April 2015 Questions & Answers


A Wrote:  I just heard the term "spousal RRSP" both my husband and I have separate RSP's. What is the difference? Is having a "spousal RRSP" give a better return?

Gail Says:  There's no better return on an RSP; it's all dependant on the investments you chose to hold in the plan. As for what a spousal RSP is, it is an RSP to which one spouse contributes on behalf of another. So if you make a contribution to an RRSP for your mate, that would be a spousal plan. Since you both have RSP’s you don't need one.


L Wrote:  Long story short, was messed around by my ex in 2006 and had to go bankrupt cause he didn't do his taxes from 1991 to 2008 so apparently since he didn't do them they attached his to mine. Didn't know they could do this since I left him in 2000. Anyhow, doing well now and have the opportunity to have group RRSP’s at work. For every dollar I put in they will give me one-fifty and is capped at two-fifty.  I make forty thousand a year and want to start putting money in. How much should I contribute to get the max amount from my employer? My deduction amount on my assessment is $81,739 and I am no spring chicken as I will turn 50 in October so any info you can give me would be much appreciated.

Gail Says:  As much as you can afford since you have all that catch-up room...that's what that $81,739 is, right, the RSP room you haven't used? Then figure out how much you can afford. I'm not sure what you mean when you say your employer's contribution is capped at "two-fifty"... they'll only contribute up to $250? That seems very very low.


C Wrote:  I have been to all your events for Cornerstone in Cobourg and spoke to you directly about our shared history of failed marriages (we both have 3). My latest marriage broke up in 2010 and we are not yet divorced because of the cost. However, I just had a friend ask me if, by chance, I ever came into any money, by not being divorced; can he get his grubby hands on any of it? My main concern (since I just had a call the other day from a debt collection agency for him) is, can I be held responsible for any of his debts? Obviously, people are chasing him. Can they come after me, even though his debts have grown since our break-up? We never had any "joint" debts; always his own credit cards. Should I pay for a divorce to protect myself? There is absolutely no chance of reconciliation; I just can't afford the divorce.

Gail Says:  If you're not signed on the debt and you have no joint assets you can't be held responsible for his growing debt. Should you get a divorce? Probably. Get in touch with www.commonsensedivorce.ca and speak to Darren Gingras about your options.

As for whether he can attach an inheritance, that's one asset that’s not attachable unless the money is put into a matrimonial home. However, to protect yourself you should at least have a separation agreement in place.

I hope I've helped. Write again if you want to chat some more.


P Wrote:  I have completed the budget builder and the one area that I am above the percentage of income is my housing costs. I have a variable rate mortgage and over time had increased my payments as rates recreates below 1%. The rate has gone up to over 2.5% and so the resulting payment is making things difficult to stay on track with the budget and reduce my other debt.

I know there is a penalty for breaking a mortgage and some mortgages (like mine) allowed me to increase my payment - but I can't find much information about trying to decrease the payment of my mortgage. I want to decrease the payment by $200 every two weeks which is about 24% below my current payment. This could be achieved by changing the current amortization period left from 7y4m to 12 years.

Gail Says:  Ah yes, the variable rate mortgage that goes up. People seldom talk about it. You don't have to "break" the mortgage if your financial institution will let you renew early and blend and extend your current mortgage. You can choose a new amortization period. If you want to make sure you don't run into this problem again I strongly suggest you go with a fixed-rate mortgage. Do a printout of similar mortgages with the lowest rates and take it with you when you meet with your bank (or whomever holds your mortgage).


N Wrote:  Just wondering if you have any suggestions on how a young couple with 3 small children in today's economic climate are supposed to meet all of their obligations when daycare costs for the 3 little ones cost $45/day for EACH child!!! (Yes, that's right...$135.00/day x 20 days per month...for a grand total of $2700.00 per month). They DO NOT qualify for subsidy because each of them gross approx. $50,000 per year. They never planned on having 3 children; however the last pregnancy resulted in twins! Like most young couples living in a big city, they purchased a modest home to accommodate their growing family and have a car payment and need to operate 2 vehicles to accommodate shift work and child pick-ups at daycare. Add these expenses to the cost of everyday living such as utilities, groceries, insurances, gas for cars (dad commutes part-way on public transit after dropping kids off at daycare) they are going further and further into debt and can see no way out! They both are becoming increasingly depressed about their situation and don't know where to turn anymore. There is no equity left in the home because they borrowed against it and their mortgage payment equals what a rental payment would be...and then suitable daycare would become another nightmare if available even at a different location! Usually rental properties request a credit check and their credit is in the toilet. I have done what I can to help...but am retiring in a few months and can no longer figure out a solution!! They both work extremely hard and are good parents and so far have been supportive of one another but I feel the strain of all their financial woes will eventually take its toll on their relationship and then 3 little ones will be left to deal with the after effects of a "broken home". Do YOU have any suggestions because I have nothing left to offer!

Gail Says:  This problem may take completely rethinking the situation. Perhaps one parent needs to stay home with the children, eliminating the daycare costs and giving up one vehicle -- and the expense associated -- to make the budget work. If they are actually paying $2,700 a month in daycare costs, on an income of $50,000 they are taking home (in Ontario) $3,442, which means they are keeping only $742 in their pocket per month after daycare costs (although there is a tax deduction, see next para). Staying home may work better if they eliminate that extra $742 in spending (car and other expenses).

If it's a matter of cash flow because the tax break for childcare comes after you file your taxes, there's another option. The child care deduction is $7K a year up to age 6 and $4K a year between 7-16. The claim has to be made by the lower income earner in the family. Since they make about the same, one should fill out Form T1213. This form lets you request permission from the Tax Man to have your employer reduce the amount of income tax taken off of your paycheque every month. If you can demonstrate that you’re eligible for certain recurring deductions that will reduce your tax bill at the end of the year – you can trade in your tax refund for more take-home pay. So instead of paying extra tax and getting refunded, you’ll pay less tax on an ongoing basis so you’ll have more cash to use during the year. You’ll have to fill out the form and send it to the Tax Man each year. You can do it at any time, but the best time is in October or November for the following year. Once you’re approved, the Tax Man will provide instructions by letter to you, which you then give to your employer, who will adjust your pay for the remainder of the year.


C Wrote:  We currently have a bank line of credit of approximately $27,800 (5% interest), which is essentially the full purchase cost of two new used vehicles in the past four years. Thankfully the past 6+ months my husband and I have managed to get our savings up to almost $7,000 (we've had 5+ tight years of one job loss and a business start up) in a tax-free savings account we use as an emergency fund.  We currently pay $300/month to our LOC, and around $700 to our TFSA.  Is this an ok equation? Or should we be putting more to pay down debt?

Gail Says:  Your $27,800 LOC at 5% will cost about $115 a month in interest. So of your $300 payment, the first $115 goes to interest, leaving about $185 for principal repayment. Using straight math it'll take you about 150 months or around 12 years to pay off the LOC. But because you're paying interest on a declining balance, it'll be less so let's say it takes 10 years to get that puppy paid off. By then you'll have paid about $13,800 in interest. How do you feel about taking 10 years and spending almost $14,000 in interest on that LOC? Makes those 2 cars a tad more expensive than you thought, right?


T Wrote:  I contribute my company GRRSP and am trying to calculate my rate of return. Where I get confused is, the investment company calculation for my "personal rate of return"(using the "internal method") includes my semi-monthly contributions, which inflates the rate.

How do I figure out my net rate of return?  I know it's not the 18% I'm being quoted on my statements.

Gail Says:  Ah dear me. That seems so wrong. This won't give you an exact number because as you make those monthly contributions they also work to earn some return. But to get a general idea:

Take the current balance, subtract this year's contributions. So if your current balance is $25,000 and your monthly contributions have been $200 for the last six months, you would have $25000 - 1,200 = $23,800 (actual). 

Now take the balance at the end of 2013 and divide that into your "actual" and multiply by 100. So, if at the end of 2013, your balance we $20,500 you would have 23,800 ÷ 20,500 x 100 = 116. That means you earned a return of 16%... a little less actually, because those contribution you made helped to get to 116%.


L Wrote:  I am a 19-year-old from Windsor, ON. I'm a girl with big dreams but unfortunately do not come from a privileged family. I currently have a full time job making $1500- $2000 a month. I still live at home with my mom who I've been helping out financially for the past month which has been making it hard to save money. I currently have $3000 saved and I recently applied for college this September which will require me to quit my job and find something part time. I have no line of credit, OSAP or any financial aid yet. Now that you know a little bit about my background I was wondering what’s the best way to go about saving and paying for school, other necessities and future needs with little to no debt?  Which loan do you think would best suit me?

Gail Says:  We often hear in the news about parents helping kids out. The young people who are helping parents get’s way less press. You should apply for OSAP. Here's a link:


That’s the best way to finance your education since there is no interest calculated as long as you remain in school. When you do graduate, the moment you graduate, the interest clock will click on so don't take on more debt than you can handle repaying.

Read this: https://osap.gov.on.ca/AidEstimatorWeb/enterapp/debt_calculator.xhtml  You can also use the calculator to see what repayment amounts would be. Please don't default to the minimum since that'll keep you in debt and paying interest for 10 years! For an undergrad degree, you should aim to have the student debt repaid in 5 years or less. Working part-time is a great way to minimize the amount you must borrow. If you can continue to live at home that will reduce your costs too (maybe?) depending on how much you're contributing at home.