May 2013 Questions & Answers


J Wrote: This is both a question and a success! I wanted to say, first off, I have been following your advice and rules for years, and both my husband and I are in great financial shape. Now that we have come out of the "how do we save?!" dilemma, we are trying to become more financially saavy.

My question is about RRSP's and pension plans. Both my husband and I have a pension plan where we will get 65% when we retire. However, having seen both my grandparents in serious decline the last few years, with nursing home expenses (man, they are expensive!) and going to the States for surgery, I am wondering if we should start saving to make up that 35% in retirement. If so, should we be putting money into an RRSP (I am 25, he is 30) since we never have, or is there a better way?

Currently we are maxing out our TFSA's each year, have an emergency fund for work, a home emergency fund, and a baby fund alongside our regular savings, so this would be above and beyond savings.

Gail Says: It sounds like you're doing great. I would continue to max-out the TFSAs. If you have additional funds that would allow you to save more, and you're in a tax bracket above the bottom two, then the RRSP may also make sense, but you'll be limited in how much you can contribute by your company pension plan. As long as you're following a plan don't worry so much about the future that you don't have a great life now too, k?


A Wrote: I'm wondering about where in my budget to slot a few things. I'm self-employed (as a massage therapist) and I have three items that I'm not sure where to slot in my budget. Basically these are three categories: 1) supplies (lotions, sheets, etc) for work; 2) professional liability insurance & my professional association fees (these are bought together but I can separate them in the budget if necessary for saving for them), and - the biggie - my college dues (not college as in school, but as in my governing body). It seems like those would fall under "club/union", but that's part of the "entertainment" budget, which doesn't make sense - they're not optional, if I don't pay them I can't work as an RMT. The insurance, professional association fees, and college dues cost about $800/year. Lotions, etc. cost less (approx. $200-300/year, depending on if I'm getting the expensive brand stuff) and I can cut costs there if I need to, but they're still "work items". Should I start a third "savings" account just for those fees and account it under there?

Gail Says: You should actually be running your business separate from your personal money. You need to have an account into which you put your deposits and then you can write a cheque from that account to your personal account for the amount you are "paying yourself. So you would have 2 separate budgets: one for your biz and one for you personally. All the expenses you describe are business expenses, so they'd go under your biz budget. So too might costs like internet, cell phone, and part of the costs for utilities. You should go and see an accountant who specializes in small biz for guidance as to what you can write-off and how best to do it.


J Wrote: I have read your tips for debt repayment and understand the concept of "debt fatigue". I'm wondering if you include withdrawals from RRSP's (for home ownership) within your advice that all debt be paid in a maximum of 3 years? I understand that this is debt, however, with a 0% interest rate provided you pay this back under the 10 year guideline, do you still recommend the 3 year repayment guideline or is this debt okay to stretch out if it would remove some of the pressure from your current budget?

Gail Says: Nope, I don't include the RRSP HBP in the 3-year rule. That's for consumer debt. You'll have up to 15 years to repay the HBP with no interest cost. Keep to the 15 yr schedule and make your regular RRSP contributions too, k?


D Wrote: My wife works in the food and beverage industry. She gets tips plus her hourly pay. My question is how should I put this amount in our budget spreadsheet? In my spending journal I have been adding it every time she worked a shift. The place she works is a seasonal place, and she is busier in between October - May-June. It is never the same amount so I find it hard to figure out how to budget this. I also need help in reading the budget spreadsheet. I have everything filled out but I am not sure how to read it.

Gail Says: Collect her tips for November in an account (or jar) separate from your regular November spending. Then deposit the total in December, and add it to your December budget. You'll know exactly how much you have to work with and can plan. Meanwhile, back at the jar, you're collecting December tips, as measly as they may be. How does that sound?


M Wrote: I had an old high school acquaintance message me on Facebook and wanted me to get involved with a company called "World Financial Group", they wanted me to withdraw my RRSP’s and invest with them, I was very fascinated from the start and then when I met face to face I was a little sketchy afterwards, because it sounded too good to be true. I have watched your show for years. In your expertise what is your opinion about the company.

Gail Says: Any company that tells you to cash in your RRSP’s and invest with them instead is suspect. You would take a huge tax hit. And why can't you buy the investments they're offering inside your RRSP if they are legitimate? Run for the hills!


S Wrote: Let me first say: you are wonderful. Thank you for helping me get control of my money, my life, my future. I'm nearly finished reading your book "Debt Free Forever", and have asked for two of your other books for Christmas from friends and family. Now, on to my question! I have taken your advice in being creative with ways to make money. I am very good with words, and connecting with people on an emotional level through the words that I say. That being said, I have come up with a way to potentially make me $1M. What is the best way to deal with that much money? Do I invest it? Do I invest part of it? The very first thing I would do with it is tithe it - 10% of it to be spread between my local church that I'm serving in, missions organizations that I support, etc. Once the tithe has been taken out, what do I do with the rest? Thank you for your time and thank you oh so much, again, for helping me become debt free and living within my means!!

Gail Says: I have no idea what your goals are? Are you working towards becoming debt free? Spend most of it there. Are you building your emergency fund? Your long-term savings? Put some of it there. But make sure you're having some fun too, okay. It's not all about accumulating money. Once your financial foundation is rock solid, set some goals about creating joy in your life and make those goals into reality.


C Wrote: I'm reading your book, “Never to Late” and my question relates to the tip on page 70 where you give examples of how much you should have saved for retirement by the time you've reached your 40s, 50s, etc.

You state that you should have by the time you reach your 40s; your net worth is the equivalent of 5 year's worth of salary. Is the salary your net salary or your gross? It makes a big difference in knowing how close I'm to the finish line or how much I have to catch up.

BTW - I make my teenagers watch your show with me and they're learning!

Gail Says: When I use the term "income" I'm referring to "net income." When I use the term "salary" I'm referring to your "gross income" so total salary before taxes and other deductions are taken.


K Wrote: A quick question about a house maintenance fund - my hubby and I bought our house about 6 months ago ($488,000) and we've been socking away $750/month in a maintenance fund. We don't anticipate any major repairs in our near future (roof, H20 tank and furnace are all relatively new, etc), but you never know!

My question is this: is there a point when there's "enough" in a maintenance fund that you can just maintain that number, like an emergency fund? If so, what would be a good amount? (We were thinking something like 10k.) The thought is that after we've hit our magic number, we could start putting that $750/month in a home renovation fund for some reno's we have in mind down the road. Of course, if we ever have to tap the maintenance fund those savings would go straight back there to bump it up again. Good plan? Is 10k enough money? This is our first house so the last thing we want to be is house poor!

Gail Says: This is a really good question, and not one I've been asked before. Imagine! Of course a home maintenance fund is like an emergency fund, and there would be a point at which you could just maintain, replenishing as you use it. As for the number, you must decide that for yourself. Think of three major emergencies you might have (because caca never comes in ones); do you have enough to cover those three things. Yes, then you can move into maintenance mode.