March 2013 Questions & Answers
- I've been in debt for almost four years now and I feel like I have no way out of this rut. My debt totals to about $12,000 now.
- There is no interest charged on the balance of deferred property taxes that the BC Government is carrying. Ques: Do you feel this is a good idea or not so good?
- I was wondering if you had any thoughts on how much one should allocate in a monthly budget for disability insurance premiums?
- I've attempted budgets before but being self employed makes is very difficult.
- I don't have a paper trail to look back at expenses for budget because I almost always use cash rather than debit or credit. Where would I even start??
- After 13 successful years in my current career, I have decided that I want to go back to school and reinvent myself. Should we consider funding my education with the Life Long Learning program?
- Is there anything I can or should be doing to save towards retirement? I know it might sound absurd, given that I haven't even finished school yet but I won't finish until I'm 30-32.
- Should we work to pay down our mortgage first, should we maximize RRSP'S contributions, should we start education funds for our kids, or should we do a combination of all?
N Wrote: I'm a single 25 year old female. I've been in debt for almost four years now and I feel like I have no way out of this rut. My debt totals to about $12,000 now. I've turned to financial advisors to assist me in consolidating my loans but I'm either told my debt is too low for consolidation, my credit score is too low for a loan approval, private lenders tell me I would need to pay an expensive fee for them to assist me to repay the loans etc. No one has given me a plan on how I can repay my debt with the income that I have and still save. I'm at a point in my life right now where I want to be able to be debt free and just plan for the future and the life that I want to live. If you can please help me to figure out a solution to pay back my debts, build my credit rating, budget and save for the future.
Gail Says: You know I have a perfectly good book that explains this step by step, right? It's called Debt-Free Forever. Get your hands on a copy and follow the steps laid out. There's no reason to not do this yourself. You're going to have to change some behaviours, no doubt, but if you're serious about becoming debt-free, then just make up your mind to make it so.
Z Wrote: My husband and I are 58 years old, own our home and we have no debt. I am the only income earner, my husband is disabled. We live in Maple Ridge, BC and each year our property taxes increase. This has become a terrible burden on our finances to the extent my husband has decided to "Deferr" our property taxes. The BC Government has a program whereby we can deferr our property taxes until we either sell our house or we both die.
Each year we deferr those taxes but I put the equivalent amount into an RRSP. This way I receive the tax benefit from the Federal Government for the RRSP amount and the BC Government takes care of our property taxes. There is no interest charged on the balance of deferred property taxes that the BC Government is carrying. Ques: Do you feel this is a good idea or not so good?
Gail Says: If this: "There is no interest charged on the balance of deferred property taxes that the BC Government is carrying" is in fact true, it sounds like a wonderful program that will allow you to stay in your home for as long as possible. Failing that, the option would be to sell and move to something less expensive.
A Wrote: My question is about disability insurance. I have obtained a quote for personal disability insurance at $180 per month, with two exclusions for prior health conditions. I worked out that these premiums are about 4% of my gross annual salary. This seems like a huge chunk of my money to spend each month; however I have no coverage at all with my employer and children and a mortgage to think of. I know you recommend disability insurance and this premium will pay out enough to cover my monthly expenses should I become disabled. I was wondering if you had any thoughts on how much one should allocate in a monthly budget for disability insurance premiums?
Gail Says: No m'love I don't have a %, but it would fall under "LIFE", so it should be within the 25% allotment for that, unless you have no consumer debt in which case you have another 15% to play with. You're going to have to weigh the potential benefit and the peace of mind against the expense to decide if you're going to do this. When I bought my disability insurance I was only 30, and my premium was about half of what you've quoted, but it and my life insurance premium have let me sleep at night knowing my backside was covered. I get so many letters from people who become unable to work and have so little money to cope that I count my insurance premiums as blessings. You must decide for yourself.
L Wrote: I’m self employed, and one of my clients told me about your books, although I have seen your show and love it.
I will be going to purchase your book tonight. I've attempted budgets before but being self employed makes is very difficult.
1) I never make the same amount of money each week
2) I don't have a paper trail to look back at expenses for budget because I almost always use cash rather than debit or credit.
Where would I even start??
Gail Says: If you have no paper trail to analyze, then you must track forward for a minimum of 3 months. That means getting a notebook you can use as a spending journal and writing down every single financial transaction you do. EVERY SINGLE ONE. It's good practice for what will come next and it is essential for creating a budget that you plan to stick to, in lieu of the spending analysis.
G Wrote: I am a great admirer and I try and see all your programs, as I have learned a lot, even though I am 53 years old...but you have helped me not to make the same stupid mistakes, I did in the past, and now I have managed to even save! All thanks to you.
My son is 24 and his fiancé is 23, they are getting married in 6 months. Yes, they will save for the wedding first! Your advice...lol I have tried to pass some of the tips that I have learned from you, like: No priority to their wants, only needs; save first pay later, you deserve it, if you have the money for it, etc... Question: Do you have a video, or book that can teach them how to handle their money, before they mess it up? They are so eager to learn! Why don't you create a program, which can be targeted to young couples, when they start, before it is too late?
Thank you Gail, you rock!!!!!! I can say that my life is before Gail and after Gail.
Gail Says: Thanks for all the kind words. I have several books out: Debt-Free Forever which also has a good section on creating a budget and on setting goals, Never Too Late, which is all about saving for retirement, It's Your Money, which is targeted at women (but your son's penis won't fall off if he reads it) and covers all the components of a financial plan. The next book coming out in Dec is Money Rules and is more about attitude than skills, which the first two books cover in detail. Hope that helps.
I Wrote: I have watched Til Debt Do Us Part faithfully - and have adopted many of your practices into our finances. I have used your guidance to help teach our kids about the value of a dollar and am happy to say that they save faithfully and spend wisely. (they even use a jar system to do it!)
After 13 successful years in my current career, I have decided that I want to go back to school and reinvent myself. My husband is very supportive and the plan is to apply to go back to school full time in September 2013.
OSAP will not be an option, as my husband makes a good living (3rd tax bracket) and we have savings, but we do have the ability to refinance the house, or take it out a line of credit. We have been saving for retirement and also have the funds needed in our RRSPs. My questions is - should we consider funding my education with the Life Long Learning program? I have been reading lots of information on the CRA website and reading advice columns on the subject, but would value your opinion on the pros and cons to help make the right decision for us.
Gail Says: I think the LLP is a good way to minimize your education costs, and beats the hell out of a line of credit. I'm curious about the "reinvention." What are you moving from and what are you moving to, and why?
E Wrote: I am a 25 year old Masters student. I completed my undergrad debt-free and have since accumulated about $13 000 in debt while working on 2 Masters programs. I have one year to go and have won a substantial federal scholarship to fund it (but it doesn't leave any "extra" cash - that's for sure). I plan to do a Ph. D. starting in Sept. 13 and am not sure how it will be funded but will be applying for a number of scholarships and funding through the universities to which I'm applying.
My question is... is there anything I can or should be doing to save towards retirement? I know it might sound absurd, given that I haven't even finished school yet but I won't finish until I'm 30-32. I fear that if I wait that long to start saving for my retirement, I won't have enough time to accumulate a decent amount of money. To be honest, I don't think I can take another job as I work as a teaching assistant and a research assistant, and need to focus the rest of my time on my own studies. Any thoughts?
Gail Says: Saving on one side of the balance sheet while racking up debt on the other doesn't actually get you further ahead. As for having time to save because you're starting in your early thirties, chill. You still have plenty of time. Socking away 10% of you income for retirement should get you to where you want to be. The RRSP contribution room lets you put away up to 18%, so as long as you're diligent once you start working, you'll be just fine. Well done on getting to where you are with so little debt. You go girl.
S Wrote: We've been following your shows and advice over the years and it's led to great conversations and tools/ideas for my husband and I. Recently, we just paid off all of our debt ($20,000). Our only outstanding "debt" is our mortgage. We've even paid of our vehicle. With this all finished we have a substantial amount of money left. Currently it is in our savings account and we are looking for advice as no how to proceed. We owe $372,000 on our mortgage at 2.99% interest. Combined we have about $45,000 total in RRSP's. We have three small children (ages 12, 7, &6). Our monthly fixed costs for grocery, mortgage etc is about $6,000 a month. My husband nets about $10,000 a month - up until now, extra money has gone to debt repayment. We have done a lot of work to get to this point and fix our spending/thinking to arrive at a point of being debt free and with money left in savings. We wonder now what the best financial decision would be. Should we work to pay down our mortgage first, should we maximize RRSP'S contributions, should we start education funds for our kids, or should we do a combination of all? After kid’s activities and the costs of everything, it easily seems the more one has the more one spends - and we want to plan now for the future and maximize the potential of our money the best we can..... What would you suggest?? Your advice is meaningful, valuable and appreciated by us.
Gail Says: YES. Having multiple goals means you need to be addressing them all. Retirement savings are important, as is saving for the kids' future educational needs. So set up RESPs for the kids and contribute $100 a month for each. (Go to your bank for this. Do NOT buy a group or scholarship RESP.) Figure out if you want to be using an RRSP or a TFSA (see my book, Never Too Late) for saving for retirement. And pay down your mortgage. If you use an RRSP, you can use the tax savings as a lump-sum contribution to your mortgage.