Gails Blog

There’s nothing like leaving home to remind you how wonderful your life really is. Ken, my husband, loves to quote T. S. Eliot:

We shall not cease from exploration And the end of all our exploring Will be to arrive where we started And know the place for the first time.

 

Eliot was a genius not just because he could really write, but because he could capture a truth so clearly.

When was the last time you stopped, looked around you and saw your life with fresh eyes? Never mind the goopy stuff on the counters, or the clothes on the floor. Never mind the dust accumulating on the shelves. Never mind the newspapers piled up in the corner, the light bulb you’ve been meaning to replace or the dead leaves on your houseplant.

Close your eyes and think about the least fortunate person you know. It has to be someone you know reasonably well. Okay, now imagine that you’ve given your life to this person. How does she or he see your life? Look through new, more appreciative eyes.

It’s interesting how you can see your life differently if you practice looking through the eyes of someone who appreciates all you have (as opposed to seeing all that’s missing.) So often, we take for granted what we have, and look only at what we have not. Whazzup with that?

 

As y’all know, if you follow my blog, I’ve been away in Italy for the past two weeks. I arrived home to over 100 new questions. Wow! Y’all have a lot you need help with. Some of you are asking questions I’ve already answered so you have to go and look for the answers, since I’m not going to repeat myself. Some of you want to suggest show ideas, which I’m happy to forward to the producers. Some of you are pretty demanding. I got this from one person:

You have not replied back to me. I would really appreciate you writing back , I realize you have a lot of fan mail. I really enjoy your show I never miss an episode.

Hold your horses, sweetie-pie. I’m going as fast as I can. And I try to answer as many questions as I can. However, I’m just about to start shooting seasons six and seven of the show, and I’m going to be a little busy. There’s no way I can answer all the questions I get, so y’all need to be using the info on the site to find some of the answers to your questions. Use the SEARCH (click on the magnifying glass at the top of the screen), to find what you’re looking for. It’s pretty good.

Here’s an example of searching for what you want. Pamela wrote:

Your show is fantastic and I learn something new with every episode. I have implemented the cash jars into our routine and wow, what a difference it makes to the discipline of spending. The only thing missing for me is “Where can I find that fabulous ‘Office in a Box’”? I have googled all over and can’t seem to find it. Can you point me in the right direction please? Thank you again for such a great show, for opening my eyes and giving us a chance at a debt free future!

Pamela, use the search to look for “office in a box”. You have to search the blog separately (down on the left side of the page). You’ll find what you’re looking for.

 

I got a great question from Evelyn:

What happens if you start your budget just before a large yearly bill is due? Where does the money for the bill come from? I haven’t had enough time to save yet! For instance, if I start my budget in March, and my car insurance is due May, and I’ve worked out that I need to put aside $40 a month to pay for it yearly, I’ve really only put $80 aside by the time the bill is due after starting my budget. Where does the extra come from?

Well, Evelyn, this is one of the reasons you need to have an emergency fund and some savings set aside - so you can backfill your budget when you need to. Alternatively, you can steal from the categories you haven’t had to use yet like your holiday budget or your home maintenance budget. Failing that, haul in your belt and be ready for a lean month while you suffer through the shortfall caused by the big bill. Take heart, next year will be easier if you stick to the plan.

 

Here’s another question that brings to light some issues a lot of people have:

I am a single 44 year old woman, no dependants, making 95000 a year beginning to panic because I don’t know if I will be able to retire at 55…my total debt is 75,000 for my mortgage…should I pay my mortgage off and then save like crazy for my retirement? I only have 50,000 in RSPs… or should I simply try and save 1000 a month for the next 14 years. I do have a fairly good pension plan, but feel anxious just the same.. my mortgage is 6 years from completion, but I could cut the length in half with a disciplined pay down…what would you do? any other suggestions?

First, what’s the rush to retire? What are you planning to do with your time once you’re no longer doing the job you’re currently doing? If you’re planning to restyle your life, would a new career, even a part-time job, fit into your retirement picture? Any money you’re able to earn during retirement will reduce the amount you have to save before you leave work.

Second, the mortgage versus RRSP/savings question is one I get all the time. My usual answer is this: Make your maximum RRSP contribution and then use your tax refund to pay down your mortgage. It’s a win-win solution.

Third, quite worrying and find out what your income/expenses will be during retirement. As long as you’re living in I-don’t-know-what-to-expect land, you’ll be wringing your hands. Get the facts and lose the anxiety. That means:

a)     figuring out exactly how much you’ll be getting during retirement from your company pension plan and from government benefits,

b)     figuring out your likely expenses during retirement,

c)     deciding how you’ll fill the gap if there is one. As I mentioned before, you can work to help fill the gap. Or you can save like a mad fiend so you won’t have to. But at least you’ll be dealing with real numbers and not some nebulous anxiety.

 

Kristi wrote to ask:

I have 2 credit cards - one with an interest rate of 23.50% and one with an interest rate of 19.50%. I have often seen you on your show tell your clients to call the credit card companies and ask for a lower interest rate. I would like to know how I go about doing this. I am unsure what to ask and how to ask. I would like to have the higher of the interest rates lowered significantly but don’t know what to ask/say to have this happen. Any advice that you can offer Gail, would be greatly appreciated.

Okay, go to Oprah’s website and print a copy of the script Jean Chatzky provided for negotiating with your credit card provider. However, please note, because of the current credit situation, negotiation has gotten tougher and you have to be more persistent. You may also have to be willing to switch to another credit provider (assuming someone will have you) that offers a lower-rate option. Good luck.

 

Matt wrote:

I was watching “MAXED OUT” on the W Network. They were featuring a couple (Gillian and ED) that I knew I had seen before. Then I realized that they were on your show (”Gail force winds” was the name of the episode) Unfortunately, they did not follow your advice and were still in Debt trouble. When they were on your show (about 2 years ago), they were $50000 in debt. Now on the “MAXED OUT” show they are $70000 in debt. Have you though of doing a “follow-up” show, on some of your previous shows, to see how everyone is doing and offering more advice and guidance. I always watch your show and the advice you give.

Okay, Matt, and every one else who wants a follow-up show, the only way to get it is to go to SLICE and bug them. They’re in charge of what we do, so if you want it, than YOU make it happen. They won’t listen to me.

As for Gillian - I loved that show, it was so funny - if you go to the TDDUP Facebook page,  you can see how she responded to a similar comment.

 

Rhonda wrote to ask:

Do you suggest having separate account for emergency funds and other types of savings (vacation, sports registrations, etc) and I am also concerned about the interest we will have to pay on the money in the bank. Do you have any suggestions until the tax free savings account starts up in January?

First, whether you open up separate accounts or have one account and keep track of the various amounts for each category on paper depends on how organized you are. Since it doesn’t usually cost anything for a savings account, that’s the option you should use if you can’t keep track on paper (or a spreadsheet on your computer).

As for the interest you’ll have to pay tax on, hey, what’s your worry. If you earn $10 in interest and pay $3 in tax, you’re still up seven bucks. Just don’t spend all $10. Set aside some for the taxes.

 

And from K:

First of all, I love your show. It was the turning point in my view of our finances, and then a huge help in getting my common-law spouse to see where we were heading. It wasn’t as bad as most of the people on your show, but we are SO much better off now than we were before. Anyway, my question was: what is the main difference between and RRIF and a LIF?

Terrific question, K. A RRIF (Registered Retirement Income Fund) is what you use to mature a regular RRSP. A LIF (Life Income Fund) is what you use to mature a locked-in RRSP, which was created with funds from a company pension plan.

 

A wrote:

On the budget form there are 3 places to fill in taxes. There is the tax rate on the income, property tax and again 4th from the bottom. What type of tax goes in that blank?

A, that’s for any taxes you may owe, which is why it’s with “debt repayment”.

 

Heather wrote:

At what age would you suggest one start buying life insurance? I’m 26 and single, with no dependents.

Heather, right now would be good, while you’re young and healthy and your insurance premiums will be nice and low.

 

M wrote:

My fiance and I are planning a wedding but we have no idea what our budget should be, how can we plan a beautiful day without putting us in financial debt?

Go read my blog, “Leah,
this one’s for you” which has a bunch of links for people who are getting married. Mazal tov!

 

Annieshome wrote:

If you ask the credit card company to lower the interest rate, does it then affect your credit rating? We went to see a company who was able to help us clear all of our credit cards and debt but it would then be reflected on our credit report and would then make it impossible to get a mortgage or loan. Very hesitant to do this. Please help!!!

The answer to this is simple: No, asking for a lower interest rate doesn’t affect your credit rating. And BTW, I don’t like credit counseling services for this exact reason.

 

S wrote:

I absolutely love your show! I’m a dedicated viewer and we use a lot of your tips and therefore my husband and I are in a great financial position but my father is not. My father is getting older and his health is not the best and I worry that his spending habits are going to be my problem after he passes. Is it true that a parent’s debt must be covered by the family? He does own a home but it is mortgaged to the max and he also has credit card debt. Please let me know if I should be worried.

S: unless someone has co-signed on a debt, the debt is the obligation of the borrower only. No one can be made to repay a debt that they have not signed on. I hope that sets your mind at rest.

 

And from yet another “S” - what’s with all this anonymity people… what are you afraid of?

We are looking into buying our first home. Gross, we bring in $93,000/year. We have no debt and have over 20K in the bank saved up, but only want to put down 15K and leave the rest for emergencies. Most banks want you to put down 20% for the down payment or pay a lender’s insurance fee. My question is, would it be better to save up the 20% and then buy a home or put down what we have now and pay the insurance fee? It will take us another year to save up the additional money for 20% of a $215,000 home. Do we throw our money away on rent or on this insurance fee?

First, rent is not money thrown away. It’s what you pay to live in a home that you don’t own. As for whether to throw money away on “rent” or on “mortgage insurance”, that’s your call. For my part, I believe in 20% down. If you can’t manage to save that, I don’t believe you’re ready for home ownership and all it’s inherent costs.

 

G wrote to ask:

Gail, I watch your show faithfully. My husband and I (43 and 42) both make excellent money (approx $9000 monthly take home). We have a $149000 mortgage and have consolidated all of our debts (car, credit cards etc) onto a credit line for a total of $21,000. This all makes me nervous. Our mortgage is up for renewal and we are thinking of rolling this credit line into our mortgage and have a total mortgage of $170000. Would you recommend this? Thank you for any help.

Yes, G, I would because your mortgage has the lowest interest rate and is the most manageable way of dealing with debt. However, I would also recommend that you save some extra money each year to make a principal prepayment to mitigate the extra interest you’ll pay by consolidating your debt on your mortgage.

 

Lucy wrote:

Hi Gail, First I want to tell you how much I enjoy your show. You offer really good advice. My questions is: I took $20000 from my RSP to put as a down payment on my 1st home. I have 15yrs to pay it back no interest. 1st was that a good choice? And is that a good debt or a bad one?

Sure, that’s one way of getting into a home. Of course, the sooner you get the money back into your RRSP, the faster sit can start growing on a tax deferred basis. And technically, it isn’t debt at all (although it has to be repaid) since it was your money to begin with.

 

Alicia wrote:

I’m a student in my 4th year of university, and I watch Til Debt Do Us part religiously. I’m not in debt, and I’m very paranoid about spending money, but I was wondering if you’ve ever considered doing a debt prevention episode?

Alicia, all my shows are “debt prevention” shows since my mantra is DON’T SPEND MORE MONEY THAN YOU MAKE.

 

Stacey wrote:

Hi Gail!!! I love your show! I have my TV timer set for it everyday!!! My husband and I just had a baby and we’re trying to figure out if we can afford for me to stay home after my mat leave is up. Any suggestions on how we can figure this out?

Sure, Stacey. Figure out what your income will be without your job, compare it to your expenses, chop what you can, and see if you balance. If you’re not spending more money than you make - WITHOUT USING CREDIT - then staying home with baby is a go.

 

Some people who are using the Interactive Budget don’t understand how the numbers for the jars are arrived at. Since the jars are “weekly” and there are 52 weeks in a year, the program takes the monthly amount, multiplies it by 12 to get a yearly amount and then divides by 52 to get a weekly amount. (FYI, on the show, we simply divide by 4 because that’s how long we work with a family.)

A LOT of people are writing to ask about the percentages I r
ecommend for things like housing, debt repayment, and transportation. Go look at the Interactive budget, which has the percentages on it. As for how much you should be spending on individual lines on your budget, I don’t know. Since I don’t know how much you make, how many people are in your fam, and what your other expenses are, I couldn’t even guess. Don’t be lazy. Do up a budget and as long as it balances (you aren’t spending more than you make) you’re fine.

It seems my accent continues to be a topic for discussion and curiosity. I am from the land of wood and water. Good luck with that!

And once again, for all those who haven’t been paying attention, I’m sorry but I do not take private clients. 

This entry was posted on Monday, March 24th, 2008 at 5:36 pm and is filed under This & That. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.