August 2014 Questions & Answers


A Wrote:  I'm a teacher with a pension that I will of course collect upon retirement. Should I be contributing to an RRSP? I was told by my bank guy that I shouldn't bother but I'm wondering about it. I'm 36 years old. 

Gail Says:  It's unlikely that you have a lot of RRSP contribution room because of your pension. If you don't think the pension will be enough (because of your years of service, or whatever) by all means put as much as you can into an RRSP. This is particularly true if you'll get a whack of tax savings. If not, you might want to consider maxing your TFSA before contributing to an RRSP.


L Wrote:  I love your advice!  It has helped to get me out of the debt trap! My question is; I now have some extra money that I would like to put aside for my niece and nephew's education. I talked to my sister, and we were thinking of setting up a joint account so we can both put money into the account, and have it transferred from there to RESP's for the kids. My contribution would be a regular automatic transfer, but my sister's would be lump sums depending on the month (her income is variable, I'm on salary). The RESP's would be under my name, so they can't be touched by my sister's creditors. She and her husband are working to get their finances under control, though, and starting to follow your advice, too! My question is, because my sister's credit rating isn't so good right now, will opening a joint account affect my credit rating? Or would it be better to have her give me cash to deposit when/if she has it available?

Gail Says:  The only way a joint account will affect your credit rating is if she bounces cheque on the account (or in some other way overdraws the account.) Just being joint account holders will have no impact on you, regardless of her circumstances, unless that particular account is affect. Though creditors might try to "grab" some of the joint money since it is in part in her name.


T Wrote:  My boyfriend is not very good at managing his money. He has student loans, a maxed out credit card, and he wants to buy a new truck! I think I've convinced him not to buy the truck (especially because with his less than stellar credit rating he wouldn't get good financing.) He is 26 years old and made the decision this year to move home so he'd be able to save more/put more money towards hit debt. (He still pays rent... just a lot less!)

Thing is... I think he is a little lost with how to go about dealing with debt. We want to be able to buy a home in the next few years, and he's panicking about his debt. I told him I thought his first step should be to pay off his credit card so he stops paying so much in interest. Is that sound advice to give? After that is paid off, should he just focus on eliminating student debt before saving for a down payment? Or should he set aside money to save for a down payment at the same time he puts money towards his debt?

Gail Says:  You've given him good advice: always start with the debt that has the highest interest rate, which is the credit card. As well, credit card debt is "callable," which means the bank can demand its money at any time. The next thing to do is get rid of the student loan debt. Saving for the down payment comes third. He should, however, be setting aside at least a small amount $25/mo for the future (retirement) and building an emergency fund. Good on you for being so smart.


S Wrote:  My husband and I have pride ourselves in having no debt other than our mortgage. We pay off our credit cards each month, we save money and we do not live beyond our means. We both have good jobs and we do make a pretty good household income approx 155K. We have a 2 year old child that goes to daycare full time which is quite an expense and we live in a condo in one of the most expensive cities in Canada, Vancouver. We are thinking of expanding our family and that would involve a move to a bigger place and our goal is to purchase a home. We have had this condo on the market on and off for 2 years now, listing it at a loss so that we can just move on and recoup equity elsewhere. We are going stir crazy in this condo and because both bedrooms are being used, we have no space and we cannot even accommodate visits from our family who lives in Ontario. We feel really stuck and are not sure what to do. Do we:

a) continue to lower the price of this condo, potentially losing upwards of 70K by the time all is said and done so that we can move on and finally move in to a family home, even though this would mean less money to put down on a place as the loss will eat up a lot of equity we have?
b) do we rent this condo out for approx 2000k a month vs the 1500k we currently pay in mortgage and rent a bigger home for a while hoping the condo market improves and we can sell our condo?
c) do we stay put, suffer through the living situation, putting our plans for a baby on hold for another 2 years to save even more money to try and buy a second home (honestly the thought of carrying 2 mortgages in this city scares the crap out of me).

Feeling super stuck and conflicted and not sure what to do. I have to admit it really bothers me that we earn a great living, are responsible with our money but it feels like we are not in a position to purchase a home. We really could use some help or resources to help us understand all aspects of our situation and get on a plan to really reaching our goal of purchasing a home and finally being comfortable in a place we call home.

Gail Says:  I can hear your frustration. I'm sorry that you feel stuck. Canadians have been lead to believe that buying a home will always end well, that prices will always go up; that the growth we've seen in real estate won't ever end. Unfortunately, you now know differently.

I can't tell you what to do. It's Your Money, so you have to make the decision. Here are some things to think about:

Scenario A: How much equity will you have and will it be enough to get you into your next home? Are you determined enough to move that you'd be willing to swallow that bitter pill?

Scenario B: Can you get $2K a month for the condo? If so, will that cover ALL the costs associated with carrying the condo? Do you have any resources to draw on should the condo go unrented for any period of time, or need any kind of repairs? You've been living there a while, you know what I mean.

Scenario C: What will be different in 2 years? Is it that you're expecting that the condo will revert to its original value? How much more will you have saved in 2 years?

If you are planning to move so you can have another child, you must also take into consideration the income-gap while you are on maternity leave. Will the cost of no daycare (since you're home anyway) make up for the reduction in your income while you're off work?

I know this is a hard decision. I know you're frustrated. But sometimes things don't go as smoothly as we would like. You'll make the right decision for YOU. Just sit down together and work out what's really, really important to you both. And for heaven's sake, be on the same page when you do whatever it is that you do.


A Wrote:  I set up automatic payments with all of my bills every month and never have a problem. I sometimes also set up payments to come out automatically in addition to those mentioned above (like credit cards because there isn't a consistent balance) I have never missed a payment on anything in my life. I also transfer the "savings" I have at the end of each month from my chequing to savings accounts.

Twice in the last three months something has gone wrong with my PC account where a payment was scheduled but PC charged me an NSF fee because something went wrong (obviously a lack of funds to be NSF) but the problem was in the technology, because the money was always there, it just didn't transfer properly. Once was a contribution to my RRSP and the other was a credit card payment that was cancelled because I wanted to pay it three days later but the first payment went through somehow which resulted in an NSF. I paid that bill three days later, before it was due.

Both times PC financial refunded my NSF fee because something went wrong on their end. Because they refunded it does this now mean that the NSF code has been removed from my credit history? I am wondering what affect these two NSFs have had on my credit rating, if any affect at all, since they were both refunded.

Gail Says:  You should get a copy of your credit history to see if the NSF was reported and then fixed on your credit report. Send a written request to one of the two major credit bureaus in Canada: Equifax Canada Inc. or Trans Union of Canada Inc. More information can be found online at and There is no charge for this service if you ask for your record by mail. If you’re into instant gratification, you’ll have to pay a fee.

BTW why are you still banking with PC financial if they keep screwing up your money management? Don't you get tired of the mix-ups? Is "free" keeping you there?


B Wrote:  Is it true that upon death your RRSP can be transferred to your spouse regardless of their available space with no tax implications? And if the RRSP upon death is transferred to your children that 52% is deducted first for taxes before they receive it? So is it safe to say that should you not have a spouse invest other ways if tax deferral isn’t an issue or be sure to use up RRSP/RIFF first before other investments at retirement if thinking best inheritance if it comes to that. What are the implications once it is in a RIFF? Is it the same tax style?

Gail Says:  The RRSP rollover to a spouse does not have anything to do with contribution limits, so assets pass from one spouse to the next with the assets continuing to be tax-deferred. So, no, you don't have to pay any tax until you take the money out. The rules are the same if the assets are in a RRIF.

As for what happens if assets pass to someone other than a spouse (including children, unless they are dependent) the tax does have to be paid before the assets can be distributed. The amount of tax payable depends on the province of residence of the person who died. The max tax in Ontario (both federal and provincial) is about 42%. It's higher everywhere else except Alberta, Yukon and Nunavut.


C Wrote:  How do you calculate a company pension into your net worth? I read it somewhere and can't find it.

Gail Says:  The real value of defined benefit plans comes with tenure and time. In the early years they’re not worth much on paper. But over time, boy, do they really come into their own. When it comes to using a value for your net worth statement, it is common practice to take the annual pension you’ll receive and multiply it by 15 (or multiply the monthly by 180). So if you’ll get an annual payout from your pension of $36,000 a year, you’d value that at 36,000 x 15 = $540,000. The risk with this however, is that you get cocky about your net worth and use it as an excuse to take on debt. Remember that debt is real and concrete. But the value of your defined benefit plan is variable, depending on how long you stay in the plan, and when you chose to retire.


E Wrote:  I've been approached a few times by friends and family who have gotten involved with direct selling.  They've tried to recruit me into their "business opportunity" and I've listened to their "how much money I can make", "how I can make my own hours", etc. One of them is from Herbalife, and the other one is from Primerica.  While I’m not really interested, they are VERY pushy.  I've researched the companies a bit but it seems to me they succeed only if you recruit and recruit (as you need to have people under you).  My question is; how do I tell them I am not interested?  These are people that we love a lot -- not family but they are part of a very close community at church.  Although they have good intentions, I am not interested in their businesses but I don't want "friction" to cause problems within the group. I already work hard and have little time for these types of endeavors. Not sure if you can get my drift on this question, but how do you think I should approach them?

Gail says: Sure, I get it. Simply tell them that you are already fully committed time-wise doing the things you love, and that between those passions and your life as a dad and a husband you don't have an iota of time left. You love their passion about what they do, as you're sure they love yours about your life right now. It's great they want to share with you, but you've just got your hands full, so thanks, maybe down the road sometime, but for the next couple of years you're dance card is full.