing = 35%) goes towards necessary items for her and we are unable to cut back any further. We are neither able to boost our income at this time as I am currently on maternity leave from a government job that supplements my EI payments to my normal salary prior to going on leave. As my hours will be reduced when I go back (not by choice) I am currently earning more being on leave than I will when I return. My husband is currently in trade school so he is unable to work outside of that. Our dilemma is this: we are now faced with doing some upgrades to our condo that are unavoidable and must be completed within the next two months. We are unable to use the equity in our condo due to a condition in our mortgage. The only thing I can think of to pay for these upgrades, which cost in the range of $2000 - $3000, is to take out a low interest loan or line of credit.  I am hesitant to take on any more credit (apart from the loan we have one low-interest credit card) but cannot think of any other options.  Is there anything you can suggest?

Gail wrote:
You have exhausted all the options I would suggest like taking on more work to accumulate the extra money, or going through your budget with a fine tooth comb to cut back, or using your emergency fund and then rebuilding it. There's no magic solution. I will agree that taking on more debt now seems like a really bad idea: your husband won't be able to make more money, you're facing a reduction in income when you go back to work, and your expenses (baby) have just gone up. So why do you think you'll have the resources later to pay for something you can't pay for now? Unless you have plans to change jobs or your husband can do some work on the side (jobs around the neighbourhood), I'm not sure what the answer is. I'm afraid you've closed all the doors I'd suggest you look through. Perhaps you need to think about this again. 

 

Shawn wrote:
I am a single father (separated for 7-1/2 years) with a joint custody.  My son lives with me while my daughter lives with her mom. The question I have for you is that after doing your worksheet to tell me what goes in the jars which I have been doing for a while. What puzzles me is how much should be really left in my bank account after the fixed expenses is paid and calculating the variable expense.  To give you a better idea what I am saying.  My income is about $2200 month minus the fixed expenses.  Now usually I have about $700 left over.  What should I really be doing with the left over?  I have put money into the jars for gas, groceries, kids allowance and so on.  I have never gone below the $700 at all.  My kids understands that daddy does not have that much and have to watch what I spend at all times.  I really love my job for 7-1/2 years.  What do you suggest?

 

Gail wrote:
I may be a little thick, but I'm still not sure what you're asking. Let's see if I can take a shot at this anyway.

You make about $2200 a month. Your fixed expenses -- so housing, car payments, everything that HAS to be paid every month at the top of the budget (did you use my interactive budget?) comes out to about $1500, leaving you with about $700 for variable expenses like food, clothes, entertainment, gifts, gas and car repair, and the like. (Did you remember to put a little sumthin' sumthin' in savings? Good lad.)  

Or are you saying that after all your bills are paid and your jars are filled that you have $700 left over? Wow! That would be a great thing buddy. As for what to do with the left-over money, well, there's savings, there's building up an emergency fund, there's saving for school for the kids so they have some help when they head off to college or university, and there's fun, fun, fun. Plan a vacation. Decide to take in a concert or two. Plant a garden with your kids. 

If I haven't answered your question, please write me again. 

 

Deborah wrote:
We have a personal  line of credit loan of $60,000. with an interest rate of 3.75%. Our home is payed for, but do understand that if we do sell our home, the bank will take what is left oweing on the loan We have no intention of selling,as we still have young adults in college.  All our credit cards are completely in control, except our Master Card with an interest rate of 6%. with an outstanding balance of 8,000. We are not spenders at all, but just can't seem to get that line of credit down or that Master Card down.  It seems everytime we turn around, something comes up between the cars breaking down or something major.  Would it be wise to pay our Master Card off with our line of credit .  I just want to cut up that master card and concentrate on paying that line of credit off, especially before we retire, which is in 11 years.What is your advice, as I respect your knowlege of money management and  of helping the people on your show - Best Deborah.  I feel that all we are doing is paying off interest fees
  

Gail wrote:
You say you're not spenders but you can't get the MC paid down from $8000 (what's on it?) and you have a $60K line, (what's on it?). If you have space on the line to consolidate the MC that would make sense because it would reduce your interest cost. Yes, cut up the frikin' card so you aren't tempted to use it. But don't cancel the account because you need that for your credit history. Then get busy paying down that line. Interest rates are on their way up and you need to get that sucker paid off. As for all the expenses that pop up, that's because you don't have a plan for those things. If you have a car, you must budget for maintenance.

 

Angelina  wrote:
I absolutely love everything about you! I have probably watched all of your Til Debt Do us Part episodes.
I'm a Financial Security Advisor in Sudbury, ON. I'm a mom, wife and HUGE fan of yours.
You should be proud of your successes!
This week, I am hosting a couple of workshops for people with Disabilities ("the forgotten ones") and the employees to teach them about budgeting and their financial health.
Any advise?
Thanks for your inspiration! I love you!

Gail wrote:
You must be an angel because this can be a tough (but very appreciative) audience. I think for these people who have limited resources you have to focus on quality of life and how important it is to find fun and interesting ways to build joy into their frugality. They should focus on their emergency fund for savings, but skip the retirement savings... in all likelihood they will have enough from the "system" to meet their basic retirement needs. They should also look for small ways to supplement their incomes: babysitting for friends in exchange for a meal as in "I'll come to your house and eat your food and watch your kids." Or growing a veggie garden... maybe they can form a group the person who has the growing space swaps that for the labour of the ones who don't and everyone shares the bounty. Housesitting for vacationing friends, pet-sitting for working friends, there are loads of ways to make a little extra here and there if disabilities aren't too severe. Best of luck to you.
 

 

Y wrote:
I am 55 years old, single, retired and apart from my mortgage, I am debt-free. My mortgage is now at $30,500.00. Ideally I wanted to be mortgage free at retirement, but I had to retire early for medical reasons. I have $4,275 in a tax-free account and my RRSPs are worth $52,000.00. My question is, should I continue to try and pay off my mortgage as quickly as possible or focus on putting savings in the tax-free account? Thanks for your input.   
      

Gail wrote:
It sounds like you have extra income each month after all your costs are paid, so now you're trying to decide whether to pay off the house or save the extra. Since you have more than enough money to live on, and you have some stashed away in an emergency fund (that TFSA), I'd work to eliminate the mortgage first to save on the interest cost. Then look to saving so that later, when you pension comes under pressure from inflation, you have a stash of cash you can use to supplement your income. Don't tough the RRSPs until you absolutely have to. Let them continue to compound and grow to help with the inflation issue. 

 

A wrote:
I have just paid off all my student loans in 3.6 years (for graduate school) by making major life sacrifices. I have a small line of credit and one small credit card to go. I have a plan and have been sticking to it.  After I pay this all off, what should my next financial step be?

I am already saving a very small amount into a TFSA (aka home account) and "high interest" savings account (aka car account).  I want to contribute $250 bi-weekly into an RRSP (for life). I would really like to purchase a car and save towards a home (I'm 35). Should I even be looking at new cars or should I be saving towards a home first or save for both till I can afford them?

I cannot afford the car outright but could make a small downpayment. I would have to finance the car but then put myself in debt which at this point, I've fought long and hard to get out of. My salary is gross $69,137 and my rent is very low. The temptation to get a car is huge so please help me. I know I could afford a small car and pay it off in 3 years/less b/c I am all about the budget. It may impede my home savings but...then again, it will likely take me 3+ years to get a home.

Can I have it all (the car and the house?) How long should I wait?!! Desperately seeking a reward for my hard work! Thanks and I LOVE your show. YOU are my hero!! I wish you  would do  show called the strapped student - the ugly picture AFTER graduate/undergraduate degrees! :o)      

 

Gail wrote:
Take a huge hug for having so diligently paid off your student loans and gotten into the black. You're a very determined young woman, I can tell. And you've also set some goals for the future, so good for you. Now here are some questions to answer to help your decision-making moving forward:

1. Are you determined to have a new car, or will previously-loved work for you? Since cars depreciate quickly in their first two years, being a previously owned car could save you a substantial amount of money.

2. If you're determined to by new, have you seen all the ads for nothing-down, no-interest cars? Why not get one of those and let every penny you put in go to paying off the car.

3. Have you worked out what kind of home you will be able to afford on your income? Depending on where you live, home-buying can be a very expensive proposition. And while it seems like a no-brainer to go for home-ownership, you have to be sure that it's what you really, really want, and that you can afford it. You sound to me like a girl who doesn't like debt, so make sure you not only figure out what your mortgage costs will be, but what your carrying costs (taxes, utilities, insurance, maintenance) will be so your housing costs don't end up pushing you to use credit to make ends meet.

 

Stephanie wrote:
I have a large income tax return sitting in my bank account...should I use it to pay off my student loan (I would actually still owe about $600) or should I save/invest it???  My loan payments are low but they are for I think the next 9 years, and I have an RRSP plan BUT...according to the student loan people I qualify for interest relief and a possible reduction of my dept as I dont make a lot of money and dont always make enough to pay them.  I dont want to be a mooch though...so financially what is the best course of action????  I also have an RRSP plan which puts $2/hour into a low volatility stock so im pretty covered there...so confusing   
      

Gail wrote:
I think you should spread the joy around. Put half your refund into a TFSA as an emergency fund. Take the other half and pay down your student loan. But keep making the same payment as you are currently making. On the much-reduced principal, you should be paid off sooner than you imagine.