February 2015 Questions & Answers


F Wrote:  I recently graduated and started a new job, and have two questions. I have been using your Interactive Budget worksheet to get organized and have a question because there are two separate cells labeled "Taxes". I assume that the top part is referring to income tax, since it asks for gross and net income. What expenses should go in the second "Taxes" cell?

My biweekly pay stub lists the following automatic deductions: income tax, pension plan, CPP, EI, union dues, health insurance, dental insurance, long term disability insurance, and group life insurance.

My second question relates to the group life and long term disability insurance, which is offered through my employer. I am a little concerned about the word "Group" insurance and am wondering if I should I seek private coverage instead of/or in addition to, the employer-provided insurance.

Gail Says:  Ignore the "taxes" cells

As for the group vs individual insurance, I suggest that you look into individual insurance (both life and disability) since when you leave your employer you lose the benefits (unless there is a provision that you can assume them as an individual...check that). If you are in Ontario, I'd speak to Glenn Cooke (866) 662-5433.


N Wrote:  Thank you for taking the time to read my email. I recently found out that my son and I are eligible to apply to be Canadian Citizens. Within three years after I arrived in Canada, using the advice and the window of opportunity presented on your shows (I have been a big fan since I saw it first on television), I have set up an RESP account, RRSP and TFSA. I would not have thought I would be able to put money away for myself. On 2012 I got married and I have changed my status provincially but just recently changed it on the CRA.

I received mail from the CRA that says I owe them back $450.00 for the GST Low Income Family Act since my status financially is now combined income.

On top of that, I received more mail from the CRA that I have to pay back $938.52 for the Canadian Child Tax Benefit under the single family act from January 2014 to June 2014.

I called the CRA and they informed me that there is no time frame for this payment and no interest fee as well but I am concerned if I don't pay it off right away my credit history might not look too good.

As I already have issues with my Bank (I opened up another RESP account for my son and found out that aside from the account they opened they also gave me a credit card to which I did not agree or sign), the Financial Advisor whom I spoke too did not seem to understand what my concerns are.

I would like to know if I can pay off all the amount I owe to the CRA from my TFSA account?

If I do pay it every month (full amount divided by 12), will it affect me someday if I want to borrow money from the bank for my first home?

I work as a cashier on a retail store and earn enough but not too much to build enough money for my saving account. My options were taking it off from the TFSA to which I have $6000 or just pay it off gradually as there is no interest.

Gail Says:  This is an example of doing the thing that "feels" best to you. Since there is no interest being charged (really? are you sure) there's no downside to making the payments. However, if you would sleep better paying it all off at once, simply use the money in your TFSA to repay CRA and then make the payments you would have made to CRA back to your TFSA to top it back up.


L Wrote:  Gail we live by your rules! We have no debt other than our mortgage and are working to pay this down, but I have some questions for you. Currently my husband makes $130,000 a year and I am off work, but will be retuning to work in the near future. We base our life on his income as I have on again and off again health problems and always want to ensure we can afford what we are doing. So my concern is we are never saving enough and my husband is we aren't having enough fun spending anything! I think we might need a bit more balance; he has an employer RRSP plan he puts 5% away and they match it plus he gets employee profit sharing, sharing at an average of 5-10% per year that goes into a pension plan for him. We also buy discounted stocks at 2% of his pay and are leaving that for a rainy day or till retirement. On top of that I save an additional $400 a month for a RRSP. We put $400 a month away into savings and have an emergency fund that is good for six months of expenses. I also save for a house maintenance fund and a future car purchase and all the other things. I think I might slightly be over doing it! In fact I really think I am overdoing it, I was thinking of cutting the RRSP and savings in half at this point just so we can do some more things, but is this realistic? I just want to make sure we have fun now but can afford the future as well! Thanks for your opinion and keep up the straight talk about money!

Gail Says:  It is important that both you and your husband have retirement savings so rather than cutting the $400 to RSP’s for you, why not trim the $400 a month to regular savings especially since you have six months' worth of expenses covered in your emergency fund.  And when you are working, make sure you're also playing and having fun!


A Wrote:  My friend found out 2 days ago that he owed $600 to MasterCard, instead of paying it off, which he could; he purchased a $300 vacuum for his car. He ignored me and his girlfriend on paying it off before this purchase. What can we do to keep him from starting a debt hole?

Gail Says:  You could calculate how much he will pay in interest on that $600 balance if he uses only the minimum amount as his payment option. Here's a good calculator to use: http://itools-ioutils.fcac-acfc.gc.ca/CCPC-CPCC/CCPC-CPCC-eng.aspx

As you will see, assuming an interest rate of 18% and minimum payments, it would take 7 years and cost almost $400 in interest to pay off that $600 balance, so everything he bought on that card would cost that much more!


H Wrote:  After my divorce in 2010, I declared bankruptcy. I've worked very hard to get back on my feet since then and have been trying to rebuild my credit. I have one credit card with a small limit which is paid in full and have several utilities in my name which are also paid in full each month. I recently ordered my credit report and noticed that many of the credit cards from my marriage, which I had assumed were part of my bankruptcy, are still listed as revolving accounts. Is this normal? What can I do to remove these items from my report?

Gail Says:  If, in fact, the accounts have been closed, you can write to the credit card companies and the credit bureaus and ask that they be removed. If they haven't been closed (hey, who knows) then write and ask for them to be closed and then watch your credit history. Follow up in three months if nothing has happened.


C Wrote:  Is the 6% retirement savings rule (starting in your 20’s) or 10% (in your 30's) apply to your gross or net income?

By the time I hit my 50’s, I should have 8 times my salary saved. Does that include assets like the equity in my house because I live in Vancouver, and my house is worth a ridiculous amount of money?
Gail Says:  The savings rule applies to your net income. As for the house, yes, as long as you plan to sell it and use some of the money for retirement income.


C Wrote:  Never Too Late refers to having 11 times your salary saved by the time you hit 60.  Is that your net or gross salary?

Gail Says:  If you are saving inside an RSP then it would be gross since you're going to have to pay tax on the money when it comes out. If your savings are non-taxable, and you have no other "taxable income" that would drive up your tax bill, then you could base it on net… but gross is safer.


T Wrote:  How do I get myself out of debt? I'm $4000 in debt, mostly from school expenses I had to put on credit cards when OSAP alone couldn’t cut it come textbook season. I don't make much because I'm a student who doesn't have much time to work and it feels like all of the little money that I do make goes into paying interest, I barely even make a dent in what I actually owe. Is there any way out of this?

Gail Says:  The only way out of debt is to make enough money to pay it off. If you don't have time to work in traditional jobs, can you find one that pays you while you do your homework… think gas station attendant, over-night care-giver, and the like. If there's no way to solve this while you're a student, at least keep up with the minimum payments and then bust your butt to get the debt paid off ASAP when you're done school. Or take extra work over the holidays to get back in the black before your next semester starts.