March 2015 Questions & Answers

 


J Wrote:  I was laid off from my oil industry job in October 2013 with an excellent severance package. Since I will turn 65 in June 2014 my financial advisor says I can afford to retire now and maintain a modest standard of living with monthly withdraws from my RIF that would leave about $100,000 in my RIF account by the time I turn 90. Income from OAS and CPP will be about $1500 per month. My home is paid off; I own a new car and have no debt, so I think I have done everything right. But I can't get past a life-long need to save and plan for a financial future! How can I get past the need to be hoarding my money? I find myself frightened to spend anything!

Gail Says:  The savings 'habit' can be a tough one to shake when it comes time to stop saving. When I went through a difficult time and found myself in "super saving" mode, I actually had to add a line to my budget called "Pleasures" and make myself spend that money. It took a little time, but my mindset adjusted. And that's what you need: some time so your mindset can adjust. Hey if you're going to have $100,000 left in your RRIF at 90, you're fine.

Do up a budget for retirement. Figure out how much of your income will go to "needs" and how much you'll be spending on "wants". Knowing that there are places you can trim back should you need to (if the caca hits the fan in some way) will help bring you some peace of mind.

Make sure you allocate for taxes on your income, maintenance for your home, and whatever else you typically include in "planned spending" like clothes, travel, property taxes and the like. Each month, put this money in a high interest savings account. You'll feel like you're saving, but you're simply making sure the money earns some return while you're not using it. When you need to pay your property taxes, buy a new outfit or fix a window, you transfer the money back to your chequing account.

You've worked hard, planned well and done a good job of taking care of the future. It's here now, so enjoy it!

 

A Wrote:  I watch your shows everyday and have some questions and need some help. I am 23 and recently went on maternity leave. My boyfriend has a great job and tries his best to support us. We don't have a lot of debt ($3600 CC and $1700 car loan) but I am not sure were all the money is going. All the money I receive goes to bills (then I have nothing left) and he pays the rent ($1200). So what happens to the rest? Since it is his should I even ask? We have no savings and no emergency fund. I want our debt paid off and I want to own a home but our finances are separate and I need more help from him. Should I take control of all the money coming in? Is it okay to ask him for money to help pay off our debt? Because I am the only one paying it off. I feel like I am struggling and he gets to do what ever he wants. Is that how it will be till I am working again? Should I go back to work early so I have more of my own money to pay off the debt? I am really stuck on what I should do at this point and could really use some advise.

Gail Says:  Did you decide to have that baby all by yourself? If your mate doesn't see that "a family" means coughing up more than rent, you've got some work to do. First, make up a budget that shows all your expenses in one place. Make sure you've created a debt repayment plan. Set your credit card payment at $400 under "debt repayment" on the budget. Next, add it up and figure out what you should each be contributing proportionate to your income.

While you're on mat leave your contribution will be smaller (maybe) than when you're back at work. To do this, add up both your take-home pays. If you take home $1200 a month and he brings home $2,400 your joint take home is 1200 + 2400 = $3600. Next, divide his income by the joint take him to see what % of the expenses he should be covering. So 2400 ÷ 3600 x 100 = 66.66666 which is 67%. So he should be paying 67% of the expenses and you should be paying the remaining 33%.

While you were just living together (before the baby came along) it may have worked to just split the bills, but that's not working anymore and you need to change how you do this. You'll only end up deeper in debt if you don't figure this out now.

 

B Wrote:  How do you get around exorbitant bank management fees?

Gail Says:  I'm not sure what you mean by "exorbitant bank management fees."

If you're speaking of account fees then you need to take a hard look at the charges on your statement and how you use your bank account. Multiple ATM withdrawal fees means you're using your bank account like a wallet. And if you're paying to use another bank's machine, then either change to a more convenient bank, or find other ways of getting your cash without it costing a fortune: make only two cash withdrawals a month and portion the money to last or use the cash-back system at the supermarket.

If you use multiple banking services and pay for them on an individual basis, you should shop around for an account package that gives you the services you need for a fixed amount each month.

If you're speaking of the management fees charged on various types of investments -- typically referred to as the management expense ratio or MER -- then you need to know that banks charge some of the lowest fees for investing. Besides, who cares what the fee is if you're getting the return you want. An investment with a 0.5% fee that returns 6% isn't as profitable as an investment with a 2.5% fee that returns 10%. So it's the fee relative to the return you're getting that's important, not the fee itself.

The general rule of thumb is that you can spend about 4% of your net assets a year to create an income that will last and that will keep pace with inflation over time. That's the number most pension plans use, though there can be some variability depending on who you ask. So if you plan to spend $45,000 a year as a couple, you'll need to have $1.125 million in assets you can cash in as necessary. Might I suggest that you go get a copy of Never Too Late and work through the exercises to see exactly where you stand so you can make plans that work for YOU?

 

N Wrote:  my husband said he heard you speak about a book you enjoyed about a bookstore. He thought I would enjoy it too and thinks the Authour's last name was Block.  When you get a chance would you email me the title?

Gail Says:  It's a series that includes “The Burglar Who Liked to Quote Kipling” by Lawrence Block. Enjoy. (You can always look for books I've read on my website under the "Gail Reads" category.

 

J Wrote:  I've just recently come across the "wealth" (pardon the pun :-) of information you offer - which is wonderful. I can definitely start putting some of the practices to work for myself.

My questions is - do you have any information targeted for older single women? I will be 60 next year and have am afraid I am on the road to "Freedom 99". That's okay, I know I will need to work as long as my health allows, but I want to start being smarter about it and I'm wondering if there is any information on your website specifically targeted for seniors? I took a look but couldn't see any.

Gail Says:  You should head on over to the Other Voices part of the site and read everything written by RycePapers (look under Our Bloggers on the right side of the page). Victoria is retired and many of her blogs are focused on issues you may be interested in. (When she was "done" writing for me, the readers demanded her back!) She's great.

 

A Wrote:  As a Canadian of Spanish descent who is currently in a relationship with a native of Spain I have noticed a rampant lack of financial responsibility/education on the part of the general public (ie; middle and lower class). Having benefitted greatly from your advice I attempt to pass on some of your wisdom to some of the locals including my significant other, and I can’t help but see a possible market for your books and advice. Have you ever considered having some of your publications translated and adapted to other languages?

Gail Says:  A Spanish publisher would have to ask to acquire the title. The books have been translated into French and Korean and are also available in India through an Indian publisher, although in English.

Why don't you check out www.mymoneymychoices.com, which is my new financial literacy site. You could create a Spanish Tribe and be the person who leads them down the path I've created to financial control.

 

P Wrote:  We met at your book signing in Calgary Costco about 3 years ago. I bought several copies of your book, and while you flashed your ring at me, I mentioned moissanite. Just curious if you ever followed up on this glorious and (cheaper than diamonds... and better than diamonds) option?

Gail Says:  The flashy rings I wear cost me about $40 a piece at my local store. I don't believe in spending heaps of money on jewellery; it's just not my thing. I did look into the moissanite. While beautiful, it has no place in my budget.

 

M Wrote:  I listen to you on NewsTalk1010, and have several of your books ... and I just LOVE your common sense attitude! My question is: do you ever do personal consultations, for a fee ...either per hour, or a set amount? I would feel privileged to meet with you at time and location of your choice - I even think we'd enjoy meeting each other!

My questions concern distribution of my assets in the most tax-effective way; e.g., I have dividend-bearing stocks (with Nesbitt Burns), a RRIF, a LIF, an Open and TFSA account (with Assante), and some mortgage-free real estate - all of which totals a sizeable amount.

As I am now 73 with a spouse who will leave me even more assets - I won't need it all! I have 5 adult children, (11 grand-children and 3 great-grandchildren), and I would like to give "chunks" to them now, rather than when I die which could be 20-30 years hence.

What do you think? I am certainly lucky to have such "problems" (although I confess that the "harder I work - the luckier I get", so I am happy and thankful and not at all "guilty" about my good fortune).

Again - I would love to meet in person with you, and would be happy to pay for such a consultation.

(Some things that puzzle me: Q: Is money from an Open Account tax free, as it is with after-tax dollars - although the invested interest would of course be taxable? Q: Are all Wills available in the Public Domain...meaning can anyone look one up and get all the itemized details of who got what, how much etc., and what the total of the Will actually was? Q: If a Will has only the spousal home, a RRIF (both of which would go to me), and the only other thing was an Open Account with funds to be dispersed to relatives - does that Will have to automatically Probated?)

Gail Says:  Sorry hon, I don't do personal consultations. But I will answer the questions you've asked here:

1. If you believe you have more than enough money to live well, then gifting while you are still alive is a lovely idea. Why don't you decide what your surplus is? Then divide it by 2. Gift the result. You're going to keep the rest for a) a future gift and b) just in case you underestimated your needs.

2. Money in an unregistered or "open" account has no tax implications other than the taxes that must be paid on the income earned on that money.

3. Please do not use a Will kit of any kind. The complications can be horrendous. When making a Will (or 2 in your case) seek the help of an expert -- a lawyer who does estate planning. Just as you are willing to pay me for my help, you should pay a lawyer to make your Wills (and powers of attorney while you're at it) because estate law is a pig! And if you don't do it right you can end up in the slob.

4. Anything on which there is a completed beneficiary designation -- insurance, homes held jointly, RRIfs for which the designations have been completed -- are not probated. Anything that passes through a Will is if there has been no beneficiary designation made.

I'll be doing a fund-raising campaign shortly to raise money to continue the financial literacy work I'm doing. If you would be interested in making a contribution let me know and I'll add you name to my mailing list and let you know when the program is ready. Best to you and your hubby.