June 2015 Questions & Answers



K Wrote:  My husband and I have loved all of your shows including The Baby Edition and Prince$$ but most notable the plain and simple Til Debt Do Us Part. I am a high school math teacher. I'm on maternity leave and returning to work for the final 6 days in June. These will be the final days of high school for these students before entering the real world. I could give them a Calculus exam on material I haven't taught and what they will never use in real life. I want to leave them with 6 days they will never forget. I'm thinking of incorporating your ideas into 6 days of financial planning. It's not a lot but it's better than nothing. I was thinking of selecting two shows that would be most applicable to them and showing them the first fifteen minutes (end it right before you do the challenges) so they get the idea of how clueless people are and how much debt people have racked up. I was then thinking of getting them to research a job they would like, calculate their monthly income, divide that money into how much they can afford to spend in each category (6% on savings, 35% on rent, etc...) and finally to determine how much can go in each jar. Separately, I will have them keep track of their spending for the week and have them calculate how much they'd have in retirement if they used that money to invest every month just to accentuate how compound interest will really work in their favour at their age.

I'm completely open to suggestions with what I can do regarding financial planning and thought I'd ask for your input.

Gail Says:  I applaud you for taking the opportunity to give your students a money boot-camp experience. I would make sure to cover a) what the cost of student loans are if you use only the minimum repayment schedule that the system defaults to and b) how to manage cash flow and lump sum money while at school since this may be the next step for some. Here's a blog I did with some links to free resources on my website. I created these specifically for students. http://gailvazoxlade.com/blog/?p=192

The tracking spending shouldn't be linked to 'spend it or save it' since that's not really the choice. Savings needs to be a habit ... you just do it ... so calculating the compounding on that 6% saved over 40 years is a great exercise. The tracking of spending is more about knowing how much money you have and the conscious decisions you must make. Here's another blog that explains that: http://gailvazoxlade.com/blog/?p=5335.  Let me know how it turns out.


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.


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.


J Wrote:  A friend of mine is considering a $350,000 mortgage. He also has a lot of debt (credit card, student loan and expenses for his business). He was advised to combine all the debt into the mortgage. Is that a good idea? It seemed a little scary to me - - -the idea of taking 30 years to pay off credit card debt??

Gail Says:  Combining high cost debt into a mortgage where the interest rate is much lower does make sense if you do it to save on interest cost. But you're absolutely right when you say taking 30 years to pay off a credit card is not saving any money at all. The right way to do this is to figure out how much it would take per month to pay off that consolidated debt in 36 months or less. So if he has $32,000 in debt that he is consolidating to the mortgage, he would divide $32,000 by 36 (months) = $889 a month. The next step is to set up a high interest savings account and transfer that $889 a month to the account for the purpose of making a principal pre-payment against the mortgage. That will get the consolidated debt off the mortgage fast enough for the interest savings to have actually been worthwhile. It may be a tough three years with little extra money beyond the basics. But your friend already spent money and had the benefit, and now it's time to pay it back. If all dude is doing is freeing up cash flow so he can go spending again, then he's going to be back in trouble in no time.


M Wrote:  My question is regarding common law. I divorced a couple of years ago which was very tough emotionally and financially. The money I had left after the divorce I saved in a high interest savings account to hopefully be able to buy a place one day which has been tough so far. I'm currently living with my girlfriend for almost a year now. Things are not going so well and I'm scared that she might try to get money from me if we break up. I'm a little confused with common law rules but is she able to get anything from me? I've already been through a tough time with divorce a couple of years ago and the last thing I want is to lose any of the savings I have left. Can you shed some light on my situation?

Gail Says:  It depends on where you are since divorce comes under provincial/regional laws. Everywhere except BC common-law is NOT the same as married. She would not be able to touch your money. She might make a claim if she has receipts to show she has contributed (if she bought furniture, for example, or paid for a new roof) and you'd have to compensate her for that. But your income and assets are pretty safe. BC passed fresh legislation giving common law partners the same rights as those who are married, so that's a whole different ballgame.


S Wrote:  My boyfriend moved into my house that I own. We both have spending problems but with different items. He lived with his mother for quite awhile and paid $600/month inclusively. He is paying the same at my house and I have asked him to start paying $700/month. I can get pretty cranky because of my debt. So I'm not sure if I have a right to feel angry at him because he seems more like a renter instead of a partner. Is it wrong to expect him to pay half? Before groceries, gas, insurance (he also drives my vehicle), my house costs are just over 1,750/month.

Gail Says:  I usually tell couples to split their joint expenses proportionate to income. If you make 65% of the household income, you pay 65% of the joint expenses (housing, food, utilities). Since he's also driving your car, include the car expenses (payment, insurance, maintenance, gas) in the joint expenses. If he doesn't want to pay his fare share, he doesn't get to live the lifestyle.

As for your debt/spending problems, I strongly urge you to take control of that now before you have to write to me again and tell me that you're at your wit's end. Start by doing a spending analysis to see where you have each been spending your money. Then do up a budget that shows what you'll realistically spend in each area. Make sure savings are part of the plan.


A Wrote:  My husband and I in our mid-30's and make approx $165K a year between the two of us. Our only debt is our $215K mortgage and $10K owing on a car loan (with 0% interest). We make extra payments to our mortgage and expect to pay it off in 12 yrs.

My husband has been fantasizing about getting a pickup truck at the cost of approx. $40K. He commutes 100km a day to/from work and right now only spends about $200/month on gas. I expect that will at least double with a truck. To me, it makes no financial sense whatsoever to buy a fuel guzzling vehicle that will cost more in insurance, gas, and payments. I told him to wait until he pays off his current vehicle so there is some trade-in value to it and we can re-evaluate at that time (2.5 yrs worth of payments left), but to him that's too far away.

We have approx $15K in savings; have an emergency fund of $15K and RRSPs, pensions at work etc.

Financially we could manage the additional $500/month in gas/car payments but I think it is the dumbest thing ever. We have 2 young kids and pay for daycare etc. I see that money better spent giving them life experiences and things to do as a family rather than a truck for him.

Is there a point where you think if we can afford it - just do it? I just can't wrap my head around it, but am not sure it's worth the (almost) daily fight in our marriage. I'm just wondering if there is any other way I should be looking at it from a financial standpoint.

Gail Says:  The rule of thumb is to not spend more than 15% of your take-home pay on transportation costs: vehicle loans, insurance, gas, maintenance. If the new vehicle goes over this, then show him your budget (you do have a budget including what you want to spend on the kids' activities and experiences, right?) and ask him where he thinks the money should come from. It's easy to prioritize wants when you don't have to deal with the consequences of what you'll have to give up, to get those wants. Asking him to choose what you won't buy so he can have his truck will help I think.


L Wrote:  I am divorced and grateful to have watched your shows and read your books, they have been so important to help me get my life in order, to where I clearly see my future. I have my emergency fund in place now, no consumer debt, my oldest in college now, and a forecast to burn my mortgage papers in seven years!!! My partner, soon to be my husband faces the challenge of how he is to note the current child support he pays? Should he list it in the income section as a negative because it comes first before any expenses he has for his home, life and children while they are with him? He has followed so many points you present, but finalizing his worksheet is confusing.

Gail Says:  You're a smart girl. That's exactly the right thing to do.