November 2011 Questions & Answers

 

 


C Wrote:
How do you set up your jar system for a weekly budget? We only have $300 on a Lowes Card that we owe and we will pay that off this month but we want to start maximizing our savings and putting that away for our retirement. We are a family of 4 (two boys in college at home still) with a monthly income of $3500 and our month utility bills run about $585 a month. We are setting up a Roth IRA next month but wanted to find the best way to invest our money for the best growth. I want to utilize the jar system to show my family where the money goes and that it doesn't grow on trees and hopefully curb any unnecessary spending. Thank you for your time.

Gail Says:
If you use my interactive budget on at www.gailvazoxlade.com (under resources) the worksheet will pour the money into the jars for you… and do it weekly!

 

B Wrote:
Our family loves watching your show and reading your books. Right now I am on maternity leave and we have started the jar system to keep things on budget. We used like to buy things like meat in larger packages to save money and baby essentials when they are on sale. Do you recommend buying weekly on an as needed basis, or is it okay to "plan for future" by buying necessary consumables (ie. formula) on more of a monthly jar system? Thank you in advance

Gail Says:
I think anything you can do to save money is a good thing. You should keep a float in your grocery jar – and extra $25-$50 – to take advantage of bulk and sale buys, assuming you can afford it.

 

K Wrote:
I just currently got out of debt yay! However, my son was recently diagnosed with autism/bipolar/ADHD. My question is this. Since my son has a mental illness and nothing is covered for these children, what would your advice be to keep a family from going into medical debt? I am currently on mat leave until November. His prescriptions are over $130 per month, he goes to the Occupational Therapist 2x a month each at $100. Soon psychiatrist will start along with possible neuro feedback which is around $2500.

Gail Says:
Like everything else in life, medical costs need to be on your budget. You have a good idea what you’ll need to spend so put it in the budget and then trim back elsewhere to cover those costs. Keep all your receipts so you can claim them on your taxes. BTW, that’s a lot of diagnoses for your son. I wish you the best of luck on this difficult journey.

 

R Wrote:
Thanks for your time. I have a pension through my work if I stay for 25 yrs. I'm not sure I will want to stay for the whole time though. If I leave I will get a return of contributions (only the money I paid in with no interest). Should I be saving separately for my retirement just in case I decide to leave? I am almost 34 yrs old.

Gail Says:
It would be very odd for you to get only a return of contributions. I suggest you go check with your pension administrator or HR person to verify that. I know of no pension that simply returns premiums. If that’s the case and you can opt out, do so and do your own retirement savings in an RRSP.

 

V Wrote:
I'm sure you must've answered this somewhere but I live with a husband who SUCKS with money. He always needs the latest gadgets. Are having separate bank accounts the answer? If yes, how do I help him on his end? I am frustrated being the responsible one.

Gail Says:
You’re right; I do get this question a lot. I suggest you do use a His, Her, Ours approach. You each contribute to the family joint account proportionate to your income. But you also keep separate accounts, separate savings and separate credit. That may lessen your frustration and give him some breathing room while he meets his commitments to the family in the joint account.

 

M Wrote:
I've read through your site and hope to one day emulate your money-saving success. My situation: I have $46,000 in OSAP loans from undergraduate and graduate school, and believe it or not, all of that schooling HAS landed me in my field of work (government) - though I wish someone would have told me at 18 that I was mortgaging my future. I make a good living (if you look at my gross wage), but know that I have to use my net numbers (which aren't as good). I also have 2 credit cards and a LOC. My question: I know that you always say to pay down your most expensive debt first, but what do you do when your most expensive debt repayment are student loans ($519/month for the next 9 years), but also the longest? I can't continue to pay my student loans and only pay the minimum payments on my 2 credit cards and LOC as well. How do you make a balanced debt repayment plan that takes into account all of your debt, not just the most expensive?

Gail Says:
When I say “most expensive” I mean the consumer debt with the highest interest rate. Then focus on the student loans once the consumer debt is gone. To make a plan, go and get a copy of Debt-Free Forever and follow the process I’ve outlined there. It’s not easy. It takes work. And determination. But you can do it.

 

J Wrote:
My Husband and I, are a double income with no kids currently, we do plan on having kids in the future (the only debt we have is our mortgage, and we are constantly saving for planned purchases and emergencies). My question for you is, "Is it better to split equally between our RRSP's or should the individual who earns more contribute more to their RRSP's?"

Gail Says:
You should put as much into your RRSPs as you can to take full advantage of the tax deferral. If one of you earns way more, that person can contribute to a spousal RRSP for the other partner so that you’re growing your savings equally, while minimizing your taxes. The higher earner can also “give” money to the lower earner for a TFSA without any tax consequences.

 

K Wrote:
Just a quick question to post in hopes you’ll answer it on the FB chat. We have two daughters and prior to our second daughter being born, we wrote a living will and power of attorney, as well as a will with one of those DIY kits. I feel that we should update the will now that we have the second daughter, although I also included, “future children” as well. My concern is that now I feel that it’s not enough and that we should really consult a lawyer for this. I’m afraid that it will be expensive and we don’t have the money saved up for it. What are your thoughts? Is the DIY sufficient until we can get a proper will?

Gail Says:
I’m not a huge fan of DIY will kits. I know they are one way to go, but they leave so much room for interpretation. Estate planning is one of those things (like divorce, and tax planning) where you get what you pay for. Here’s what I suggest: over the next several weeks, look through your budget and see where you can trim just $30 a week. It might be coffee, or fancy food, or some other indulgence you’ve just gotten used to having. In 10 weeks you’ll have $300, which should be about enough to get you a basic will. Have you executed powers of attorney yet? You need to budget for those too.

 

L Wrote:
I am a single Mom in Arkansas, USA. For the last 5 years I have busted my tail to work off $50,000 worth of debt. I'm down to my last $3,000 but all my hard work doesn't seem to be improving my FICO credit score. How can I improve my score if I don't ever plan to have another credit card?

Gail Says:
I’m wondering why you’re so concerned about having a great credit score if you don’t intend to do any more borrowing. The credit score only matters if you’re planning to use credit. If not, ignore it. It’s a very unbalanced system, and shouldn’t even exist. (See this blog: http://gailvazoxlade.com/blog/archives/1959) If you’re planning to borrow – let’s say to buy a home – then improving your score will matter. Read this blog: http://gailvazoxlade.com/blog/archives/217.

 

A Wrote:
My husband and I are in about $9,500 dollars of consumer debt (credit cards, and student loan). We make our payments on time (and more than the minimum every month). Our credit score is not improving. How do we improve this? Also are you ever going to do shows in London, ON? We desperately need help and for your saucy attitude to whip us into shape. We have started to do well (record our spending, use cash) but how do you determine the cash amounts for the envelopes (we use those instead of jars)? I should probably add that we just had a baby about 2.5 months ago which of course has made things harder on us. Thanks for your help

Gail Says:
See my response to "L Wrote" about the credit score. As for being a participant on TDDUP, too late! All done. If you want to figure out how much to put in your envelopes, go use my interactive budget on my website. http://www.gailvazoxlade.com/resources.html. It pours the money into the jars, which you can then use to fill your envelopes.

 

B Wrote:
I'm a second year university student and I need financial help. I'm only 18, but after living with my mother (who has no control on her debt) I'm worried about my own future. My only huge debt causer right now is my student loan, which is about $10 000 per year of schooling, but I can't pay that down until I'm done university. Luckily, I don't have any credit card debt or anything like that because I don't own one (but I do want to start that soon to create a good credit score). My question is this, how does a young person like me start preparing for a financially safe future?

Gail Says:
Congrats on seeing the error of your mom’s ways and being so determined to do it differently. You’re right; you can’t pay down your debt until you’re done school. But you can be working to minimize the debt as much as possible. Every dollar you earn while you’re in school is a dollar you don’t have to take in debt. If you’ve got the discipline to use a credit card without abusing it, then apply for one while you’re in school and start using it and paying it off in full every month. That’ll get you a good credit rating. There are heaps of good books you can read to learn about money. I have one coming out in Dec: It’s Your Money: Becoming a Woman of Independent Means.

 

L Wrote:
I would love to have budgeting and planning tips for someone who is self-employed. I run my own business, own my condo and carry debt that is steadily going down (with your useful online calculators - thanks BTW!). Basically, it's hard to budget and plan when you have variable income from month to month.

Gail Says:
The trick to working with a variable income is to use a tiered approach to budgeting.
Read this blog: http://gailvazoxlade.com/blog/archives/1228.
I also cover different ways of budgeting in both Debt-Free Forever and Never Too Late.

 

C Wrote:
I sent an e-mail through your website so I apologize for the duplication. I just thought you probably get a lot of e-mails! I am in the very beginning stages of starting a business offering similar services to yours. I have long been obsessed with TDDUP and finally I realized why...I want to do that. I have an accounting cert. from years and years ago but last year I enrolled again to up my skills and be sure I was interested in numbers and money and people. Turns out I am. I was just wondering if you had any advice for someone starting out? What knowledge do you think is most useful to share if I am sitting at a table trying to balance a budget for a client? Any words of wisdom would be appreciated.

Gail Says:
I do get a lot of emails – about 200-250 a week. I can’t possibly answer them all, which is one reason I’m doing this tonight. As for what knowledge to share, I find that most people are missing the very basics of money management. They don’t know what they’re spending. Some don’t even know what they’re making. If you start at the bottom of the financial plan with cash management and budgeting strategies, you’ll save your clients a lot of frustration down the road because they’ll have a solid foundation on which to build.

 

S Wrote:
I am driving from Sydney, NS to live in Edmonton, AB at the end of this month. I plan on having around $2500 saved. I have a place lined up for $500 and free admission to a bartending school there. I don't have a job lined up but there are lots of opportunities there. Do you think I will have enough money to make this move?

Gail says: I can’t possibly tell you if you’ll have enough money because I don’t know what you’re planning to spend money on, or how long it will be until you get a job. But, the fact that you’re thinking about it and that you have an amount saved is a good sign. Remember that once you move and start working, you can deduct all your moving costs on your taxes against the income you earn in your new location. As long as the move is 40 kilometers or more you can deduct moving expenses against employment income in the year moved or in the year following the move. These include the cost of travel, meals and accommodation, and expenses related to termination of existing living arrangements (like a lease cancellation fees, or the costs associated with disconnecting and re-connecting utilities, as well as storage and up to 15 days worth of temporary living expenses.

 

I Wrote:
Thank you for taking the time to answer our questions. We are a couple, we are in our early twenties and have both recently graduated university. We have a student-loan debt of around $45000, and currently a net income of $35000 (+ extra from overtime). I am planning to get into graduate school in the winter, and I will find a temporary job. My girlfriend's parents have been very kind in letting us stay with them rent free. We feel that renting is a waste of money. Instead of paying the mortgage and eventually owning something, it's an "empty" expense. We understand that owning a house also means taking care of everything like hydro, electricity and fixing it. The question is: We cannot stay in this house forever. What would you recommend we do? Should we try to save money and buy a house as soon as we can? Should we rent and then buy a house? If we buy a house, can we consolidate our debt into the mortgage to decrease the interest?

Gail Says:
Wow, you’re running before you can walk honey. You already have $45K of debt with an income of just $35K and you’re planning to return to grad school. Will that mean taking on more debt? Will you have an income during grad school? Have you saved any money yet for a down payment on a home?

Go read these 2 blogs that give 10 tips for first-time home buyers: http://gailvazoxlade.com/blog/archives/2799 and http://gailvazoxlade.com/blog/archives/2802