Gail Vaz-Oxlade's Blog, page 18

Time Off

I’ve been blogging here for the past seven and some years. Some blogs get lots of comments, some get only a couple, but I always enjoy hearing your thoughts.

Typically the summer months are the slowest on the blog. Everyone is off having grand adventures and spending time with family and friends. I’m planning to take the summer off: There won’t be any new blogs for July and most of August because:

a) I’m trying to get my next book in ship shape, and
b) I need a break.

The newest book, Money Talks: When to Say ‘Yes’ and How to Say ‘No’ will be out at the end of the year. The official release comes in January 2016, but I’m told it should be in stores before Christmas. It’s the book that deals with the really tough part of money: the conversations you must have with the people you love. It was a challenging book to write but I am very happy with how it is turning out. Now I just have to finish dotting the Is and crossing the Ts. And there will be an updated Money Rules. If you have a daughter, a nephew, a grandchild or a god child that is graduating from college or university, this is the book that will tell them what you didn’t!

As you know I’m a rabid gardener. During my time off from blogging I’ll be in the garden digging and pulling and moving and planting and giving my brain a rest from the challenge of coming up with fresh ways to talk about money. I also hope to spend more time painting, a new creative outlet that is truly a joy.

I’ll blog until the end of this month, take a break and then I’ll be back in late August. I’m thinking of running The Hardest Ever to Win Contest one more time from Sept-Nov. If you didn’t participate last time and want another shot at getting your money in ship shape, lemme know.

I’d love to have your feedback on what you like about the blog and what you’d like to see more of when I return and into 2016.

The current set of Other Voices bloggers will be the last for a while. People seem unprepared for the amount of time it takes to blog every week and I’ve been left in the lurch a few times over the past year. So as bloggers leave Other Voices I won’t be replacing them. The current bloggers will remain for as long as they want to keep writing.

Well, that brings you up to date with my plans. I hope you have a wonderful summer full of laughter and exploration.

Waste Not

Food is often at the very centre of our experiences. We share meals as a family. We get together for dinner with friends. We cook up a storm on special occasions. But we also end up wasting a lot of it. A lot. According to the US Department of Agriculture’s food loss estimates, Americans throw away a lot of food… more than 20% of all the food they buy. You probably thing that’s awful, but hey it’s America, and food is so cheap down there, right?

According to the Value Chain Management Centre in Guelph, 40% of our food – about $27 billion worth – gets wasted every year and over half of that waste comes from households! Hey, how can people complain about the price of food and then throw it away. That makes no sense.

I get that you might be caught with the odd piece of fruit that goes bad… we throw about 25% of our fruit, but we have to get smarter about how we use up stuff so less of it goes to the garbage or compost. Things like meal planning, freezing veggies to go in stews and soups, and fruit to go in desserts and smoothies, and learning how to store our stuff so it lasts longer are all smart moves.

If we don’t meal plan, it isn’t surprising that our spur of the moment purchases sit and go bad, ending up as waste. Yes, we have busy lives. Yes, it’s easy to be enticed by the apples that look so good we want to buy a dozen. Don’t. Buy six, have a plan for how you’ll use them, and eat them while they still have some nutrition in them. Above all, don’t throw them away. That’s like throwing away money. Cut them up and make them into pie. Or applesauce.

The food we throw away most often is fresh fish. Total lack of planning. And a lack of commitment. Sure plans change, but that doesn’t mean you throw good food away. Freeze that puppy and add it to a soup later on. I’ve got a huge pot of fish soup bubbling on the stove as we speak. I’ll have 5-6 servings for the freezer and lunch for the next couple of days. It’s good for me. It’s time-saving to have some that I can freeze for later. And I used up a bunch of veggies in my fridge: things like leeks and carrots, the rest of the cilantro I had from another recipe and some mushrooms.

If you’ve made a meal and don’t think you’ll eat it all – aren’t our eyes ALWAYS bigger than our stomachs – divvy it up and freeze portions for lunches or nights when you just don’t feel like cooking. Don’t just leave it in the fridge to go bad because someone ‘might’ eat it!

Make a commitment to getting better about using up all your food. Instead of throwing away the equivalent of hundreds of dollars every year plan to use it up. Take an inventory of what you already have, and come up with meal ideas to use it up before your next shop. Look in your cupboards: what can you use up to save some money at the grocery store, even as you save some money for your future.

Wishful Thinking

I’m a big believer in optimism. And I’m a glass-half-full kinda girl. But being an optimist doesn’t mean that I believe bad things can’t happen to good people. That’s why one of my mantras is, “Plan like a pessimist so you can live like an optimist.”

Being optimistic and being delusional are very different things. Making financial decisions based on what you hope will happen isn’t optimism. It’s wishful thinking, and it can get you into a whole lotta hot water.

Did you buy a home that eats up more than 50% of your income? Did you transfer your consumer debt to your mortgage by refinancing and then put your credit cards back into play? Did you take advantage of a buy-now-pay-later and then let it expire without having made the full repayment? Then you, darling one, fall into the category of Wishful Thinker.

People who believe that real estate values will always go up, that $1,000 is all they need as an emergency fund, or that there will be plenty of time to save for retirement later are Wishful Thinkers. There’s a reason for the saying, “What goes up must come down.” And how will $1000 keep a roof over your head and food on the table if the caca hits the fan? As for the argument that there’s plenty of time to save, maybe. But you’ll have to save a whack-load more money to make up for the time you lost for compounding to work for you. Start saving in your 20’s and you’ll have to stash away just 6% of your net income. Wait until you’re in your 40’s and the number triples to 18%.

Investing is another world in which wishful thinking does us no good. Chasing hot performers is how Wishful Thinkers end up losing lots of money. Did you know that our brains are hardwired to over-react to recent events? This works if you’re a forager. If you’re looking for food the best place to look is where an animal was yesterday. But the economy is a different kettle of fish and no matter how often you hear that the markets are rationale, they are not.

Despite dire warnings not to do so, we continue to use our forager brains to consider what will happen next in the economy. No matter how much the experts talk about market cycles, investors cling to the idea, ill formed, that wherever we are today in the markets, that’s where we’ll stay. So if we’re in a rising market, the market will continue to soar, and a downturn in the cycle can make people run screaming for the exits.

Smart investors don’t buy anything they can’t explain to a 12-year-old. They only choose options that match their investment time horizons. And they understand their risk tolerance. If you have no idea what I’m talking about, time to go do some studying before you leap into investing.

Wishful Thinkers feel bullet-proof. Sadly, no one is. From divorce to illness, from job loss to creditors calling loans, there’s a lot of room for disaster in our everyday lives. Even the little things like increases in costs for gas, food, or interest, can add up to a problem, especially when pay cheques haven’t grown much.

If you find yourself turning to your credit cards or line of credit, or living in overdraft because rising costs are straining your ability to get to the end of the month before you get to the end of the money, maybe part of the problem is your wishful thinking. Flying by the seat of your pants may have worked when you always managed to stay in the black, but if your expenses have grown past your income, you’ve got to start paying attention to where your money is going. And you’re going to have to start making some tough choices.

Perhaps the wishful thinking I am most impatient with comes from the people who believe it’s okay to spend money they haven’t yet earned. They blithely head out to the malls, using their credit cards to buy New-and-Shiny. Or they take home a new couch, new bedroom set, new television with the intention of paying it off in 18 months. Or they figure as long as they can work the payment into their budget, there’s nothing wrong with getting the one with all the bells and whistles.

Here’s a newsbreak: if you can’t afford it today it’s just going to be worse tomorrow when you add on the interest costs.

Buying anything on credit when you know you won’t be able to pay the bill in full at the end of the month means you think that you will be able to afford to pay the bill later. More wishful thinking.

 

The Resilience of Trees

I spend a lot of time watching trees. I love trees. I think they are some of the most beautiful creatures. In Africa where the savanna is hot and dry, the trees grow tall, bare all the way up to the wide ceilings that have survived the constant grazing of giraffes. In my backyard where my red maple rustles with each whisper of wind, I love to watch the leaves dancing in shadow and sunlight. In Jamaica, I was drawn to the coconut tree, the long line of its trunk bent by the constant island breezes, curving up to an afro of fronds.

Whether sturdy with deep roots and broad branches, or slender and willowy, perhaps the thing I admire most about trees is their resilience.

A few years ago we had an ice storm that was so fierce it locked my Internet receiver in a block of ice thick enough to keep me disconnected for a week. The maple tree in my backyard was encased in inches of ice, which bent its branches almost to meet the snow on the ground. I wondered how it would fare come spring. How many branches would give under the weight of all that ice?

When the ice started to melt, the ground below the tree was strewn with chunks of glassy ice. The limbs remained bent. But come spring, the tree took a deep breath and slowly straightened up. Wow! Such resilience.

We all could take a lesson from the resilience of trees.

We all have times in our lives when we are bent under the pressure of what we face. It is our ability to take a deep breath and slowly straighten up that keeps us in the game.  Some of us are better at it. Psychologists say that when you face difficulties early in life, you strengthen your resilience; having it too easy for too long leaves this muscle weak. In Jamaica I grew up hearing, “What don’ kill yu mek yu stronger.”

Maybe that’s how I came to know with certainty that whatever adversity I was facing just had to be waited out. I watched as the strong winds of the almost-hurricane that came each season was no match for the resilience of trees.

Instead of seeing whatever challenge you face as insurmountable, it is better to think of it as the thing that will make you stronger. It will. And each time it does, you are better prepared for the next time adversity bends you to the point of almost breaking. You know to take a deep breath and slowly straighten up.

One of the very best lessons I learned about resilience is that regardless of what is happening that is stressing me out, if I can focus — even for short periods — on what is good in my life, I’m better equipped to handle the crap. I’ve met people who are so focused on what is missing that they can’t even remember that they are blessed with food to eat and clean water. They are so mired in misery from the person who has left them that they can’t seem to see that they are surrounded by people who love them.

I’ve also learned that you just never know where your next updraft will come from. If I don’t close myself off to new ways of being, solutions present themselves. If I’m brave enough to say “yes,” that will open doors I hadn’t even been aware of.

There is a solution to almost every problem we face. Sometimes we must be patient, giving the solution time to arrive. Sometimes we must be willing, accepting solutions we may not have considered previously. Most times we must tap all the resources at our fingertips — our friends, our spirituality, our talents — to see our way past today to the promise of tomorrow.

I am resilient. And I thank the trees for their beautiful lesson.

 

It’s Ma Birfday

I’m taking the day off. And later this month I’ll tell you more about my plans for taking off a couple of months this summer to let my mind wonder.

Have a fabulous day! Imagonna.

Language Love

Remember Lavern and Shirley? It started:

One, two, three, four, five, six, seven, eight.

Sclemeel, schlemazel, hasenfeffer incorporated.

We’re gonna do it!

Schlemiel and schlimazel are both Yiddish a schlemiel : an inept clumsy person; a bungler; a dolt. A schlimazel: a chronically unlucky person. So the schlemiel is the person who spills the coffee and the schlimazel is the one on whom it’s spilled. These are both examples of words from other languages that don’t have an equivalent word in English. And there are a lot of them.

Tartle is a nearly onomatopoeic Scottish word for that panicky hesitation just before you have to introduce someone whose name you can’t quite remember. You know that feeling, right? Now you have a word for it.

German gives us many words for which there is no English equivalent. Some we have incorporated into everyday use like kindergarten (garden of children) and schadenfreude, which is a feeling of enjoyment that comes from seeing or hearing about other people’s woes. How about this one: Backpfeifengesicht, which refers to a face badly in need of a fist. If you learn to say the word, it might be almost as satisfying as delivering the blow, and it’ll keep you out of jail.

You know when you’re waiting for someone to show up you keep going outside to see if they’ve arrived yet? Iktsuarpok is the Inuit word for that. And we’ve all scratched our heads as we try to remember something. Well, in Hawaii they have a word for that: Pana Po’o.

The next time you bite into something hot and then open your mouth while you tilt your head and make the sound “aaaarrrahh” the people of Ghana want you to know they have a word to describe what you’re doing: Pelinti means “to move hot food around in your mouth.”

I walk Tabitha off leash. I whistle or making that sucking sound with my lips to get her attention and make her come back to me if she wonders too far away. You know that sucking sound? There must be a word for that sucking sound… Okay, we’ll just use the Samoan word Faamiti.

I often get caught gazing vacantly into the distance. It’s my mind processing something I’ve seen or heard and I usually have to tell whomever I’m with that I’ll be right back. Well Boketto is the Japanese word for it. So now I’m just gonna say, “Boketto Break”.

Gut Microbes

You know that feeling when you just HAVE to have a piece of pie. Or you can’t think of anything except getting your hands on a Nanaimo bar.

How would you feel if I let you off the hook by telling you that the bacterial living in your gut are pulling you brain’s strings to get what THEY want?

A study published in the journal BioEssays says that certain bacteria have a taste for certain nutrients. And what those bacteria want they get! According to Dr. Carlo Maley, director of the UC San Francisco Center for Evolution and Cancer and of the study, “Bacteria within the gut are manipulative.” While some of what those bacteria want is good for us, other demands may be misaligned with your dietary goals.

Researchers believe that bacteria release chemical signals that affect our moods and appetites, influencing us to gobble more of what the bacteria crave. Dr. Maley says, “Our diets have a huge impact on microbial populations in the gut. “

One type of bacteria found only in the Japanese is specific to the digestion of seaweed. Since bacteria need on fats and sugars, when they get hungry so do we.

So are we at our guts beck and call? Turns out you can change the kinds of microbes living in your gut with the food choices you make.

Studies have shown that probiotics can decrease anxiety levels in mice. Researchers from UC Los Angeles showed that the brains of people ingesting a probiotic for four weeks had less activity in brain areas associated with excessive anxiety.

Scientists are on the onramp in studying the relationship between our gut microbes and the brain. But now when you eat that piece of chocolate, it wasn’t the devil that made you do it, it was your gut!

Burn Rate

Have you ever heard the term “burn rate?” It refers to how fast you “burn” through your money.

It’s a term that’s been borrowed from the corporate world where it’s used to refer to the rate at which a new company used up its venture capital to finance overhead before generating a profit.

As consumers, we are whipping through our money at such a clip we need a new term to describe our total lack of self-control and inability to see the future consequences.

Nobody has been paying much attention to the idea of cash management in the last… well… EVER. In fact, most people who talk about financial planning don’t even bring up the idea of cash management.

What is cash management? It’s exactly what it sounds like. It’s the management of your cash on a day-to-day basis. It’s what I focus on when I work with people to get them back in touch with their money and keep them focused on managing it so it doesn’t run out.

Cash management has traditionally been the domain of bankers but bankers are doing such a crappy job of dealing with this area of their customers’ financial planning that some investment houses jumped on the band-wagon a while back. It was short-lived.

Too bad. No doubt their initial enthusiasm spoke to the lack of investing that’s resulting because of all that debt out there. After all, if your credit cards, lines of credit, car loans – however it is you’ve chosen to borrow — is now eating up $300, $500 or $700 a month in interest, how could you possibly have money to invest? Of course, the investment houses didn’t do a much better job of this whole cash management thingy than the banks do. *Sigh* Sometimes I feel like a lone voice in the wilderness.

In all the TV shows I’ve made, and there have been over 180 episodes, I have never worked with anyone who didn’t have to change their lifestyle to change their outcome. If you could just keep doing same old, same old, without creating problems and wreaking havoc on your family’s peace of mind, then nobody would be talking about it. And we certainly would not have needed to adapt the term “burn rate” to our rabid spending.

So, there is a problem. There’s a big problem. And it’s not going to go away, until we admit that we’ve made some mistakes and commit to doing things differently.

People can get out of debt; it takes determination and gumption. People can live within their means; it takes planning and discipline. People can be happy NOT spending money; it takes having a real life.

Do you want to be one of those dopes that blithely shops yourself into the financial dumper? Or do you want to become fully conscious of how you’re using your money so that you can make it work for you. Wouldn’t it be nice to not have to work any harder than absolutely necessary to have the life you want.

If you’ve decided to take charge, why not calculate your burn rate. It’ll take about a week and here’s how you do it:

Make yourself up a tracking sheet. Put the days of the week across the top and some typical categories down the left-hand side. Include stuff like coffee, snacks, lunch, cigs, gas, magazines/newspapers – everything you spend money on in a day.
Leave lots of blanks on the left because you’ll be amazed at what you’ll add when you see all the places where you’re spending money.
As you go through your week, write down what you’re spending. You’re going to add it up, so there should be a column on the far right for Total Spent for the week for each category you’ve included on your worksheet.
Identify the point at which you spent $100 on non-essentials. That’s your burn rate. Did it take you a whole week? Five days? Less than three days? What were your biggest areas of “weakness?” Eating out? Kids or grands? Bad habits?

Are you surprised at what you’re spending?

While small savings may seem inconsequential compared to the pleasure you derive from spending the money, that’s a very shortsighted approach to using money as a tool. Sure, $5 a day on coffee and snacks may not add up to a whole hellovalot in five or ten years, but the more than $75,000 you have after 30 years (assuming just a 2% return) is much better than the alternative: zilch. Manage even 1% more in return over the 30 years and you’ll have almost $90,000. That’ll go a long way to making your life more comfortable in the future.

Still not convinced? Well, since the average Canadian receives about the same from Old Age Security and the Canada Pension Plan, you can look forward to an income of about $12,000 a year if you don’t take some steps today. Imagine living on $12,000 a year right now.

Did you just shiver?

Relax

I’ve been out of the world of TV production for over two years now and the thing I find most surprising is how much I still do. I had fully expected when I left that job, which ate a lot of my life, that I’d be lost… purposeless… adrift. It didn’t happen. I do have more time on my hands but I’ve learned how to relax into that time.

When you have a career, kids, a busy life, it’s sometimes easy to forget that relaxing is an important part of staying healthy. If you have parents who are getting on and they’re part of your responsibility, if you’ve added school to your plate, if you’re trying to meet the expectations of all the people around you, relaxing can seem like a waste of time.

Who has time to relax? Seriously? If you think you need another four or five hours in your day just to come out even, the answer is YOU.

If you allow the hum and buzz of your life to deplete you, its only a matter of time before — frayed to the thinnest of strips — you fizzle right out. Relaxing is the only way to re-energize, so you better find a way to work it into your life if you want to remain the rock you are for all those people counting on you.

You could read a book. You could meditate. You could take a stroll, sit and pray, write in your journal or listen to some music. Relaxing doesn’t require that you set aside gobs of time. It does require that you be committed to chilling out without interruption. So ignore the phone, put away the electronic devices, and be unreachable for just a little while. You want to give yourself enough time to come down off the buzz that hums in the wire of your constant activity.

Stretched taunt? Can’t imagine where you’d find the time? That’s because you haven’t really tried. So convinced are you that the world will stop revolving without your hands-on attention that you won’t even give it a go.

Give it a go. Light a candle and take a bath. Turn on some music and flip through the family photo albums. Knit, paint, sing. Whatever fills you with a sense of peace, do it.

If you grew up in a family where sitting still was frowned upon, where the idea of doing nothing was considered ridiculous, you’ll have to retrain yourself to think of relaxation as your right, not an indulgence. You have to stop seeing the twenty minutes you take for yourself as time stolen from chores you should be doing. You have to give yourself permission to take great pleasure in doing something just for you. The ultimate in relaxation is to do absolutely nothing. To just sit and observe the world, without passing judgement, without wondering what you’re missing or what’s missing you.

One of the big lessons I had to learn because I worked from home was how to not respond when it was Me Time. If I’m eating a meal or watching a favourite show on television and the phone rings, I don’t answer it. I am enjoying being with me, I don’t want to be interrupted. They’ll leave a message or call back. The world won’t end.

This & That: Happy, Happy Edition

G Wrote: We’ve done it! We have been debt free for years, our emergency fund has saved us a few times and our little family is living comfortably and maxing the RESP savings option. Your TV shows get me excited about saving…. but please tell me how. If we have $2G monthly to save for emergency, retirement, vacation, new car, furniture then how would you recommend splitting our money to save? Also, is it best to max the TFSA then contribute to the RRSP…and once in these buckets where should we put it; mutual fund, GIC? In short, we are ready to save but don’t really know how. I am concerned the general savings accounts for emergencies, new car, new stuff is a waist of potential savings income and I am really concerned that mutual funds is a waste of money…how does anyone get a 4% return? Help?

Gail Says: Congrats on having your financial life in balance. First let’s differentiate between planned spending and saving. Planned spending is the money you’re accumulating for things like furniture that you plan to spend. I manage that by having separate savings accounts (I actually have an ING account that allows me to label separate pools of money.) How much you put in depends on when you want to make a purchase. I take a big vacation every 5-7 years, so I divide the amount I want to set aside by 60 (months) and set that amount aside each month.

Saving is what you do to have money for when you’re no longer getting a paycheque; emergency savings for if you get sick or lose your job (or someone dies), retirement savings for when you hang up your spurs. You need to have about six months’ worth of essential expenses (hamburger not steak) in your EF. As for retirement savings if you’re in your 30’s, the 10% rule works. For more details, check my blog or read Never Too Late.

As for where to get 4% in returns, you’d have to use a mix of investments to get that. With loads of time to retirement, you can afford to choose investments that carry more risk but offer more potential return like mutual funds. Your emergency fund, on the other hand, should be in a savings account because you might need the money at any time and don’t want to cash out of MFs in a down market making your “paper losses” into “real losses.”

 

R Wrote: Gail I cannot find this in a quick search: Have you written about ethical investing? Ok, you’ve convinced me — some money in TFSA, and diversified. But I do not want to be responsible for women and children suffering in prostitution and pornography, or the sex trade. Does ethical investing avoid that? Many huge media corps like Time, have ‘diversified’ holdings themselves, and surprise surprise, have pornographic movie, web and video channels. For one example.

Is ethical investing really ethical? How do I know? I asked a friend who works in my bank and she scoffed, saying “oh they wouldn’t do that”. Another said well not everyone thinks that’s wrong. End of conversation.

What do ethical investors do to find ethical investments?

Gail Says: What a great question. Your banker-friend scoffed because most banks don’t offer ethical investment options. You have to go looking for them. As for your other friend, while others may not think anything is wrong with pornography, clearly you do.

When you allow your social conscience to guide your investment decisions, you’re investing “ethically”. A growing trend among investors, ethical investing has brought about some significant changes in legislation by putting the power of the wallet to work for good, as opposed to focusing simply on making money. Some investors choose to eliminate particular industries from their portfolios: guns, gambling, and alcohol. Others choose to put their money into companies that meet their guidelines for being environmentally friendly or for the fair treatment of workers. The basic premise is that investors can do well while doing good.

Also referred to as “socially responsible investing” or SRI, ethical investments work to balance the demand for profit with respect for the environment and human rights. Some investment companies simply screen out companies that don’t meet their selection criteria. Others engage with companies to improve their approach to environmental, social and governance issues.

Keep in mind that sometimes ethical funds, rather than excluding all companies in a sector that perceived to be tough on one of their criteria, simply choose to work with those companies that are using “best practices” in their operations. So while mining is hard on the environment no matter which way you cut it, an ethical portfolio might include a mining company that compensates for its sins in some way by setting new standards on issues like sustainability. And proponents of ethical investing suggest that instead of simply focusing on screening out companies, the best SRIs are those who seek out companies that make solid contributions to society. At the same time you have to watch for companies that “whitewash”… present themselves as socially responsible but are just selling a bunch of pretty words. So before you put down your money, check the list of companies being held within a supposedly “green” fund to make sure it doesn’t include companies that would make you shudder!

Don’t let anyone convince you that if you invest with your conscience you automatically have to settle for lower returns. Lots of advisors believe this to be true. But there are heaps of non-ethical mutual funds that never perform better than ethical options. If you’re committed to being an ethical investor probably the best place to start is by finding an advisor who knows the playing field. Then you can discuss what’s most important to YOU and they can help find the fund or funds that match your values.

If you want to do some research online, head to:

socialinvestment.ca

socialfinance.ca

ethicalfunds.com

 

S Wrote: I have just finished three of your books in three weeks and you have reformed me! I’m actually excited about my new financial life! I didn’t read anything about your opinion about ten year fixed mortgages. We signed up for one last year at 3.79%, and my feeling was that the interest rates will only go up, even though my friends all have five year 2.99% and they say they will save lots of money. A year later, I still wonder if I made the right decision. We plan to stay in our house forever.

Gail Says: Hmmmm, did you make the right decision?

Do you have to worry about what your mortgage payment will be for the next 10 years?
Do you have to watch rates so you can lock in before they go up?
Is it likely that rates will rise above 3.79% in the next TEN years?
Are you planning to move any time soon?
Is this one less thing you have to think about?

 

K Wrote: I am 36. About a year and a half ago I decided that after a life working in the arts, contract to contract, what I really wanted to do is become a Speech Therapist. Not only is it something I think I would be great at and truly love, it is a very viable career and considered one of the most promising in this country right now as far as quality of jobs and salary. In order to be accepted to one of the very competitive programs, I had to obtain several pre-requisites. So, 12 years after graduating with a degree in Theatre, I went back to school last summer part-time. Since then, I have taken 10 classes while working part-time. I found out in April that I was accepted to one of the 2 year programs and will be starting in September in another city. I have a common-law spouse who has decided to quit his work and find a new job in the new city. So, this summer is going to be challenging for cash flow…I have a two specific questions as I work towards funding this.

I had $20,000 in an RSP (mutual funds) which I had saved over the years. I have taken out $10,000 in the lifelong learning plan in order to pay for the $9k in tuition for my first year and to cover some current tuition for pre-requisites. My main question is about this money. I currently have about $7500 in a savings account waiting for the remaining tuition payments throughout the year. Yet, I am already in some debt from the past year ($3500) which I have in a low-cost credit line (prime + 3%). Should I pay off that debt with the ‘tuition’ money and then dip back into the credit line later in the year?

Also, my father has offered to loan me some money. My current plan is to apply for OSAP and then borrow money from my father once the interest starts to kick in. My thinking is that my father can keep his money, keep having it gather interest, and once it is time for me to pay the school loans, I can borrow that money and then avoid paying as much interest on it. Plus, hopefully, there is a chance that a portion will be “forgiven”.

If you do choose this question to answer and need more information, feel free to ask. These are the two main decisions I am trying to make right now.

Gail Says: Paying off the current debt is a good idea and then using the credit line, as long as you are very conscious about a) not taking on any more debt that isn’t school related and b) not becoming complacent because the interest rate on the line is quite low. As far as your dad’s offer goes (great offer, nice dad!) you’ve got a sound plan. Good luck!