April 2014 Questions & Answers


D Wrote:  I make about 46K a year. My wife makes about 26K a year. We have a line of credit of 50K, which we pay $1000/month, no mortgage.  Our credit card balance is usually only a few hundred dollars.  We usually run into the negative, with our bank accounts.  We bank with Canada Trust, and asked them about financial planning, etc. They kinda were like hmmm, maybe we can check on your accounts, but that was about it.  I thought paying off your house and you would be set for life? What happened?

Gail Says:  You don't need a financial planner at this point. You need to get control of your cash flow. Do you have a budget? Are you tracking your spending in a Spending Journal and then posting it against your budget to see where the money is going? That's The Gail Way (look on my website) and it makes you accountable for every penny you spend.


N Wrote:  I have a simple, yet important, question for you regarding our monthly budget.

My husband and I are using your tools to get out of debt. Though we are not overly indulgent or materialistic, we did have a few tough years in which we accumulated a good amount of consumer debt. I am pleased to report however that despite this, we cannot consider ourselves in that much trouble because I have always kept a close eye on our budget and never allowed a missed payment on anything, be it debt or every day bills.

You have said a good rule of thumb is to put aside 10% of our monthly income for savings. We have different types of savings: we each have our own savings account, we have special type fund we opened to set money aside for vacation projects, we have one for our daughter and I have an RRSP fund in which I contribute every 2 weeks. We also have a specialized savings account we recently opened to set up an emergency fund. So I use 10% of our monthly income and split it in these various savings.

My question is in regards to trust funds we took 5 years ago, upon our daughter's birth, to save for her future education. We have a fixed amount to contribute to them (we have two) every month, like you do for an insurance policy. Because of this, I have always put the trust funds in the "Fixed Expenses" of our budget. As we are working on freeing as much money as we can toward debt repayment, we are wondering if the trust funds are indeed "fixed expenses" or should we consider them "savings", in which case we must reconsider the amount we set aside for our other various funds.

Much thanks for all your good tips. My husband and I are like many couples whom have made mistakes and are trying to fix them. I watch your show on a regular basis and you have taught me a lot.

Gail Says:  The save 10% rule applies to saving for your long-term future. Savings for an emergency fund, kids' education, and anything else would be on top of that.


L Wrote:  I am single, female in her late 50's still working full time and no intention of retiring until after age 65. I have invested wisely, through a financial company and work with an investor who assists me in managing my retirement portfolio. I have no outstanding debts (e.g. house, car or credit cards) and continue to save.

My question is when I do retire and collapse all of my retirement accounts (e.g. RRSP, LIRA) into an annuity or RRIF, how can I avoid the monies I will lose as a result of collapsing or selling off my retirement accounts which are invested in various mutual funds (e.g. dividends, etc.)? I understand I could pull out half of my retirement portfolio for myself and the remainder can be transferred to my annuity or RRIF. Is this a good idea?

Gail Says:  Why would you collapse your retirement assets? You'd simply move them from the RRSP to the RRIF (maintaining most of the same investments) and take only as much as you need to live. Taking more than necessary WILL mean you pay more in tax, so don't do that!


N Wrote:  My husband teased me at first when I started hauling our money around in Zip-Loc bags (my portable jars!), but now he totally gets it and appreciates that we never worry about money. We just finished getting him through a second university degree with these bags!

My question is about our emergency fund amount. When you say that we should have six months worth of savings for essential bills, do you assume we BOTH are not working when we need this money? We take home $8100 dollars each month (we both make almost the exact same salary). Our essential bills are approximately $4750. So the difference in calculating the emergency account amount is significantly different... $28500 if we are BOTH not working OR $4500 if one of us is not working. The likelihood of us both losing our jobs at the same time is very unlikely (I am a teacher and he is an athletic therapist for a pro sports team).

I personally am not comfortable with only $4500 in an emergency account so I will make sure we have more than that. However, I feel almost $30000 is a little excessive and our money could be making us money somewhere else.

Gail Says:  You should have six months worth covering all essential expenses. Do you really spend $5,000 a month covering ESSENTIAL expenses? If so, then, yes, $30,000 is your number. While you may not think you can both be out of work at the same time, I get letters all the time from couples to whom this has happened. And, besides, if one of you is still working, it just means you won't decimate your EF before you get back on your feet having to start rebuilding from scratch. As for having your money make you money, hey, I get your hesitation.  The question you then have to ask yourself is this: are you prepared to sell investments at a loss in order to cover your emergency should the situation arise? Each of us has to make our own decisions. I give you my best advice and you decide what to do with it.


M Wrote:  Before I get to my main question, I have a question about you. We share the same country and year of birth (I believe I am a few weeks older-May 22). What high school did you attend in Jamaica? I doubt that we went to the same school but we would have been at school at the same time.

I have no consumer debt but I have dabbled in the real estate market in the US because of the incredible bargains there. I have drawn down on my LOC's to make these investments. I have "rehabbed" in the past but now have 2 units on long term leases with positive cash flows. I know how much you despise debt but how about debt for investment?

Gail Says:  I'm an Immaculate girl. And I don't have a problem with investment debt as long as a) you've done all your homework and it's not speculative and b) you have a plan for getting it paid off and a back-up plan if something goes amiss. It sounds like you're doing great. Make sure you create an "emergency fund" for your investment properties to take care of big maintenance issues that may crop up or period of emptiness should they occur.


L Wrote:  My son is 24 years old. He earns about $40,000 net per year. He is supposed to pay us $300 per month and he is always a month behind or he sometimes doesn't pay at all. He drives our vehicles under our car insurance even though he has 2 cars himself but they need work. One is a collector car that he keeps putting money into so he can sell it. So for $300 a month he eats our food, and uses any item, toothpaste, shampoo, aspirin, etc. he wants. Uses all the facilities, has a space of his own, has cable, etc. Basically he uses anything he wants. I don't approve of this but my husband does. I would like him to move out and I have told him that he needs to move but he says he can't afford it and yet he has money for his car, vacations, going out for dinner, movies, clothes, etc. My husband seems to protect him every time. I feel that he is disrespecting us and I feel resentful and used by him because of his behaviour. I love my son but I don't like his behaviour. What should I do because my husband doesn't agree with me? How do I get him to leave? I can't take it anymore.

Gail Says:  NOTHING... until both come to the table with a plan for how you will live together peacefully and as a family, and your son presents his plan for moving out. He will need some time to prepare. Six months should do it. Take no less than 35% of his take home pay for rent during this time. Find a room you like, and be prepared to cook for one for the next little while.

If this seems impossible, then come up with a plan of your own to make your point understood. If you can't do that, resolve yourself to the life you currently have.


J Wrote:  I just purchased your $4.99 Budget system. Question- on "The Budget Worksheet", there is a section for "Income", etc.  Then "BUSINESS EXPENSES".

Not sure what this is used for. Am I supposed to put a total in that spot if I have any Business Expenses, or have my own business? I guess I could just ignore it if I have no personal Business Expenses??

I was busily deleting rows that were not applicable to us, and it seemed to be working fine. Fine, until I got to Business Expenses. It wouldn't let me delete it without freaking all the formula references out!  I see the cell for this is included in the totals.

Gail Says:  Some people have small business and have expenses they run through their personal budget because the biz doesn't yet make enough to cover its own costs. That's what would go here. You should NOT be deleting rows; you can hide them which achieve the same visual but doesn't mess with the formulae.


Jillian Wrote: Gail, We desperately need your help. Our bills are more than we make.  Ive been trying to get more work since i recently quit my full time job since i couldnt afford daycare. But we cannot make ends meet.  we recently have been granted government assisitance for daycare, we didnt want to decline and we are now facing daycare at 40 dollars a day working 15 hours a week. credit cards are racking up .. it is getting really scary.  i need help. We are a family of five.  we are spending more than we make.

Gail Says: I'm not sure what you think I can do for you. If you're spending more than you make, you have two options: stop spending or earn more money. I don't have a magic wand. YOU are the magic wand and only YOU can change what's happening in your life. I have all the tool you need on my website. You have to bring the gumption to the mix.