September 2010 Questions & Answers



T wrote:
I bought and read your book and it was very interesting.  My wife and I both work and have fairly good salaries.  We don't have any debt except for our mortgage.  We haven't had any problems but one thing I did get from your book was to keep track of our spending.  We don't really have any idea how much we spend on groceries, heating bills etc. etc.
We have started keeping track and are putting money in savings as your book recommends.
The question I have is on long term savings.  You mention it fairly often and I am assuming that you are talking about retirement savings.  We both have good pensions at work and I was wondering how much they should count for when determining how much we should be saving separately from the pensions.

Gail wrote:
Your company pensions absolutely count towards your long-term savings (yes, retirement savings). If you feel that you will have enough from your company pensions -- some company pensions are very good -- then you can decide just to do a small top-up for extras, grow your emergency savings, or spend your money and have fun!


S wrote:
I watch your show all the time and love it!  I'm 22 years old, very budget conscious, and my boyfriend until very recently was the complete opposite until he found out that he couldn't get a loan for a truck he wanted.  He has since opened a savings and RSP account and I’m very proud of him.

My question is more of a “relationship rescue challenge “type I think...
I'm a university student, and my boyfriend and I live together - everything happened very quickly and started off great.  We’ve been together for over 6 months and things have already changed.  
Being that I’m a student, I don't have a lot of spare time on my hands.  I moved 30 minutes away from my University so that he and I could be together more, but it seems that we just spend more time apart.
 I have a good amount saved, so money isn't the issue.  My issue is that my partner works Monday to Friday, then comes home at night and gets to relax and does the same all weekend.  I on the other hand go to school all week, do school work every evening and all weekend.  We do make time to be together, but on top of my school work, I seem to be the only one cleaning the house, cooking, and taking care of our pets.  We have two dogs and two cats - both cats and one dog are mine, the second dog (a husky) we got together and my boyfriend was going to look after him, walk him constantly, discipline, etc. because he has a lot of energy.  That promise has not been kept - I'm stressed, the dog is not all that well behaved because he is hyper and I have a hard time controlling him because ultimately he just hasn’t been taught enough.  My boyfriend and I fight all the time over the fact that he gets to sit around, go play basketball, paintball, football, and go out drinking while I have to sit at home and finish my education.

Is there any way to get through to him and make him understand how much this hurts me?  I bring up the fact that I seem to do everything around here, but he just doesn't get it, and come fall, he will be coaching a high school basketball team on top of everything else which means more time apart, more stress and even more for me to do around the house, not to mention that I’ll be alone more and home with the dogs to take care of alone.  I keep bringing up this problem but I just don’t seem to be getting through to him.  Please help!


Gail wrote:
Doesn't this sound a little like a rotten marriage: fighting over the household chores, fighting over the furry kids, fighting over the stress of one person doing way more than the other? That's what it sounds like to me. If your partner doesn't have your back and isn't doing what it takes to make you life easier, maybe he isn't the right partner. Or is it that your expectations are unrealistic... after all, he works hard all week, shouldn't he get to relax? Only you can answer these questions because only you know what's really going on in the relationship. Be honest with yourself. Be honest with him. If this isn't working for you, time to cut bait and move on. If it is, and just needs some wrinkles ironed out, get ironing. There's no point in letting the resentment build. That's no way to live. Talk about what you and he want from the relationship. Come to an agreement that works for both of you. Or get busy getting on with your lives. 


D wrote:
I have used your online spreadsheet to "Build A Budget that Works", however it seems that my situation is not as much our spending, rather it is an income issue.  In recent years past, I was making 90K at my full time job, an additional 12K on my side job and my wife was making 18K at hers.  Since then, we had our second child and I gave up my weekend job to spend more time with the family, my wife has gone back to work part time so she can raise our kids better and reduced to 12K NET a year, and a blow that we were not expecting, the economy has hurt my full time sales job to bring me down to 70K from 90K.  Our issue is we are still leading the same lifestyle...expensive home, 2 cars that are needed, etc.  I'm lost for a solution and at a negative $1600 a month and a 26K credit line already, I'm starting to get concerned.  How can I make this work while not taking away from our family togetherness we worked hard to establish?   

Gail wrote:
Your family's togetherness is not dependent on having an "expensive" home, 2 cars, and all the other "stuff" you got used to on your higher income. You'll have to decide if time or the stuff is more important. You can sell your home, find something less expensive and maintain your "time". Or you can make more money and have less time with the kids. The first thing you should do is go over that budget and trim out all the non-essential stuff... the fancy cable, the shopping, the eating out. None of those things actually contribute quality to life... the just fill it up. You can find less expensive ways of having a great life with your children and save some money.

It's always hard when circumstances change and you're forced to re-evaluate what's important. I wish you the best of luck.


Mike wrote:
We have recently moved in the last year into a new house. I am the sole income provider in the family and we found out we have a second child on the way.

My questions is are we house poor??? We really like the house we are in but we seem to be running out of money before the month ends. I make $4,682 net per month.....our housing costs are coming in at 50.45%. We have $35-$39K in debt over a loan, credit card and back taxes.

My question is, do we need to sell our house or can we move %'s around and make and effort to dig our way out of this hole?? My wife and I fight over money all the time and it creates a huge amount of stress for both of us. We recently bought your book and are in the process of reading it right now.   

Gail wrote:
You're not just house poor, you're debt-poor too! And all that debt/house is eating up your income. You may have to sell the house. Have you built up some equity that you can use to pay off that debt? Could you use that equity without selling the house? Can your partner not work at least part time to help with the expenses? You have lots of options. You have to sit down, NOT fight, and talk about how you're going to take care of the problem together. 


Tiffany wrote:
I am a newly engaged young lady who works for a major bank. My husband to be is a great man and we both have good stable employment. We did up a budget when we first purchased our condo ( approx. 8 months ago) and recently I have found that things aren't quite matching up. We combined our finances in July '08 but my financee did not change over some of his banking to our new account because "it takes too much work". So the financial arrangement in our home has become very secretive and when I do the calculation for our budget I come up about $600 short each month. I know he is keeping this money from me and it has left me to struggle with our budget and not have the "fun" things I want while he gets to buy anything he likes. Please advise me as to how I should bring up this matter with him. I understaned that he works very hard for his money but I feel that our home and our debt is a joint venture and that if money is going to be tight that we should both have to live within our means. Also I don't things would be as tight if we both got access to that additional $600 per month. Thanks.   
Gail wrote:
Perhaps it is that your honey is resentful that you think his money is your money. Many people who go into new relationships are not honest with each other because they have a sense that their honest would cause an upset. So they just nod and "say the right thing". You should have a system set up where you each have your own accounts, and your own credit. You should then have a joint account to pay for all joint expenses (like the condo, food, utilities, etc.). I often recommend that each person contribute to this joint account proportionate to their income. So if you earn twice what he does, you'd put twice as much money into the joint account.

If, after all the joint stuff is paid, you don't have the money for "fun" stuff you'll have to decide what you're going to change. Will you try to make more money? Maybe get a second job? Will you give up something: perhaps you don't want to pay for cable anymore so you can have money to go out with the girls once a month. You'll have to make choices.


C wrote:
My husband and I are currently in foreclosure proceedings and we carry alot of credit card debt. We have no retirement savings other than what my job pays directly into a fund that I do not have access to. We are currently so far into debt that we keep selling things to make it through each month but we don't know what are options are since we are in foreclosure. We desperately need a consolidation loan but who would give us that when we have the foreclosure. To top it all off I work for the school district and don't make money over the summer. I can collect EI but it leaves us with 6 weeks of no pay. We live a long way out of town and if I had a summer job it wouldn't cover fuel costs. (My EI pays more than a part time job)

Please help us! We have two kids (17 and 13) and the stress is putting alot of strain on all of us. We accept that we made bad choices and really want to fix this and start to plan our retirement since my husband is 43 and I am 37!

I look forward to hearing from you and I am ready for the hard work and challenge of becoming debt free and able to live again!!
Thank you so much for your time and expertise!

Gail wrote:
I recommend very strongly that you go and see a bankruptcy trustee. With no assets left and only your income, now's the time to break free of this debt and get yourself back on track financially. The longer you delay, the more you put off rebuilding. Since you're hitting your middle and peak earning years, it's important to get this behind you and then get busy reestablishing your credit and building up some assets for the future. Go! Now!


S wrote:
I would like to have you come and tear me apart, like you do the people on your shows, for all the stupid decisions I made in the last 20 years. Where do I start if I am feeling overwhelmed?

I have a great son attending 2nd year University. I have great job. I have a house worth about C$450000, mortgage is C$200000. Other debt is C$50000, half of which I had not expected as it is my Husband's business debt that I took on as I have on previous occasions so the now high mortgage.

My mortgage is up for renewal next year and I want to plan ahead with the resolve that if the business goes under I will not get my money to decrease my mortgage at any time.

I know this is a hugh question: WHEN CAN YOU COME AND TELL ME HOW STUPID I HAVE BEEN AND MAYBE STILL AM? Seriously where do I begin?
Gail Wrote:
You begin by not accumulating any more business debt into your home. Stop that right now. Then you move to getting that consumer debt paid off. How long will that take you? If it's more than 3 years, you may want to consider selling your home, paying off all your debt and starting fresh. Don't bother beating yourself up. That's just a waste of energy. Figure out what you need to do to make things right and DO IT! 


N wrote:
My father passed in 2008.  He left me approx $50,000 from his 401k account. I'm able to leave the money in the account for 3-5 years.  At that time, I'm considering using that money to pay down my $109,000 student loan debt.  Will the tax liabilities be worth it? My current gross income is $54,000. I have $19k credit card debt & $36,000 mortgage & $20k in my own retirement fund.   
Gail Wrote:
If you are able to arrange to receive payments from the account over a period of years, you'll spread out the tax hit. Since there's no way to avoid tax completely this may be your best option. As for using the money to pay down your student loan, I'm sure your father would be very happy with that decision!


Wendy wrote:
First I have to say I think you are the greatest! Thanks for all the great tips. I am just about to get my annual bonus from my employer. I will receive around $10,000. I have a savings of only $7000 and RRSP mutual funds of $35,000. I can take the cash or put it straight into RRSP's. I earn $57,000 gross before bonus and car and dont have six months emergency money in the bank. Should I take the tax hit and add to my emergency fund or top up my RRSP? (forgot to say no debt, thanks again for all the tips!!!!) Just in case this matters I am 35years old.

Gail Wrote:
If you want to protect that money from tax the only way to go is with the RRSP. If you think you'll have enough other deductions to offset most of the tax then you could use it to build up your emergency fund (use a TFSA). But this is a black and white calculation and you should do the math to see how it works out. 


S wrote:
I use a monthly budget and aside from an occasional unexpected expense we are living approximately $200 until the next payday. My debt (ie: RV loan, truck loan, Mortgage) is slowly decreasing with every payment, my mortgage is accelerated weekly, the others are monthly. My Visa isn't bad I do carry a balance and I have a low interest rate, and I usually pay more then the minimum. We have 3 GIC's and 2 Mutual Funds and 2 TFSA's that we pay pre-authorized either weekly or semi-monthly.

My question is this; is it possible to be over saving? I ask this because we don't really lack anything, our bills are paid on time and we can usually afford to go out once in a while and or take a short camping trip etc. I just noticed that I have alot of money allocated to the saving's portion of my budget...should I scale it back and maybe put some money on the debts, or keep putting it in saving's?

I hope this doesn't sound like a silly question, but I'm trying to figure out if I should put our paychecks into paying debt or savings? We are 33 and 35 years old with one 11 year old child.

Any advice would be appreciated!

Gail Wrote:
You seem to have a lot of ways of saving but you don't say how much you're saving. And you are carrying consumer debt... that credit card, for example. And the RV loan too. I'd make sure I was saving enough (so taking full advantage of the TFSA, setting aside some money for your 11-year old's schooling later) and I'd be actively working to get rid of that debt. If any of those GICs are not registered (i.e., not in an RRSP or RESP) you can use them right away to pay down or get rid of the debt you have. 


Becky wrote:
I have asked a lot of people about contributions to RRSP’s, and unfortunately I keep getting different answers. I really admire you and your straight forward answers and know that you would never steer me wrong.
My husband and I both work for the federal government, we have been told that since we have the “Cadillac” of all pension plans, that the only reason that we need to contribute to an RRSP is for the tax break every year. But when it comes retirement time, taking too much out of RRSP’s is a bad idea and that it would put us in a higher tax bracket.

As of now my husband (33) and I (29) make approx $130,000 year, own our own home (with a mortgage of course), no consumer debt, no car loan, have $15,000 in our TFSA, he has $20,000 ($200 monthly) and I have $12,000 ($100 monthly) in RRSP’s.

I’m a little confused as to what we should be doing with our savings and where it should be going….are RRSP’s worth it if we have a good pension plan and if so, should we increase our contributions or just add the extra money to our savings account? Also I am buying back about $9000 of pensionable time from previous employment and upcoming maternity leave at 4% and it will take me a while to buy it all back. Do you suggest I transfer my RRSP’s (which I have not made any money on) over at no fee, or pay it down over time?

Thanks so much Gail….and just so you know, life for me was not so cheeky when I was younger. I owed $7000 in consumer debt on 4 cc, and $5000 to my dad as I did not pay the interest on the loan he co-signed for me, ooops. I had to go on a non-profit credit counselling program and paid off everything in 2004. My credit is still not fixed and I have trouble getting a credit card, but have been consumer debt free since and absolutely love it.

Gail Wrote:
If you have a fabulous pension plan there is a risk when it comes time to take money out of the RRSP that you'll be paying a lot of tax. I'd make sure to maximize the TFSA each year and then I'd have some fun! You work hard, you're doing everything right. If you're determined to set aside a little more each month, then slap it against your mortgage so that you're debt free faster. Congrats on having all your ducks in a row. 


V wrote:
My husband and I love your show and bought your book.  We have one question maybe its dumb that we don't really know the answer by now but here goes: Is it more economical to keep investing in an RRSP account as each of us do or is it smarter to pay down our mortgage?  We are in our forties and have only 5 1/2 years left on the mortgage.  

Gail Wrote:
With only 5.5 years left on the mortgage, you'll be mortgage free when you retire, which is usually the goal. Don't change course now. You need to sock away your retirement savings while you still have a good amount of time for compounding to do it's magic.