Gails Blog

I’ve been married three times, and I haven’t had two husbands who’ve dealt with money the same way. It seems with every re-union, there are a whole new set of habits and preferences to learn about, and a ton of negotiating to do. It’s not a job for one sitting.

Yours, mine and ours: There’s no one right way to handle money in a re-marriage, but since you can’t escape responsibility for your partner’s decisions, you better talk about it. Some couples maintain separate savings and checking accounts, paying for their own personal and children’s expenses and sharing the costs of running the household. While they may still quibble over shopping habits, keeping some money separate leaves each partner free to indulge.

Who gets to decide: Couples have always struggled with how to save and spend their money. For the newly remarried this can be further complicated by their histories, particularly if spousal and child support are issues. To create a realistic picture of your financial state, keep tabs on where your money comes from and where it goes for about six months. Then you can make some decisions about how much each of you will contribute to the household, and how much discussion is appropriate (and who will prevail) when purchases are made.

Who we are with money: By the time we get to husband number two or three (or four), most of us have clearly defined money personalities that affect our decisions about education, housing, clothing, vacations, medical and dental services, investments, and gift giving. Financial responsibilities are also a big part of this discussion. While many a newly wed may know that her spouse has financial obligations to another family (a previous spouse, a mother, or Great Aunt Lucy), living with the reality is often very different from the intellectual acceptance of that responsibility.

Where credit is due: While each of us may have a different money management style, understanding which styles are no longer appropriate in a new family is critical. If you’ve always chased the blues with a shopping spree, you may have to take up kick-boxing. You’ll also have to get a grip on the impact of past decisions on your new family. One that’s often overlooked is the fact that divorce financial settlements are not binding on creditors. If you and your former spouse continue to have both of your names on a loan or account, you are at risk for each other’s financial behavior. That means the new family is also at risk. So take an inventory of your financial obligations.

Home safe home: Put more kids and more stuff under the same roof and you’ll probably want to take a look at your insurance. From home insurance to car insurance — adding teenage will be expensive so brace yourself — you need to do a full review. And if your divorce agreement assigns your former spouse as the irrevocable beneficiary on your life insurance to cover support responsibilities, it may be time to start shopping for new life insurance too.

Who gets what? You’re also going to have to deal with how your property will be distributed after death according to the law, the needs of your new family and prior agreements. Remarriage makes a will more important than ever. Biological or adopted children of first and remarriages are treated the same. While that may appear fair at first glance, when you consider the fact the first group is through college and the second set are only in elementary school, the picture changes. Most children expect money and property to follow a bloodline, not a wedding band. If you have a good relationship with your adult children, make time to talk over their concerns and expectations. And make sure you’ve clearly identified your position to your new spouse so there’s no misunderstanding about promises made.

Over time, the issues relative to merging your loves and your money will evolve. The issues you have to deal with initially will be very different than those that arise if you start having children together. Some of the things you should talk about may take some time to get to. And you may never be joined at the hip financially. But as long as you keep talking, keep sharing information and keep listening, you should be fine. 

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One of the issues I run into often when dealing with my fams is the arrival of a new babe and the income loss associated with taking maternity leave. In Canada, new moms can take up to 52 weeks off from their jobs and have those jobs protected for their return to work. However, all that time off doesn’t necessarily come with a full paycheque. Yes, there are companies that offer a “top up”, but it hardly ever is for the full amount of your before-baby pay, and it seldom lasts for the full year.

For people who do not receive a top-up, employment insurance (EI) benefits will provide an income. EI benefits are calculated as 55% of your normal earnings up to a maximum salary of $40,000.  So if you’re earning $40,000 a year, which translates into $3333 before taxes a month, or $769 gross a week, you’ll be entitled to 55% of that or about $423 a week, before taxes. Ouch!

On top of that pain is the fact that the first two weeks of mat leave are unpaid, so your income calculation won’t start until the third week. And since it’ll take between four to six weeks to get your first EI benefit deposited into your bank account, you shouldn’t be counting on that money to make your mortgage payment or buy food.

Moms aren’t the only ones who can take time off with your new Mini-Me. Dads can take up to 35 weeks of parental leave; however EI benefits have to be shared between the mother and father so they can’t both collect EI at the same time.

Adoptive parents also get to take parental benefits and fall under the same rules as dads.

So, now that you know you’ll only be getting a fraction of the income you’ve become used to, how are you going to cope?

Some of my fams have resorted to using their credit cards or lines of credit to see them through. Dumb! With a new long-term expense – that’s the baby - adding gobs of interest to the equation is no way to secure your financial future. I meet them when they’ve fallen further and further behind, becoming almost desperate at the hole they’ve dug themselves. And if another baby arrives soon after, OMG!

First, I’m going to say something that may not be very popular: just because we are guaranteed a year of mat leave doesn’t mean we have the right to take it. We only have that right if we’ve taken the time to plan for it, and have the money we’ll need to make ends meet without going into debt.

The best way I’ve come up with for people to see the implication of the mat leave income drop-off is to have them live on their mat leave income for the duration of the pregnancy. Yup. Live on less, and put the rest away for emergencies, to buy the stuff you’ll need for baby, or to start an education savings plan. If you can’t swing it for the months that you’re preggers, you might want to reconsider taking the full year’s mat leave.

The other thing you have to consider is which member of the family should take the most time with the baby. While, traditionally, women have done this, when the woman is the primary breadwinner in the family – and I’m seeing more and more of this - then the income loss to the family is felt doubly. You really do have to do the math to see who should take time off and how much, and how that will impact on the family’s financial situation.

And, of course, you have to make a budget that balances while you’re off, including a whole bunch of new categories that incorporate baby’s food, clothes, personal care (diapers, shampoo, cream), medical, toys, activities, and savings.

Don’t forget the costs associated with actually getting the baby here: hospital rooms and parking. If you have a health plan through work, you may be covered for semi-private room. If not, you may have to settle for sharing a room with a lot of other crying babies. And don’t bank on being in hospital for only one day. I had to have a c-section TWICE and they want to keep you longer. And if there’s any complication with baby, you’ll be “living” at the hospital until baby can come home. Don’t add financial stress to your already over-stressed life.

The arrival of your newest family member should be a time full of joy and excitement. But you can’t expect things to run smoothly if you’re a dope and don’t do some planning. People like to say they didn’t have any time to plan… that they were “surprised” by baby’s arrival. You’re kidding me, right? Nine (I actually think of it as ten) months isn’t enough time to figure out how you’re going to cope? Or maybe it’s that you don’t want to have to face some hard truths. Well, you have a baby to consider now, so it’s time to wake up and smell the poop!

 

I’ve been getting quite a few letters of late from people who are desperate because they have a Spending Spouse. It doesn’t matter how hard these partners work to get their fams out of the red, they Spending Spouses dig ‘em another hole. It’s frustrating. They’re angry.

I’ve talked about this before recommending that the Spouse on the Spot take drastic steps like handing the money over to the Spending Spouse to manage so they get a taste of reality. But that doesn’t always work, as demonstrated when DM gave her BoyMan a little responsibility:

My boyfriend and I have been living together for almost 2 years and he has no part in the bills. I pay and look after everything. I did, at the end of last year give him the responsibility of paying our $40.00 a month insurance bill. It was canceled twice and we were very lucky they let us keep our rate and just pay up front for year. How do I get him more involved but not giving him full responsibility of anything? I don’t trust him to take full responsibility. We are really far in debt, like $40,000.00. For a young couple that’s a lot. Its got me really worried. Maybe I am doing something wrong because we just don’t seem to be getting any where.  Thank you so much for everything. I was your show when I can and your advice has helped a lot and I hope someday we will get the chance to meet you. You have to come to Nova Scotia!

I also suggested that you get naked and paint what you owe all over your body to get his attention. But not everyone has the courage to do this. And not everyone wants to dump their Spending Spouse, as L makes clear in her letter:

Gail, I am at a loss. I just received my husband’s credit card statement to find out that on top of his $16 monthly amount for playing his online game, he also just spent $60 on ‘gold’ for use in his game. The credit card is also raising his APR from 18% to 25.9%… probably due to the fact his account is over limit every month since Christmas. We have already filed for bankruptcy 6 years ago and have been working towards a better credit report but I feel like I am living with a baby with a credit card. I was just speaking with him and his first words out of his mouth were ‘So I guess I am coming home for a fight, eh?’ I am not interested in leaving but how do I deal with him, he will not a. budget or b. deal with the budget that I try and lay out. I work very part time and raise my family and keep house full time. He is happy that I am home to do everything that needs to be done, yet every time a money issue arises he wants me to go to work… if only he would work towards budgeting with me, I could afford to stay home and work the way I do. How on earth does a person deal with a spouse who thinks they need their toys and games? We were doing just fine with less money until he went out and maxed out 2 credit cards.

Lots has been written about the need for spouses to trust each other, to talk about the money, to work together on their goals. There’s very little on how to steer a Spending Spouse back in line or what to do when your BoyMan is unwilling to face adult responsibilities. And while all the usual advice is very civilized - respect each other, be willing to accept his objectives are different from yours, keep a cool head - none of this advice really works with a Dope. It’s all very well for an “expert” to say that you and your partner should spend a month tracking your expenses, but if he won’t, what’s a girl to do?

I know some people have resorted to the “allowance” system, taking all means of purchase away from their Spending Spouses and replacing it with a set allowance their partners can use, but not abuse. This feels motherly to me, and I can’t imagine anyone taking well to the idea of an allowance, particularly when they’re bringing home the bacon. If you are both on an allowance, that can ease the humiliation, but if your Spending Spouse is determined to circumvent your plan, he’ll just go out and apply for a credit card you know nothing about. Better the debt you know.

I do believe that getting your partner involved in the money management will help. No matter how much she resists, make her sit down and go over the budget with you. Very often spouses who don’t handle the money have no concept of how much it takes to keep the boat afloat. Making them acknowledge this by sitting through a weekly budget meeting may help.

One of the things that I’ve had success with working with my fams is simply showing them how much it’s going to cost in interest over the long term. You have to spend some time on a debt repayment calculator to come up with the numbers, but why not take your Spending Spouse on a tour of one, plugging in his real numbers, so he can see how much of his money he’s wasting on dumb interest.

Desperate times call for desperate measures, and if you just can get your Spending Spouse to STOP, you might have to resort to SHOCK. Pick a month and blow your brains out on your credit cards. (Buy stuff you can take back or that you actually need but never buy because you’re always covering your Spending Spouse’s butt).  Drain your bank account. Present your Spending Spouse with the bills and say, “Here honey, there’s plenty more of this to come.” I know it’ll damage your credit history in the short term, but it might save your marriage in the long term. Only you can decide how far you’re prepared to go to get your message across.

And maybe YOU can’t get the message across. Maybe you need to seek outside intervention, professional help to get your partner to open his eyes. Don’t assume that because you can’t reach him, no one can. He may be so inured to your nagging that you’re just a mosquito buzz in his ear. Another person may make great inroads with the most quiet and reasonable of voices.

To all you boys and girls dealing with a Spending Spouse, you have my sympathy. I wish you the best of luck. This is not an easy road to walk, but there’s a lesson in it for both you and your partner. Learn the lesson and you’ll be able to stop banging your head against the wall.

Okay, I’ve done it. A Woman of Independent Means has been updated, edited, uploaded…

and now it’s ready to be purchased. You asked for it, so BUY IT!

 

When I started this website a half-year ago, I promised I’d answer one of your questions every week. I’ve been inundated with questions, and have been responding to two a week. But there are times when I’ve got so many great questions that need to be answered, that I just take a couple of hours and fire-through them. Here’s what I have for you today.

rinkrat_hockeymom wrote:

One of my employers is not taking enough tax from my paycheck. I have been having an extra $50 a pay taken out to cover this since the beginning of the year. I was telling a friend about this, and he suggested it would be more beneficial to take that $50 and put it into an RRSP and I would get thed same result, plus be able to save my own money instead of lending it to the government for a year. Is he correct?

Not quite. While every dollar you put in your RRSP is not taxable, you’d have to put the entire income you’re earning from your second employer into an RRSP to achieve the result your friend is suggesting. I’m all for that… but I don’t think that’s what you’re trying to achieve. So you’re doing the right thing.

If you want to calculate your tax exactly, you can go to Taxtips for a really thorough calculator. If that one makes your head spin, here’s a simpler one that will give you a basic of idea of how much tax you should pay.

 

L from B.C. wrote:

I have just come into to some money — $35,000.00 — and I am wondering what I should do with this money. I currently don’t own my place (renting) and just finished paying off my line of credit ($25,000.00) at the bank as well as my credit card ($25,000.00). I have been working as a cashier for six months at $10.00 an hour. I am looking for a better paying job right now. Can you give me any advice for this $35,000.00. Should I invest this money or maybe put the money into an ING Direct account at 4.5%? I don’t think I am eligible for a mortgage just yet…?

I get a lot of notes like this with people asking for advice on what they should do with a lump of money that’s just fallen into their laps. I like to tell people to:

1. Take care of past mistakes,

2. Have some fun in the present, and

3. Plan for the future.

So, L, on the Take Care of Past Mistakes front, congrats on getting all that debt paid off! Wow! You’re one determined young woman. You’re in a much better place now and you should be very proud of your accomplishment.

On the Plan for the Future front, you’re right when you say you aren’t ready for a mortgage yet, particularly in your neck of the woods.  But you are ready to set up an emergency fund, start an RRSP, even with just a couple of thousand bucks, and begin building your downpayment. As for where to invest the money for your downpayment to grow, you’ll need a financial guide for that. Ask friends/family for a referral to their GREAT financial advisor. Don’t settle for anything less than GREAT!

Using a high-interest account is smart. Making sure you know what you want to accomplish with the money is smart too. So ask yourself what’s important to you and by when you’d like to achieve that goal. Plan from there.

As for my number 2 point: have some fun in the present, don’t go nuts, but take some of your money and treat yourself and someone you love to a Nicey: Dinner out, a fun weekend of movies, a new piece of furniture you’ve been wanting, or a lovely new dress. Or you could decide to set up a Mad Money Account, putting $500 or $600 aside that you can spend on anything you want whenever you want, just for the hell of it.  Have a ball.

 

On a similar theme, K wrote:

I have an inheritance if 60,000 and wondered if I should double up on my mortgage payments each week (that is the maximum allowed) or wait put the money in a high interest account until the mortgage is up for renewal this December 2008 to bay off a chunk of the 120,000 principle?

The faster you put the money to work against the mortgage, the more you’ll save in interest. And any interest you earn is taxable, but the interest you save is not. So double-up and then use whatever is left to make the principal pre-payment at the end.

 

Carman wrote:

What is your opinion for a person to use RRSP savings to pay down debt? We have enough RRSP savings to pay off our debt (excluding Mortgage). Thanks for all you teach on your show, I think everyone could learn something.

I’ve answered this one before, but I’m going to answer it one last time since I get this question every week. Really.

The answer is: DON’T DO IT! I know there are some people who say this is a good idea, but it’s a terrible idea. A really terrible idea. First, there’s the tax you’ll end up paying on the withdrawal from the RRSP, and then there’s the tax you’ll owe because the amount withheld won’t have been enough.

If you’re determined to get rid of your debt, then you’re going to have to bite the bullet, tighten your belt and put your shoulder to the grindstone. If that’s not enough metaphors for you, I have plenty more!

 

T wrote:

hi gail i watch your show all the time and i was just wondering i am 17 and still going to school and planning to go to university soon i am extremely good with money and saving and i have about 7000.00 in my bank account right now. would u recommand when i turn 18 to get a credit card and always pay it off in order to get my credit rating started. i would never spend more than what i have or even come close to spending all i got so i dont think it wud be a problem but just asking for ur advice.

T, if you swear on your Mom’s head that you’ll never spend more money than you have, then I say getting a credit card to build a credit history is a good idea. I’ve seen a lot of kids (and elders) start out with the best intentions and then fall into the carrying-a-balance trap. But if you promise not to be one of the dopes, then I’d say go for the card, Bud, and build yourself a fabulous financial history.

 

Sarah wrote:

My husband and I love your show - yes I said both of us - you’ve got us talking about our finances - YAY! Our question is in regards to student loan debt. I’m in the process of finishing my PhD and my husband and I each have 3 degrees. Our combined students debt is $62,000 (not bad considering) and we have a new mortgage of $120,000. So many of our friends have just followed the plan offered by the bank/government - but 12 years to pay it off??  We gross $76K a year but we’re going to be starting a family soon and our plan right now was to add $200/month as a prepayment to our mortgage. What do you suggest - balance pre-payments and extra student loan payments? Should we make one a priority over the other (student loan interest is prime +1, mortgage 6.3 locked for 10 years)?  We would really appreciate your advice - the bank always says “follow the plan, then you have more disposable income” - yes and they make more money in interest! love your show and your kick-butt attitude.

Ah, yes, there are those Pesky Bankers again, telling you to keep more disposable income so they can rake in more interest. Hmmm. Is it any wonder Canadian’s don’t trust their advisors?

Sarah, leave your mortgage payments as they are, and use all your extra money to pay off your student loans, which is your more expensive debt. Once that is paid off, you can balance mortgage prepayment with long-term saving. As for starting a fam soon, have a great time with that. And while you’re preggers, live on the one income you’ll have during your mat leave so that you

a) get used to having a smaller income, and

b) have a nice pool of savings set aside for when baby gets here.

 

Kerry wrote:

I am a 21 year old full time worker. I graduated with a 2-year diploma in Bus Adm (major accounting) and have taking Intro to Financial Planning as well. After graduating from college with WAY MORE DEBT than I ever imagined from 2 years of school, I have got myself back on track by my own means and would like to offer a credit/debt counseling service outside of my full time job (which I love). I want to educate people before they make the same mistakes I did, and/or repair the mistakes already made. Only problem I have found in my plan is, how do you charge a fee when your clients are already living paycheque to paycheque? PS your show and outstanding way of making the obvious PAINFULLY obvious has changed my life and influenced my (hopefully!) future career path immensely!

Hey, Kerry, that’s a darned good question. Some people who work in debt management affiliate themselves with a company that will allow them to do debt-counseling. Credit counselors, for example, are often not-for-profit organizations that help clients consolidate their debt and set-up repayment plans. And I do know of at least one private company that builds their fee into the “consolidation” loan. You might want to look at that as an option.

So, all you debtors out there, what would you be willing to pay to have someone dig you out of a hole, and how would you come up with the moolah?

 

Mercedes wrote:

I am a 24 year old university student living on my own and paying all of my bills yet have still managed to save about 15000.00 in the past 2 years. I have no debts and am wondering what to do with this money to make it grow for the future. I feel as though it’s just sitting there. How much should I set aside for a rainy day/emergency fund? Thanks!

Okay, all you student debtors who tell me you can’t possibly save any money while going to school, heads up to this.

Mercedes, you are a shining light. Congrats!

As to what to do with the money, set side at least $5,000 in a high interest account for emergencies. Ultimately, you want to have 3-6 months’ worth of living expenses covered. As for the rest, it’s time to learn to invest. Read about investing. Choose a couple you think might work for you and watch them for a while to develop a comfort level. When you think you’re ready, take the plunge. Don’t be too aggressive too quickly. And never invest in anything you can pronounce or don’t understand.

 

Carrie wrote:

I am currently on mat leave with 2nd baby. We figured out if I return to work I will be contributing 2/3 of my take home pay to working expenses and only contributing 1/3 of my take home pay to the household. Does this make it worthwhile for me to return to work? Or is the smart thing to try to find a part time job to make up the money we are short? Or, with only about 6 years left on our mortgage, should we reduce our mortgage payments in order to live, until I can return full time in about 5 years?

You seem like a clear-thinking girl. You’ve certainly outlined your options well. Here are my answers

Does this make it worthwhile for me to return to work? Yes, if you need the 1/3 to make ends meet.

Or is the smart thing to try to find a part time job to make up the money we are short? Really? This is a question? Work less to make the same? Where’s the question?

Or, with only about 6 years left on our mortgage, should we reduce our mortgage payments in order to live, until I can return full time in about 5 years? This, too, is an option, if you’re prepared for the extra interest cost over the life of the mortgage. You don’t say how old you are, but how old could you be with a second baby just here? So you have lots of time to get this mortgage paid off.

Now, the question is, what do YOU think you should do?

 

S wrote:

I work part time as a nurse, so I actually bring home more money per hour with my liue of benefits. Is it better for me to work full time and “bring home” less money, but have job security, sick time and vacation? I am 41 married with two school age children. Thanks and I love your show-your sense of humour really makes it!

It’s hard to answer this question when I don’t know how much less you’d be bringing home, or how that would impact your cash flow. Assuming you don’t NEED the extra for essentials, then the security of full-time with benefits would be a huge blessing, particularly with young kids. However, if the extra money you’re bringing in is essential to your budget, then maybe not. What do you think?

 

Erin wrote

On your show, you give your clients an “office in a box” with all kinds of file folders and coloured tabs. I tried making my own and it doesn’t look as nearly detailed or full as yours. What categories do you have in your box?

Go read 12 Steps to Getting Financially Organized and the blog Paper Chase.

 

For Lynn who wrote:

How long should you keep your paperwork, such as bill statements, payments and income tax forms

Ditto

 

A wrote:

If I have a defined benefit pension plan with my employer, do I really need to contribute to an RRSP? Also, how do I figure out my “tax bracket” as I am planning to withdraw $10,000 from my RRSP to pay down debt - if the withholding tax is 30% then how do I estimate the additional tax I will pay next April - my gross income is about $60,000…

A, you likely don’t need an RRSP if you have a defined benefit plan. I’d be very surprised if you have much contribution room at all. If you do, then I would use it up, but not break your neck to do so. As for writhdrawing money from your RRSP to pay off debt: DON’T DO IT!

 

Tammy wrote:

I have 2 children: a son who is 20 and has finished 3 years of university and a daughter 19 who has finished 1 year of college. We have paid for the tuition and book for the 3 years for my son and paid the 1st year of college for my daughter and have enough to pay for her 2nd year, her course is 2 years long. I do not want my kids to finish school and owe money but my husband and I find that most of our money goes to the kids and there is none left over for us. We have been putting a lot of things for them on our line of credit and it just keeps going up, I know I need to stop but I don’t want to see them acquire any debt but I just feel that my husband and I are sinking further and further into debt and we have been arguing over the money spend on the kids. If you any suggestions on how we can work this out I would really appreciate it.

It’s nice that you don’t want your kids to graduate with debt, but you’re accumulating debt and that’s no good either. I hope your kids are contributing to their own education. If they are not, that’s the first place to start. There is no such thing as a free ride in life, and 19 and 20 are plenty old enough to start dealing with life’s realities. Help your kids. That’ great. Don’t do yourself damage in the process. That’s dumb!

 

Victoria wrote:

Hello. Congratulations with the show. I have been watching it daily for some time now. I have put my husband on a $200 a month budget. This money includes his gas and extra spending. We have been using the jars for three weeks now. So far so good. I am currently on maternity leave and working one day a week that I am allowed. I am making $430 every two weeks. I am trying to save this for our vacation at Christmas. Do you think it would be better to put this money onto the line of credit and then take it back out when we need it? Also, we just did a balance transfer on our one credit card. We have an interest rate of 1.9% until November. Should we penny pinch and put every last cent on it so it is paid off by then? Thanks so much and keep up the great work.

First the credit card question: Absolutely pinch every penny so the card is paid off before your great rate expires in November.

Now the line of credit question: Yes you should put it to the line first, and then take it back off when you need to, to minimize your interest costs. But I don’t think a fam on mat leave with a balance outstanding on their line of credit should be prioritizing a holiday over debt repayment. Once you return to work full time, I can see saving the money for a holiday. But while you’re living on a reduced income, and have debt, your focus should be on getting out of the red.

Are you sorry you asked?

 

M wrote:

My husband says that it’s not smart to start a RRSP because I owe $50,000 in student loans, which I am paying the minimum right now. I work part time as a RN and I have 2 kids. I’m 38 years old and I feel that I have to get started. What should I do?

You should get started, you’re right. But your husband is right too. Since you’re only working part time, your marginal tax rate isn’t high, and paying only the minimum on a $50K student loan is stupid. You’ll pay way too much in interest. So:

1. Up your student loan repayment amount to an amount that’ll have you debt free in five years or less, and

2. Start contributing $200 a month to an RRSP.

If you don’t have enough to do both, you’re going to have to find a way to make more money.

 

S wrote:

I would like to know if there is a way to save money on a disability pension.

I’m surprised by how often I get this (or a similar) question. There are a lot of people out there trying to make do on disability income, which should be a heads-up for all the people who don’t yet have disability insurance. As for this question, the answer is quite simple: If you have extra money after all your basic needs are met, you can save some. If you don’t, you can’t.

I’m sorry that there seem to be so many people living a marginal life on less income than they need. It’s a tough haul and you have my admiration for making a go of it.

 

Another M wrote:

My wife and I are a one-income family and even with a very tight budget our expenses are always more than our costs every month. I have mentioned taking some of the equity from our home (either re-mortgaging or a straight loan) to ease some of the expenses until my wife gets back to work. So, I was wondering, is it ever a good idea to take a home equity loan?

You don’t say why your wife is off work, or how long it may be until she’s fully employed again, and that affects the answer. If this is a short-term thing, then I’d say do the refinance and un-strap your budget. If it’s a long-term thing, you may have to sell your home to make it through. Good luck.

 

Karen wrote:

My relationship with my boyfriend of 8 years is strained to say the least because of this debt and not knowing how to budget. We have thought of calling it quits. I think the icing on the cake was when I was offered a job but would have to take a 14k cut in pay for 2 years from what I am making now, but then would make over 100k a year after that. I had to turn it down because each month I am going further and further into debt AND with a 14k a year cut in that!??! How would I make ends meet? Help! Please point me in the right direction.

I don’t often say this, but are you sure you’re in the right relationship? After all, is this the way you want to spend the rest of your life: giving up your hopes and dreams because your partner can’t get outside himself long enough to stop going into debt for crap? If you’re determined to stay in the relationship, then I’d separate the money - yes, you heard me say “separate the money” - and make the Boy Man responsible for himself. If he can’t do it, then either reconcile yourself to a life of misery with him, or get the hell out!

 

RC wrote:

What is the best way to invest money that I am intending to use toward the purchase of a home/condo, in one years’ time. I would be a first time buyer.

Since your time horizon is very short, you need to stick with something that has no volatility at all. Go with a term deposit, GIC, high-interest savings account… wherever you can get the best rate for one year.

 

Carol wrote:

I am 55 years old and will retire at age 64 with a good Omers Hydro pension. I was a single mother raising 3 children for most of their lives, so savings and retirement planning were not a priority. However, as my children are now grown I have more disposable income. Is it too late to start RSP’s or should I concentrate on paying off my mortgage?

Since you’re over 50 and have a good pension, I’d focus on paying off that mortgage so you’re retiring mortgage free. If you still have money left over, you can take me out for dinner.

 

Cynthia wrote:

I watch your show all the time and I noticed that you always talk in terms of household income and don’t discuss the differences in the amount each person makes. My boyfriend and I recently purchased a home, but we still have totally seperate finances, we live like roommates, simply splitting the common expenses in half and then we each pay our own credit cards etc. I would like us to be a more equal partnership, but he still thinks in terms of “your money” and “my money.” Is there a proper way to start combining finances?

Girl, you and your honey need to get on the same page. Go and read To Consolidate or Not to Consolidate and So You’re Getting Married even if you’re not.

 

Brett wrote:

My wife and I have recently realized that our parents are in rough financial shape, planning on relying solely on a single pension in retirement (no RRSPS). How can we approach them to talk about it and get them doing something about it? We feel as if we will be burdened by our parents within the next 15 years, and need help to get this situation under control!

Sorry Brett, it might already be too late if they have not been planning and are pretty close to retirement, with not enough money. Do they have assets they can liquidate to provide an income? Can they move to a less expensive community to cut costs? In terms of just approaching them about the issue, read Aging Parents: Talking about the Money. 

 

Okay, that’s it. My brain is mush and my fingers are cold from the breeze created as they’re flying across the keyboard! Ha! 

 

BTW: I’m planning to put up a series of articles on home buying. Are there any special topics y’all want me to cover? Speak now.

A neighbour of mine had to live through the angst of nursing her dying mother while raising six-year-old twins. It got me thinking about how families have changed. Times past, we could count on our moms and dads to be healthy and independent well past the time we were shipping our own kids off to university or their first jobs. Today’s multiple marriages and Brady-bunch consolidations mean that the old family portrait looks quite different from today’s snapshot. Empty-next syndrome has gone the way of the Dodo bird as aging parents, young children, divorcing children with their own young ‘uns, and kids home from university all fight for space and attention.

If you’re a baby-boomer, you’re likely already familiar with the phrase “sandwich generation.” If you have yet to experience it, watch out. It feels like the proverbial rock and a hard place as you turn yourself inside out trying to meet everyone’s needs.

Often underestimated in the Full House equation is the impact of dealing with the emotional side of all those bodies under one roof. Children are forced to move home because of a job loss, divorce or disability will experience significant dents in their self-esteem. Elderly relatives won’t be happy about giving up their independence, no matter how often they express gratitude at your willingness to share your home. Don’t think yourself immune to heated moments as you redefine your roles within the new family structure. Your children and elders may at once love you for being there to help and hate you for their need for your help. Or you may experience both compassion and resentment at being put back on duty as caregiver and financial supporter.

One of the first things you’ll need to talk about with your new roomie is your spending plan. While a financial contribution may not be possible initially, there are other things your child or elder can do to compensate. Your role as parent doesn’t negate your adult child’s responsibility to do something to even out the situation. The last thing you need right now is to create a situation where a child becomes so dependent that he can’t get his life back on track. You need to have some expectations of him, just as he has some of you. Ditto your elder who will need to feel she is contributing to the household.

Speaking of expectations, set the rules right from the start. If you have to watch your child gaily gad about while you’re off slaving to bring home the bacon, it’ll drive you nuts. And if your father-in-law sits, sits, sits, while you scurry back and forth, fetching and carrying, you’re gonna get mad.

Space may not be a big deal for you have a home big enough to easily incorporate your returning child (and perhaps a brood of grandchildren), or aging parent. But if you have to get a bigger place, you may find things get a little tight money-wise, particularly if your child/elder is unable to contribute financially in the short term. Make sure you both understand the ramifications of a change of address.

This should be a long-term decision, not something done for the next few months. You might decide, for example, that you and your child will share the purchase of a new home. You will use your assets to provide the downpayment while your kid picks up 75% of the mortgage payment. Alternatively, you could offer to support a child outright while she returns to school to get new skills with the understanding that you’ll reverse roles down the road. Or you might incorporate an elder’s assets into the purchase of a new home. Whatever tact you take, talk about what will work. And keep in mind that as life changes, you’ll have to accommodate the next step, such as when your elder dies and her estate is being distributed.

Lots of families have to pull together to get through tough times. And if you are the peanut butter in your sandwich, you’ll often find yourself pressed from both ends and oozing out the sides. But being a part of a multi-generational family can also be phenomenally satisfying. Mutual respect and a financial plan will help you to forge a workable and healthy living environment.

 

I got a letter from Tracy saying that her sister and brother-in-law are spending their way into a bankruptcy and perhaps even a divorce. She wrote:

HELP GAIL! How do I approach them to tell them to work TOGETHER on their spending? After all, the goal is to be together and happy not to self-justify and out-spend each other into divorce, right? I am very worried that if they keep going like this bankruptcy and blaming, and divorce will be inevitable, then what happens to the kids? HOW can I help them? HOW can I talk to them? HOW can I get them to apply for your show?!

 

It might be time to sit down with your sister and brother-in-law and have a conversation - as opposed to a confrontation - about your concern.

Keep in mind that interventions are very tricky and not always successful. If it doesn’t work, it could affect your relationship with your sister and/or brother-in-law — and the kids, if you become persona non grata.

I think the first step would be to open up a conversation with each of them individually to see if they perceive that they have a problem. If they think they’re fine, you might just have to butt out baby. If either thinks things aren’t all that rosy, you might offer your help as a mediator while they have a discussion with each other about their issues.

I often advise people who are trying to open up conversations to do it on a secondary issue: you might ask your sister if she’s see TDDUP and then tell her it’s fun and make a date to watch an episode with her. Or you could talk about a book you’ve read, or a conversation you’ve had with a friend. Whatever it takes to open the door.

Also consider involving someone else in the intervention. If you have another sister, and she believes as you do that things are bad, then ask for her support in approaching your brother-in-law and sister. The more people who come together to support the need for the intervention, the more likely it won’t be seen as “your perception” of a problem where none exists. And if you can involve a spiritual guide - priest, minister, rabbi - whomever your loved one respects, all the better.

And then, of course, you have to have a plan of action. What are you going to ask your sister and BIL to do differently? How are you going to help them change their bad habits?  If you can’t come up with a plan, something to show them how it could be different for them, then you may be spitting in the wind.

Interventions are successful when people are lovingly forced to look at the ways that their behavior is hurting the people they love. The idea is to bring them out of denial, and get them committed to seeking help.

But stepping in and telling someone they are screwing up their lives — and, perhaps, their children’s lives, that they can’t manage their money, and that they’re failures isn’t going to go over like a chocolate sundae. You could very well be told to mind your own beeswax. And you could be censured by other family members or friends for having the audacity to try and tell someone else how to live their lives.

Proceed with caution. Love must be the source of your motivation, not judgement. And you need to be well armed with friends, family and other professionals who can help.

Ultimately, the toughest part will be when the request for the bail-out comes, if it does. Then you’ll be in a quandary:

• help, and you will be enabling your loved one to continue down a rocky road,
• don’t help and you’ll be a selfish, mean, horrible person who can just stand by and watch the kids go hungry

I’m sorry this is something you’re having to deal with. It isn’t easy.