September 2013 Questions & Answers


J Wrote: I am a 30 year old lawyer. As you can imagine, getting here required a lot of school and a lot of debt. I'd like to say I only used my $80k in student loans for good, but truthfully, there were some trips and designer shoes along the way. However, thanks to "Debt Free Forever" I am less then 2 years away from being completely debt free. I now want to pay this financial education forward (as well as some other hard earned life lessons) and I'm looking for some tips/guidance.

I'm thinking of organizing a self-esteem camp for young girls (11-14 years old) in my community and one area I'd like to focus on is personal finances. I don't have children of my own (and don't plan to), so my experience in communicating with young people is limited. I read your articles on "Kids and Money", which was helpful, but I'm also wondering if you have any workshop ideas that could be used to teach young girls how to think about and manage their money? I could Google search for ideas but since you are my guru, I thought I would ask you first.

Gail Says: Congrats on getting to the point where you're ready to give back so quickly. I think your plan is terrific. I haven't pulled together any workshops for kids, so I don't have anything right off the top of my head. Money-Smart Kids is about parents teaching kids, but your workshop would have a diff focus, so I'm not sure that would be the biggest help. I have a few websites in my favs bar and you might want to check 'em out:


Shannon Wrote: Long time reader - first time emailer...I recently tried to raise the limit of my bank Visa card from $1,000 to $2,000 and the credit report came back saying there was a judgment against me in Kitchener in small claims court. I, of course, freaked out and contacted Transunion right away to contest this judgment as the claim was made 5 years after I had left Kitchener and I had never received any creditor's notices, etc. (Plus, I may be no financial wizard but I have never walked away from any debt I owed.) This was back in January and I just got a letter today saying - that yes - the judgment did not belong to me - which I already knew because I had Kitchener small claims send me a copy of the judgment - (her name was Sharon (same last name) and she lived next door to my apartment building in Kitchener - five years after I had moved to Toronto) My questions are 1) should I contact the other two credit reporting agencies and check to see if they have the same wrong info connected to my name and also 2) is this kind of thing common? I mean this woman's bad credit was ruining my credit report - and I had no control - I just had to trust that the same agency that screwed up the first time - would get it right eventually? Please let me know what to do - and thanks for your help.

Gail Says: Yes, you should contact the bureaus and check to see if they also have erroneous info on your file. I suggest people do this regularly, check each a minimum of once a year. If you do one in Jan and one in Jun you'll probably catch what you need to. As far as if this happens often, yes it does. Info gets reported to the credit bureau and they stick it on your file, whether it is true or not. It's a bad system requiring no proof to sully your history. I had one credit card company report a debt as unpaid after I reported the card lost! Happily I don't carry a balance on anything so the interest rate my credit was hiked to didn't matter. And when my PC MasterCard arbitrarily decided to lower my limit and pushed up my "credit utilization" that drove down my credit score and drove up interest rates. So I stopped using the card completely. Hey, there are lots of ways they can get you. The bestest policy is to pay no interest!


R Wrote: I just turned 60 and I am trying to decide if I should apply for my CPP or wait till I am 65. My wife and I do not need the money because we budget wisely by watching your show.

Gail Says: If you don't need the money why would you take it early and suffer the penalty. You will lose between .5% and .6% of your benefit for every month you take it early (new rules mean the number is going up). Going with .5% a month, taking your CPP at 60 would mean your benefits would be reduced by 30%. Does that make any sense to you? I know "the bird in the hand" is the newest philosophy of Generation Spend, but if it were my choice, I'd wait.


T Wrote: Regarding LIRA…is there is any way I could make additional deposits to it (NOT Withdraw) Deposit. So far nobody will say anything other that "you are not allowed to". Any thoughts?

Gail Says: You aren't legally allowed to continue to deposit to the LIRA, but that shouldn't stop you from using an RRSP or TFSA if you want to continue saving for retirement.


A Wrote: I've been reading all of your books and your blog since November and I've kick started my finances! I tackled almost $3000 of credit debt in 2 months on a NGO salary and will have over three months emergency fund saved by this months end. My current job is very low wage ($25,000 gross a year) and I've been unsuccessfully looking for another job for the past year. I'm hoping to go back to school in September and I am eligible for an almost full-funded scholarship, but here's my question. At the rate I am saving now, for the next 5 months I should have an extra $1200.00. Should I continue to put that in my planned savings or emergency fund or throw it at my large student debt ($20,000) knowing that if I go back to school in September the debt will go into an interest and payment free period?

Gail Says: With your loan set to go back into interest relief, I'd focus on building up the emergency fund and getting the consumer debt paid off. Later, once you've graduated, you can look to using some of your savings for debt repayment, but keep a pool handy for emergencies, k?


H Wrote: What to do? I have recently taken on a part-time job to help clear off our debt. I have been a stay at home mom for many years with a small income from some sewing I do at home. I have never registered myself as a business because until now I did not make enough to bother. I have done some sewing for my employer as an individual for many years. I made it clear from the beginning that I did not have a registered business. Now as an employee part-time and still doing work for them at home, I have been asked if I want to be on the payroll or just invoice him my hours. I have looked into self employed, register a business or go on the payroll. I am not sure which will be the best way to go. As of now I am just paid for my hours worked no deductions and all of the pay going directly to debt. I already know how to live on one income. Everything has advantages and disadvantages. Which will work best for me? I am hoping you can paint a clearer picture on the advantages of being self employed and what I need to do to keep the taxman happy. Love your shows! I use them as my motivator to Debt free!

Gail Says: As a self-employed person, you are responsible for keeping track of all the financial paperwork and paying your taxes on time. You'll have to file taxes quarterly to pay your Canada Pension Plan contributions and income tax. Here's the tax man's link on keeping records: If you're up for the extra paperwork there are some benefits. There are a number of "expenses" you can write off if they can be associated with your business. Create a website or communicate by email and your internet becomes a business expense. You may be able to write off a portion of your home (rent or mortgage) if all you do in that space is business-related activities. So if you have an extra room that 1/5 of your total house space and you use it solely for biz, you could claim up to 1/5 of your rent/mortgage/utilities, etc. against your business income.
I've been self-employed since I was 25. There are some extra costs: you need to make sure all the paperwork is neat as a pin, and you'll need some expert advice. But the benefits have been wonderful too. You'll have to decide if you want to take on the extra work for the chance at building something of your own or if you want the security of being on the payroll.


B Wrote: I'm 25 years old/almost 26 (eek) and recently got married. Everything is going well so far :) My husband and I have together paid off close to $30,000 debt which he had brought into the relationship. We have worked hard together and will soon be debt free by the end of the month. This is such an exciting feeling. Our next big purchase will be a house. We will be first time home owners and would like to save the 20% down payment before we actually look into buying a house. On the savings plan that we currently have this should be accomplished within the next 2 years. However with this plan every penny saved would go to the down payment of a house. I'm worried that after we save this it will feel awesome and will be a huge accomplishment but then it could all be gone in an instant by putting it all towards our house, then we're back at zero. My question is should we be putting all our savings toward a house or only a certain percentage? We would like to get into a house sooner rather than later but realize it could take longer to save if we have different types of savings. FYI-I do have 10% of my income automatically put into an RSP every month and my husband has a pension plan with the city.

Gail Says: You do need to have an emergency fund, so I'm going to suggest you put half to home savings and half to the emergency fund until you've built up that pool of money. In the meantime you can practice living as you would if you were in your home -- financially at least. To do that, figure out the carrying costs on your new home: mortgage, property taxes, insurance, maintenance, utilities. Add 'em up. Subtract what you currently pay in rent. Put the difference in savings. Now when you move, you'll already be used to living on what's left after you pay your shelter costs. As far as long-term savings for retirement, you're doing fine with what you've got.


T Wrote: I watch your show regularly and with your advice my husband and I managed to pay off all our credit cards and student loans in 2012. We still have a 12k left on our car which leads me to my question. I am currently saving for a down payment on a house we hope to buy in a couple of years. I hope to have 10k saved by August 2013 for a house and plan to save more as 10k would not be enough to cover the down payment and closing costs. My husband feels that I should just take that money and pay off the car and have it paid by December 2013. The interest rate on the car loan is 7%. I'm hesitant to put that sum on the car and feel we should save it for the house. I told him I am willing to a put $3000-$5000 extra on the car this year. What would you do? Pay the car loan and save for a house later? Or try to save for a house while putting extra payments on the car? P.S. We still have another 3.5 years to pay off our car.

Gail Says: If you have 12K owing on your car and you take 3.5 years to pay it off at 7%, it will cost you an additional $2,500 in interest. Your husband is absolutely right. You should pay off the 7% loan, then take the payments you were making for the car and allocate them to down payment savings.