Gail Vaz-Oxlade's Blog, page 19

Gail’s Cajun Potatoes

There are some brands of seasonings I just go to automatically because making them from scratch isn’t worth my time. Club House brand Cajun seasoning is a staple on my spice shelf. Sure, I could make it myself, but this is an example of something I’d just as soon buy than make from scratch. If you want to try your hand at making your own Cajun seasoning, you can play around with these ingredients until you come up with a mixture you like:

Black pepper
Cayenne pepper
Cardamom
Caraway seeds
Cumin, ground
Dried basil
Dry mustard
Dried thyme
Dried oregano
Garlic powder
Onion powder
Sweet Paprika
Salt

Make sure you store your mixture at room temperature in an airtight container.

 

Gail’s Cajun Potatoes

I make these potatoes so often I can do them in my sleep.

6 red potatoes, cubed
1 large sweet onion, chopped medium
I red pepper, chopped medium
1 tbs olive oil
2 tbs Cajun seasoning

Cut up all the veggies and put them in a large plastic bag. Add the olive oil and shake to coat. Add the Cajun seasoning and shake to coat evenly.

Put parchment paper on a large tray. I don’t use tin foil because the potatoes tend to stick. Empty the bag onto the parchment and distribute evenly.

Cook at 410 degrees until the potatoes are browned and the onions are softened.

 

 

Puppy Kisses

Do you think of your dog as part of the family? I do. But sometimes my Tabitha can do the most peculiar things. She loves to lick my face (and chew on my daughter’s nose… she thinks Alex is her puppy-sister.) So why do dogs lick people?

For a whole bunch of reasons, it turns out. Puppies lick as a sign of affection or to ask for food. Adult dogs lick as a sign of submission to authority. When your dog licks you, it probably wants something. Doggy kisses are also a way for your pet to feel better since licking releases endorphins that calm and relieve stress.

Rumour has it that dogs have an incredible sense of smell. How much better than ours? A dog can smell anywhere from 10,000 to 100,000 times better than their people. With 300 million olfactory receptors, compared to our measly six million, the part of their brain dedicated to smell is 40 times larger than ours. Their noses also work differently than ours. While people breathe in and out the same way, canines breathe in through their nostrils and out through the slits found on the sides of the nose. This system circulates air so that the animal is always bringing in new smells. Breeds like the bloodhound also have the advantage of floppy ears that push up new smells.

Whenever I hug my kids, Tabitha starts up barking, which I usually translate as, “Don’t hug her, she’s MY mom.” So do dogs get jealous?

Probably. Not only of their humans but also when you fool around with other dogs. A recent study confirmed dogs get ticked when their people start petting other dogs. Subjects in the study were asked to give love and attention to objects while filming their dog’s reactions. The items were a stuffed dog, a jack-o-lantern, and a pop-up book. The participants would give attention to the plush and pumpkin, and then read from the book. Scientists recorded the reactions of the dogs and looked for jealousy signs such as pushing the owner or snapping. The study found that dogs displayed many jealousy tendencies and made attempts to break the owner away from the rival. They were most threatened by the stuffed dog and least threatened by the book.

You’ve got to see Tabi’s tail go. Sometimes she slaps herself in the face with it, which ends up in a round of ‘chase that tail’. She is absolutely fascinated by that fluffy thing at the end of her body. So does a dog’s wagging tail really mean it’s happy?

According to the experts, a loose wag from side to side means a dog feels relaxed and content, while fervent wagging that involves hip movements means the dog is happy or saying hello to a loved one. If the tail is straight up, it is a sign of confidence or aggression; down and curled between the legs usually means fear or submission.

If you’ve ever wondered why dogs walk in a circle before lying down it’s because their wild ancestors, who didn’t have access to doggy beds, waked in tight circles to push down tall grass and shape it into a bed. The motion would also scare off any bugs and snakes hiding in the vegetation.

As for why dogs sniff each other’s butts, they’re asking, “Who are you and how have you been?” Secretions released by glands reveal the dog’s gender, diet, and mood.

From time to time when Tabi does something she shouldn’t, like chew on the insoles of my shoes, I say, “Shame!” and she acts like she is ashamed. So do dogs feel guilty?

Maybe, but dogs are also great actors. One study asked dog owners to place a treat in front of their dogs, tell them not to eat it, and then walk away. In some trials, the dogs were scolded regardless of whether they had eaten the treat or not; in other trials, they were not scolded at all. The results showed that the dogs always looked guilty when scolded, but dogs that weren’t reprimanded for bad behavior made no face at all. So that guilty expression may just be a way to appease owners. Those big puppy eyes may be your fur-baby faking it to get out of trouble.

 

5 Reasons Budgets Don’t Work

People are always willing to volunteer their wisdom about budgets to me. I’m a Budget-Discussion-Magnet it seems. And nine times out of ten, people want to tell me why budgets don’t work. I agree. Most people’s budgets don’t work for a few basic reasons. Here’s my Top 5 List:

Inaccurate Income Projections: I can’t believe the number of people who don’t know how much money they make. How can you have a hope in hell of having a budget that works if you don’t know how much money you bring home. I know there are a variety of pay periods: monthly, semi-monthly, bi-weekly and weekly. But all you have to do is look at how much is coming into your accounts to know how much you actually make. If it varies from one month to the next, then use the lowest income you have as your basic income, and use whatever extra you earn to fund stuff like home maintenance, vacations, gifts, and the like.
Not Enough Categories: Most people generalize their budgets too much to get an accurate picture of where their money is going. I swear if I see one more budget with “spending money” I’ll spit. It’s all spending money. What are you spending it on? You have to have enough categories in your budget to give you a real sense of where the money goes and where you may be able to cut costs. Careful now; too many categories and you’ll make your budget such a chore that you’ll toss it in no time at all. Another problem that goes hand in hand with this one is…
Failure to Include Expenses: Not all expenses come in every month. Insurance bills can come annually. Property taxes can come quarterly. Service contracts, dental bills, birthday presents, health-club renewals… there are lots of things that pop up only once or four times a year. If you don’t include them in your budget, you won’t have the money at the ready when the bill comes in.
Cash: People spend cash without keeping track of where it’s going and that throws their budgets out of whack. Some people use bank machines like a wallet, pulling $20 here and $40 there as needed. The problem with this approach is that money flows away without any record of where it’s gone. And if you know you have a bill coming due in a couple of days, but your partner doesn’t, and (s)he goes into the account for cash, then you won’t have the money available to pay the bill
No Plan to Save: People seldom put a “savings” line on their budget. Despite how well known the “Pay Yourself First” idea is, people still don’t do it. They wait to see how much they have left to save. And it’s usually ZERO, Zip, zilch! If you’re serious about savings it has to be a line item on your budget, you have to identify a specific amount you’re going to save (both for long-term savings and for emergencies), and you need an auto-deduction to a savings account to MAKE IT HAPPEN.

Budgets are a great tool providing you use them the right way. You need to have spending categories that fit your personal situation, your spending habits, and your income. Don’t look to anyone else’s completed budget as a guide, except perhaps for a list of categories you may not have thought of. Make sure you review your spending patterns to see if there are areas where you’re overspending. There may even be things you’re spending money on of which you weren’t even aware.

Budgeting isn’t just about tracking your costs, it’s about making sure you’re spending your hard-earned money the way you want to. Maybe you want to get out of debt. Maybe saving for a downpayment is a priority. Perhaps traveling is your big Wanna. It doesn’t matter what your goals are, if you don’t identify them, you won’t achieve them. And with no goals and no budget you can be sure that another year down the road, you won’t be one iota better off.

Not Your Business!

I remember like yesterday when my beautiful baby daughter came home from school sobbing because one of her very good friends had called her a horrible name. She was destroyed. How could Emily have been so mean?

I sat Baby Girl down. At seven years old it’s pretty hard to explain that what other people think of you doesn’t matter a jot. I know a ton of adults who still haven’t learned that lesson. When her sobs had subsided enough for her to hear me I asked her, “Tell me, if I called you a tree, would that make you a tree?”

Alex turned her huge moss-coloured eyes up to mine. I waited. She seemed puzzled. I tried again, very quietly. “If I called you a tree, would that make you a tree?”

“No.”

“And if I called you a stone, would that make you a stone?” I saw a glimmer of a smile.

“No.” Her sigh was so big her whole body shook.

“Okay then,” I said matter-of-factly, “What I call you doesn’t change who you are, right?”

“Right,” she agreed.

How is it that we give so much credence to what other people think of us? Why would we turn ourselves inside out to be the person other people want us to be? Where does this desire to please come from?

People criticize. It’s what people do. If you allow yourself to become defensive, you’re giving power over to the person who criticized you. I know people want to connect, to belong. Historically, if you were rejected by your tribe you didn’t have much hope of making it past next Tuesday without something horrendousness befalling you. But those days are gone and the number of people in our tribes has grown significantly. So now there are even more people who can reject us, but without the same dire consequences.

Time to change how we think.

If you’ve always cared about other people’s opinions, you might think this makes you considerate. But if it matters so much that it makes you miserable, it’s not healthy. Wayne Dyer has a knack for summing up important lessons in simple lines. He says, “What you think of me is none of my business.” He’s right.

Since I can’t control what other people think of me, I have two choices. I can turn myself inside out hoping to hit a sweet spot; there will still always be people who don’t like me. Or I can just be me, and if I’m disliked, it is for the person I am, not the person I’m pretending to be. I can relax. I can find my happiness, not from what others think of me, but from the actions that bring me joy.

That’s not to say that if someone gives me valuable feedback I’ll ignore it. I do not have a need to keep people at a distance and sometimes forget that others are less comfortable when I invade their personal space. When I see their reactions — a slight backing off, a look of discomfort — or when they’re brave enough to tell me to back off, I smile, apologize and let them set the boundaries, which I adhere to.

But I won’t let what anyone thinks of my big laugh stop me from laughing from the bottom of my belly. And I won’t let someone else decide if I was being too brash, too strict, too bossy, too… What they think is none of my business!

Not caring takes some practice. It means reminding yourself that you are never going to please them all at the same time, so best you please yourself. As long as you don’t willfully hurt and are ready to say sorry for accidents, the real you is the best you.

 

This & That: Good Question Edition

L Wrote: I have a question regarding Capital Gains Tax.

My mother who is a senior citizen has co-signed a home equity line of credit for my sister for her home. It is not my mother’s primary house of residence; however, my mom is on the deed. My sister works primarily as contract with the Federal Government.

My sister has increased the line of credit to pay off credit card debit over the years and the total is beyond the original amount and based on current market returns for my mother; mom would like my sister to sell her house to clear the line of credit and remover her from the deed.

Can you speak to any capital gains implications for my mother?

Gail Says: If your mom is on title on your sister’s house and already has a primary residence, then she would be liable for half the capital gains on any increase in value on the home when it is sold. If the home is your sister’s primary residence, your sister could claim the exemption, paying no tax. However, since your mother already has a primary residence, she would be liable. She should make an agreement with your sister to absorb her capital gains as part of the sale. In other words, if the house is sold and there is a gain of $1,000, your mother would be liable for tax on $500. That amount should be calculated, and your sister should reimburse your mother for the taxes payable out of her $500. (Keep in mind this is about the purchase and sale price of the property and has nothing to do with the outstanding mortgage.) If your sister refuses, it will be a hard lesson for you mom.

 

M Wrote: My son recently purchased a condo and successfully got a mortgage for 30% of total price as mortgage from a bank. The balance is paid from a combination of his saving approx (25% of total price) and my saving (remaining 45%). Looking ahead, what if my son was to marry and the marriage does not work out? If the condo has become the matrimonial home would he be required to split this asset? To minimize this loss, with agreement from the bank, I signed a statement indicating the balance is a gift to my son and then also told the bank that it will be registered as a 2nd mortgage. My son and I met and requested that the lawyer who handles the deal of purchase, register 70% of total price as 2nd mortgage. The lawyer agrees to represent my son for this arrangement but suggested I should have my own lawyer to look at this to protect me. I had no intention to ask my son to pay me back the balance.

In this case, questions:

1 – why does my son’s lawyer want me to get my own lawyer to look at this?

2 – what protection is the lawyer referring to?

3 – do I need to pay my own lawyer to look at this arrangement?

 

Gail Says: It is standard legal procedure for lawyers to advise all parties to seek independent legal advice; it covers their butt. The protection would come from having a second set of eyes look over the agreement to ensure your lawyer’s son isn’t a) incompetent or b) pulling a fast one with terms that are not in your favor. I would indeed get my own counsel to ensure my rights were protected. Make your son pay for both since he’s the big benefactor here.

 

 

M Wrote: A couple of years ago I inherited approximately 600K from relatives plus my own cash of approx 300K. Until I decide and find a proper financial planner I’ve chose to keep my funds in a regular bank. I have very little invested in mutual funds and very little in an RRSP. I’m 58 years old, presently off ill but will eventually return to work. I will have a very modest pension if I choose to retire at 65 of about 12K per year with no benefits plus my usual Canadian Government Pensions. My modest home in Toronto is paid for however; I’m planning on some renovations of about up to 125K to bring it up to date.

 

My questions are simple I’ve tried to split up my cash amongst the banks so that I do not exceed 100K because of the limited insurance coverage of CDIC to 100K. I don’t feel comfortable putting all my funds in one bank; however I don’t want to be managing too many banks/financial institutions. Please provide me with some guidance on how I can manage/secure my cash in banks etc until I get my financial house in order with professionals. If I have to go to different banks etc in order to secure my funds I will do so

Gail Says: Some financial institutions have several companies registered as members of CDIC. For example, Royal Bank has: RBC Investor Services Trust, Royal Bank Mortgage Corporation,  Royal Bank of Canada, Royal Trust Company, (The) Royal Trust Corporation of Canada.  And, Bank of Montreal has: Bank of Montreal, Bank of Montreal Mortgage Corporation , BMO Trust Company.

The $100,000 limit applies to each of those member organizations, so you could go to the Royal Bank and tell them you want you money held in savings accounts or term deposits/GICs at each of their 5 arms and you’d safely have $500,000 covered. I’d actually recommend that you do about $90K per registration so you also protect any interest you earn along the way. Just two banks could have all your money safely insured by CDIC.

 

J Wrote: I have spent most of my life being financially irresponsible. Over the past couple months I have created a budget that only needs minor tweaks and a debt repayment plan that will have me in the black within 18 months. I am also contributing to savings but would like some of that money to be invested. And this is where the problem is. I know nothing about investing. I have RRSP’s that my company matches and had a good return last year but I have no idea how they were invested. It is a subject I would like to learn about but have no idea where to start. Is there a short list of books that you can recommend?

Gail Says: A lot of people think that The Intelligent Investor is the most important and influential book written about value investing. Originally published in 1934 by Ben Graham, this work has been heralded by such notable investors as Warren Buffett. Graham presents two types of investing styles – one for every day people who don’t want to think about their portfolios (“defensive”) and the business man or woman who wants to enjoy maximum returns (“enterprising”).

One up on Wall Street is a good second book for a new investor. Peter Lynch teaches you how to use what you already know to make money in the market.

The Essays of Warren Buffett has been edited by Professor Lawrence Cunningham and is a great reference tool to have handy. Learn about management, business valuation, investing philosophy, the use of stock options, economic and accounting goodwill plus more.

The Bogleheads’ Guide to Investing is another good basic explanation of the different kinds of assets and how they work but skip the stuff on retirement accounts tax strategies because the rules are different in Canada.

There is a lot of information on the internet about investing. You can start with the stuff on my website and branch out from there. Go to the blog and look on the right side of the page for Categories. Go down to “investing” and you’re away to the races. Enjoy.

 

M Wrote: I’m a 24 year old recent grad trying to pay off my lovely $25 000 dollar student loan. Right now I’m working a full-time job making $45,000 annually before taxes. I’m also working a part-time job making roughly $5000 annually. I’ve researched up and down about how to not owe money when it comes to tax time. On my full-time position I’ve asked to take an additional $10 off each pay period. But my question is what should I do with my other job? And could you offer any advice on how not to owe?

Gail Says: What a great question. There are income tax calculators out there that will tell you how much tax you’ll have to pay on your gross (before tax) income. This one’s my favourite because it’s so simple to use. http://lsminsurance.ca/calculators/canada/income-tax

On a regular income (not dividends, capital gains) on a $50,000 income you’ll have to pay $8,694 in income tax if you live in Ontario. (There are breakouts for every province/territory). So that would mean withholding (or setting aside) $724.50 a month so you can be square with the tax man. You can ask for that money to be deducted and remitted on your behalf, or set up a high interest savings account, pile it up yourself and be ready with a cheque when you file your taxes next year.

Now next year (because the RRSP contribution limit is based on ‘previous year’s’ income) if you contribute $5,000 to an RRSP (that’s 10% right?) your taxes will be less since the contribution amount isn’t taxed. Based on this year’s numbers the taxes would fall to $7137 keeping an extra $1,557 in your pocket. Stick that in a Tax Free Savings Account or use it to boost next years RRSP contribution and you’re laughing all the way to the bank.

 

J Wrote: I follow your financial advice religiously and have read almost everything you have written. My husband and I are extremely happy with the progress of our finances and we are a year and a half to becoming debt free (only his student loans). There is just one problem. I am not a cheerful giver. Because of my obsession with our finances, every time there is a birthday, holiday, or a charitable need to give I struggle with letting go of the cash. In my mind, tangible items carry an invisible monetary amount and I just can’t let it go. If the person doesn’t appreciate the gift or I see that it goes unused, I feel like they just flushed my cash down the toilet. Money is tight (my husband stays home with our daughter) and my husband loves to give (generosity runs in the family). I am saver, he is a spender. How do you give generously (and cheerfully) while paying down debt and keeping your financial house in order?

Gail Says: Sometimes we become so focused on one goal, the achievement of that trumps everything else. Unfortunately, it is not a very balanced way to live. In terms of not being a ‘cheerful giver’, are you happy when you give a gift that the recipient just loves? When you’re out looking for the gift, are you looking for the least expensive gift that ‘will do?” How do you feel when you give a gift to your husband? To your daughter? Are you still ‘unwilling’ or are they the exception?

Giving joyfully is for you, not for the recipient, but first you have to figure out why you feel as you do about giving. If it’s because you’d rather not give at all — really, you rather just plough the money into your financial plan — then what you’re doing is giving from the wallet, not the heart, and resenting every single dime you spend. Perhaps the first thing you need to do is decide why you’re giving.

Birthdays and other special occasions are often rife with emotional stuff…from trying to please, to competition with others in the gifting, to myriad other things that undermine the occasion. Have you had experiences in the past surrounding giving that were negative and have left you with some baggage of your own.

Pick a person to whom you give joyfully and ask yourself why you feel as you do about that gift-giving, but differently about other gift-giving. If you are giving because it’s the socially correct thing to do but your heart just isn’t in it, I’m not surprised you’re resentful of the money you’re spending. If it’s a case that you and your husband differ dramatically on how much of your overall budget should be spent on gifting, that’s something you can work out by making a list and doing some math. If you’re just singularly focused and can’t get outside your own goals, that’s something you have to work on because it doesn’t make for good relationships.

You and your husband should have a discussion about how much is appropriate to spend on the gifts for people in your lives. Make a list of them all: parents, siblings, young’uns. Then decide how much you’ll spend for each gift. Add it up, divide by 12 and put that money into your budget for gift giving. It can’t be spent on anything else. Even if you get a great gift for less money, you can’t reallocate the gift money elsewhere. Creating a pool of money with a specific purpose — gift giving — attached may help.

 

R Wrote: How do I figure out how much money I will need in my retirement? I have 20 more years before I can retire but would like to know if I am on track and if there is a calculation I could apply to figure it out. I currently have a total of 120K in retirement at age of 45. Do I need to be saving more?

Gail Says: In your 40’s you should have five years’ worth of salary saved. In your 50’s, the number goes up to 8 years’ worth and by the time you hang up your spurs you should have about 11 times your salary. Keep in mind that heading into retirement, you should be completely debt free for these numbers to work. If you have debt, you need to have more savings stashed away.

 

Books, Books & More Books

A Single Thread by Marie Bostwick When Evelyn Dixon’s life fall’s apart – her husband divorces her after 28 years and she is forced to leave her home – she decides in for a penny, in for a pound. She heads north to Connecticut, falls in love with a small town and decides to move and follow her dream of opening up a quilt shop. Evelyn’s Cobbled Court Quilts store turns out to not just be a quilt store, but a quilting community. When she decides to host a quilting event to benefit breast cancer research, Evelyn doesn’t yet know that she has breast cancer. When she finds out, she’s devastated. Margot Matthews, an unemployed marketing genius, Abigail Burgess Wynne, the town millionaire, and Liza, Abigail’s brooding, Goth niece step in to be the family Evelyn needs to help her through and keep her store afloat.

 

The Taker by Alma Katsu is the first in a trilogy, which I am looking forward to completing. Lanore McIlvrae – Lanny – is brought into the hospital where Dr. Luke Findley is on the midnight shift. She’s covered in blood. But there’s not a scratch on her. A mysterious woman with plenty of dark secrets, Lanny is unlike anyone Luke has ever met. He is inexplicably drawn to her even thought she’s a murder suspect with a police escort. She needs his help to escape so she tells him her story: a story of unrequited love that transcends time and mortality. Poor Luke. Besotted by her beauty he becomes intrigued by her impassioned account that begins at the turn of the nineteenth century. Part historical novel, part supernatural thriller, The Taker can be graphic in its descriptions of the pain and terror the sinister Adair wreaks on his household, including the beautiful Lanny.

 

Tales of the City by Armistead Maupin is like a trip back in time. Set in the 1970s (when it was originally written), it tells the story of the people who live at 28 Barbary Lane in San Francisco, a boarding house fun by Anna Madrigal. The characters have left families and friends behind to build a new life in the utopian San Francisco during the days of free love and drugs. Longing to connect, they form new families – families of choice – spinning in and out of each other’s lives. All the characters are challenged by the new sexual freedom of the day. Funny in spots, poignant in others, the characters share their ambition, their sense of loss, and their loneliness as they search for love. Tales of the City first began as a series in a San Francisco weekly newspaper in 1974. It was the fictionalized account of a real-life phenomenon occurring at a local Safeway supermarket where, on Wednesday nights, swinging singles would gather in search of romance. Tales of the City ran in the San Francisco Chronicle until the early 90s. There are six books in the series.

 

The Art of Hearing Heartbeats by Jan-Philipp Sendker is a wonderful and unusual story of a man who has such a past and such a deep love that he must follow his heart. When Tin Win, a successful lawyer in New York city disappears without a trace, neither his daughter nor his wife know where to begin to look When they find a love letter he wrote to a Burmese woman neither has heard of, his daughter, Julia, goes in search of her father. There she discovered a past so unusual it is almost magical. Julia meets U Ba who paints for her a picture of her father she could never have imagined. He helps her to unravel her father’s past, from poverty to blindness, from the his childhood sweetheart, Mi Mi, to a cruel uncle whom he escapes only by staying in America, and his final return to the heart he has always heard beating.

 

The Enchanted by Rene Denfield Could you imagine anyone would consider a prison an enchanted place? The setting for this story is an dark, sad place, and the story is told through the voice of a death row inmate. He watch everyone, listens carefully, and follows the intersecting lives of a fallen priest and The Lady, an investigator who looks for mitigating circumstances that may save the lives of condemned prisoners. It is a story of humanity and how we are all connect, even in the most nightmarish of places. Part mystery, part horror, the story made me stay until the very end. Ripe with symbolism, it’s an unusual tale that is both profound and elegant.

 

Cracking Knuckles

Some people hate, Hate, HATE the sound of cracking knuckles. I cracked my knuckles all the time as a kid and both my children love to make their joints crack: my daughter can twist her spine for a pop, pop, pop, and my son used to “throw his arm” to make his elbow and shoulder pop.

When I was young, every time I’d pop my fingers someone would tell me I would end up with arthritis if I kept it up. So does cracking your knuckles really give you arthritis?

First off, arthritis is when one or more of the points where your bones meet become inflamed. And cracking your knuckles won’t make that happen. That cracking sound isn’t really cracking… it’s more like popping. There’s a yolk-like substance called synovial fluid that lubricates the space between bones to reduce friction.

Whether you pull your fingers, bend them backwards or put pressure on them, you’re expanding your joint which decreases the pressure allowing gasses like carbon dioxide and nitrogen that are naturally occurring in the synovial fluid to form into bubbles that rush into that space you’ve created. As the joint re-settles into place, those bubbles pop.

I remember people asking me why I used to pop my fingers (and my toes.) Easy. It felt good. Turns out stretching the joint also stimulates nerve endings. And the reason you can’t pop the same joint twice in a row is that it takes anywhere from 15-30 minutes for the gasses to dissolve into your synovial fluid again.

If you don’t believe me that cracking your knuckles won’t cause arthritis, there are studies around that prove there’s no correlation. Or you could ask Dr. Donald Unger who was also warned by his mother not to crack his knuckles or he’d be sorry. So he spent 60 years cracking only the knuckles on his left hand. Nope, there was no difference in his hands.

Overdraft Protection

I’ve worked with a lot of people who have overdraft protection, and I hear from many more every month. While there are pros and cons to overdraft protection most people sign up without really understand what they’re “buying.”

Overdraft protection is usually sold to people when their open their accounts as the way to ensure that bounced cheques don’t ruin their credit ratings. When you try to spend money you don’t have in your account, the bank covers the withdrawal – be it a cheque, debit or cash withdrawal.

Don’t confuse the kind of overdraft protection you “buy”, for which you sign an agreement, with what some banks call “bounce protection” or “courtesy overdraft protection” which they offer to save you from the embarrassment or hassle of a returned cheques, which can be very expensive.

The average courtesy overdraft fee runs to about $29 a month, but fees can be substantially higher depending on how undisciplined you are. And since the fee is levied regardless of the amount you go into overdraft for, it can be astronomical when you calculate it as a percentage of the “loan.” One woman wrote me to say that she was appalled when her statement came in and she had over $160 in bounce fees.

Some banks are trying to make their OD protection even more profitable by charging up to $5 for every business day an overdraft is created or increased. So if you go into overdraft on the 12th, you’ll be dinged with a $5 charge. Buy something for a-buck-twenty-five the next day and go further into your overdraft and you’ll be dinged with another $5 fee. Ouch!

I’m all for the traditional overdraft protection for which you sign an agreement so you know what you’ll pay in interest, and for which you pay a flat monthly fee. This is particularly true if you’re in a transition: getting separated or divorced, moving, changing jobs. An overdraft protection plan beats the pants of NSF fees and the bruise on your credit report. And it is far less expensive than the pay-as-you-go option.

What I’m not down with is the idea that overdraft protection gives people a license to ignore their cash management. No, you can’t spend whatever you want, whenever you want, because overdraft protection is there to catch you like a safety net. And you’re not allowed to live in overdraft, squeaking into the black for a couple of days twice a month when your paycheque passes through your account.

While some of you might think, as I do, that overdraft protection is a short-term affair – most overdrafts are said to last only about 5 days or less – I’ve met oodles of people who practically live in overdraft.

And, ya know what? The banks don’t mind one little bit when you go into overdraft, since overdraft interest rates are well above regular lending rates. One bank I checked charges 21% interest on your outstanding overdraft balance, along with the fee that going into overdraft automatically triggers.

Despite being extremely profitable for banks, lenders can sometimes get testy if you stay in overdraft too long. Read the paperwork. Often there’s a clause that says you can’t stay in overdraft for more than a certain number of days each month. Break the rules when money is flowing easily and no one much minds. Break the rules when credit is tight and banks are feeling the pinch and they’ll call your overdraft, demanding their money back lickety-split. Yes, they can do that.

If you’re scratching your head because the rules seem to change depending on the wind, you’re right to be confused; just know the cards are stacked in favour of the bank. After all, if overdraft is just for the odd slip as the marketing material says, then why do some banks offer the option of going $5,000 or more into overdraft? That’s NOT a little slip.

Except for those transitional times when slips are natural, overdraft isn’t the great solution your banker makes it out to be; the better solution is to manage the cash in your account so you don’t try to spend money you don’t have.

How do you do that? Easy. You use a spending journal to track what’s going into and coming out of your bank account.

Get yourself a notebook. When you put money in your account, add it to your balance. When you spend money from your account (be it a cheques, on-line bill payment, debit card transaction, or cash withdrawal) you debit that amount from your balance. Keep your eye on the balance.

If you think that sounds like too much work, you’re a dope. You’d work at least this hard to find where gas is selling for a penny less, or where tuna is two for $1.59, or where wings are all-you-can-eat for $3.99. Staying out of overdraft is one of the best deals going.

 

Worry Time

Everyone worries… well almost everyone. I’ve met a few people in my life that seem to have totally taken a pass on the worry gene. And then there are the folks who worry to excess, about everything, all the time.

If you are tired — literally and figuratively — of the worry, if you can’t seem to get a good night’s sleep, if you’re constantly full of dread, you may need to take a few lessons in how to worry effectively. Since it’s unlikely that you will stop worrying completely — and I don’t think there’s anything healthy about no worry — doing it in a way that serves you as opposed to causing you undue anxiety is the next best thing.

It’s time to take control of your worrying.

One of the biggest downsides of chronic worrying is that those worrisome thoughts seem to be able to invade a will. You want to take back control of that by setting aside a specific time to worry. Yes, you’re going to schedule your worrying time. During this worry appointment, you’ll think about what’s causing you to feel axioms or nervous.

Why invite worry? Simple. Worry is going to show up the party whatever you do, wouldn’t you rather it be on your schedule?

It’s not as easy as simply making a date to sit and worry. The first step in effective worrying is the hardest: you must learn to recognize when you’re heading into a worrying territory and catch yourself before you get too far into it. You will acknowledge that you have concerns, that something is bothering you. And then you must set aside those thoughts because you have a specific date and time for doing this worrying. It is during Worry Time that you’ll re-engage with those thoughts.

It can be tough spotting when your worry thoughts have invaded and cutting them off at the pass. It takes practice. I know. I had to take control of my worry demons or I would have had a horrible life. As a master of the worst-case scenario, I could ruin something wonderful before I even had a chance to start it. I remember laying in bed beside soon-to-be Husband #2 who was 21 years my senior. While other brides-to-be were planning weddings and honeymoons, my overactive worrier had killed him off and left me to deal with life without the man I loved. How would I know it was time to get up in the morning if I didn’t hear the toilet flush and the shower run? Cripes! I wasn’t married yet and I was planning poor dude’s funeral.

I had to take things in hand. I had to find a way to be more in control or my worry instinct would rob me of all the pleasures life could hold. I worked hard at it. And you will have to as well if you want to learn to put worry in its place.

Yes, you will feel the urge to worry. When you catch the anxiety crawling into your blood, breath deeply and say, “I see you, Worry, I know that the presentation is scary. Let’s talk about it this afternoon at four.” Don’t forget how you felt. You’ll need that to get into the worry later. Take note, set aside the feelings and move onto something that can distract you from Worry.

Once you’ve arrived at Worry Time, don’t try to do anything else. You want to give the worrying your full focus. Think about the worry or worries that invaded your thoughts. (If you find you tend to forget what you were worrying about, make a note at the time of the worrying.) Think about why the worry cropped up. Was it valid? Was it random? Was there a warning you need to think about?

There may have been a real purpose to the worry: perhaps you’ve overlooked something you need to focus on; maybe you haven’t done enough practicing to feel confident. If there is validity to the worry, make a plan for how you’ll take care of what has to be done. If the worry seems random and without merit, think about what else is going on that may have triggered the worry to show up in disguise.

The point of Worry Time is to put worry in its place. But it is also to study the nuances of your worry so you learn to understand it.

Learning to banish worry to it’s own time doesn’t come naturally, but it is worth the effort. Be patient with yourself. You don’t need the added pressure of worrying about how you’re worrying. Over time, with practice, you’ll to master worry, using it to your advantage instead of letting it be the tail that wags the dog.

 

This & That: Good Question Edition

C Wrote: I have a specific question regarding calculating my family income. My husband works season work, 8+ months out of the year, the remainder of which he receives unemployment benefits. Since there is a significant drop in income for those 4 remaining months I don’t know how to come up with an accurate monthly amount. Please help!

Gail Says: Add the year’s income together. Divide by 12. That’s your average monthly income. So if in the good months he makes $3,000 a month that would be 3,000 x 8 = $24,000. In the other 4 months if he makes $1000 a month, that would be 1000 x 4 = $4,000. Added together that makes $28,000. Divided by 12 = $2,333 a month. So you would base your budget on an income (I always work in what goes into the bank, so after tax income) of $2,333 a month. In the good months, you would put the difference ($3,000 – 2,333 = $667) in the bank for use during the lower-income months. Doing this evens out your cash flow so that you can plan more productively. And you’re always living within your means instead of feasting and then fasting.

 

K Wrote: What is capital gain and should I take it now or later? I have owned a profitable rental property for approx. 3 years now. Other then the mortgage on my residence and on the rental property I do not have any debt. I have regularly paid into RSP’s for years as I have no pension plan and I save a little cash every pay.

Gail Says: A capital gain is the increase in value of capital. So if you buy a stock or a piece of property for $1,000 and sell it for $1,050, you’ll have a profit — or capital gain — of $50. Typically you get a capital gain when you sell your investment, so you can’t just “take it.”

 

M Wrote: My common-law partner and I live in his 40 year old bungalow. Although I pay half the bills each month my name in not on the mortgage, title etc. The house needs several thousands in updates (finish a basement, new windows, bathroom and kitchen). I’m 32, have recently doubled my annual income, and am in the process of paying off all my debt this year, and really do want to contribute to updating our living space. However, my concern is the “what if”: What if we break-up? What if he dies? What if we sell the house?  If I contribute big bucks to this (his) home and any of my ‘what if’s’ come true-I’ll be up a creek with no money to get anywhere! How do I protect myself financially without coming across as though I don’t want to contribute to our future?

Gail Says: A lot of people do not realize that common-law is not the same as married everywhere in Canada except BC where they’ve brought in new laws to protect common-law partners in the event of relationship breakdown. It’s fine that you pay half the bills; you’d have to put a roof over your head somewhere, and if you were renting you wouldn’t see a penny of that money back, right?

But when it comes to putting big bucks into a property that is not yours, you are very smart to think twice. You could solve the problem by adding your name to the title of the home. Or you could get your partner to sign a promissory note (make sure you both have independent legal advice so it holds up in court) for any amounts you “put into” his home. That way, if the relationship ends, the home is sold or he dies, you have recourse to recover your money. If you want that “investment” in his home to grow, you would add an interest rate that reflects current lending rates to the promissory note.

 

H Wrote: This both a question and a success post. After seeing your show Til Debt Do Us Part, I bought a couple of your books and switched our finances to match your suggestions. Now we currently do not carry any consumer debt. When we do purchase something on a credit card (major purchases we have saved for) we pay the balance by the end of the month. The jar system has worked miracles for our finances (as well as my wife and my relationship.) It has been a long process, but ultimately worthwhile. We work much better as a team on financial matters now. The emergency fund and savings were instrumental when my son was born. He required 2 months of hospitalization and due to the savings and emergency fund my wife and I were able to be there every day for him. (Thank you so much for that). Now we have rebuilt the emergency fund and are looking forward to the future. The only negative was when we reviewed our expenses and decided cable was not a necessity, and after it was removed we could no longer watch your show.

I have two questions I could not find answers to in your book. I am reviewing our long term finances and this is where my fist question comes from. I am in a pension plan matched by my employer. I contribute 9% and my employer matches the contribution. How does this work into the 10% saving you suggest for savings. We do save money, about 7% of our income (split between vacation, the kid’s university fund and home improvement fund). We were previously using the 15% debt repayment to rebuild our emergency fund. Now I was thinking to use the 15% debt repayment to pay off our truck and then roll it over into extra mortgage payments. My wife would like to leave the payments alone and split it between extra retirement savings and add a bit extra to our life spending as it currently sits lower than the 25%. As we always do when we have a budget impasse we review the books and your website. We couldn’t find anything on whether or not the pension plan should or should not be included in savings calculations. So in your opinion is it better to build additional retirement savings or payoff debts such as trucks and mortgage? Does the 18% put into my pension plan play any part in the savings calculations?

Question 2: This is more of a curiosity question as you have stated in books and on the show if you are over somewhere you make it up else where. (We do that by having lower housing and life categories). Living in more rural area my transportation costs are much higher than the 15% suggest by the books. In addition I have a disabled son who requires weekly (quite often more if he has specialist appointments) appointments 1.5 hrs away. I currently have a truck payment, 2 insurance payments (2 trucks). We currently spend $700 a month on fuel; $400 a month for medical. Is it acceptable to consider some of the transportation costs as medical expenses?

Your show and books have helped me be there for my son (I wouldn’t have been able to afford it prior to getting the finances in order) and probably have something to with my wife and still being married (we haven’t had a money fight in years).

Gail Says: I’m going to deal with Q2 first. Did you know that if you have to travel at least 40 kilometers (one way) from your home to obtain medical services, you may be able to claim the expenses you paid as medical expenses? And if you had to travel at least 80 kilometers (one way) from your home to obtain medical services, you may be able to claim accommodation, meal, and parking expenses in addition to your transportation expenses as medical expenses. To claim transportation and travel expenses, the following conditions must be met:

equivalent medical services aren’t available near your home;
you took a direct travelling route; and
it is reasonable, under the circumstances, for you to have travelled to that place for those medical services. 

That being said, when it comes to putting it on your budget, it goes under transportation. Don’t worry about being over the 15% recommended; the point is for the budget to balance, not to stay strictly inside the percentages.

Now Q1. Your company plan means you’re saving 18%, which is great. You don’t say if your wife also has a plan, but between the two of you, you should be saving about 20% (if you’re in your 30’s). If your wife is not working, you’re doing fine.

Vacation money set aside isn’t savings, its planned spending. Saving is money for the long-term. But you’re doing pretty well; just don’t call it “savings.” The fact that you’ve built up an emergency fund is terrific.

You don’t say what the interest rate is on your truck, and since your transportation costs are high, if the interest rate is over 3 or 4% I’d focus on getting rid of this debt. Don’t worry about the mortgage, as long as you’re debt-free by retirement, you’ll be fine.

Have you applied for the disability tax credit for your son? And have you considered opening a RDSP (registered disability savings plan) for him. I’d suggest you look into that too.

 

M Wrote: I’ve fallen off the spending wagon and am having trouble writing down my purchases again. Where do you start if you’ve messed up your spending plan?

Gail Says: People beat themselves up far too much for falling off track. The mistake isn’t falling off; it’s not getting back on. So I applaud you for recognizing your misstep and wanting to returns to the path.

Turn to a new page in your spending journal. Put your bank balance at the top of the page and go from there. As for your budget, since you’ve fallen off track, I suggest you enter your spending journal entries against your budget at the end of each week to make sure you’re staying on track.

 

K Wrote: I have recently bought a house and maxed out my RRSP savings to do so. I know that I have a year before having to start paying back. Would you save and sink all your RRSP funds into the repayment – getting rid of it ASAP, or would you split the money into repayment and savings?

Gail Says: You should NOT sacrifice current contributions to your RRSP for the sake of getting that home buyers’ plan loan paid back faster. Make your 1/15 repayment each year and use the rest of the money to make a regular contribution. You can use your tax savings to a) boost next year’s RSP contribution, b) pay down your mortgage, c) make a TFSA contribution. Just do something useful with it.

 

M Wrote: I have many questions about insurance:

Can you explain what a whole life policy is?
Is it a good investment?
Is a term policy better?
Do I need a term life policy in addition to mortgage insurance?
Or should we have a term life policy on each other (hubby and myself) which would cover the outstanding amount on the mortgage?

Thanks in advance. And thanks to you, I understand money and debt and am hoping you can explain insurance in your easy-to-understand way!

Gail Says: Term insurance provides protection for a predetermined period of time (perhaps 5, 10, or 20 years) or until a certain age. If you’re looking for longer-term protection, term insurance won’t cut it. When the term of the contract expires your coverage ends unless you renew the term. Each time the term is renewed, the premium is adjusted upwards.

Think of term insurance as an expense, like rent. While it will give you comfort and peace of mind, it accumulates no residual value. If you want coverage to last your lifetime or want to use insurance to build assets, term insurance isn’t the right choice.

Whole life and universal life insurance are permanent, remaining in place until death. The premium is generally the same for the life of the policy, so the annual cost can be low if taken early in life (when the risk of death is low), or very high if taken late in life. If term insurance is rent, then permanent insurance is a mortgage payment; in the early years there isn’t a lot of asset accumulation, but over the long term the pot will grow nicely.

When you compare term insurance with permanent on a dollar-for-dollar basis at any age, term is cheaper than permanent insurance, but that’s because the statistics are in favour of the insurance company with term insurance. With permanent insurance the company is going to have to pay out, it’s only a matter of when. So the trick is to buy your permanent insurance when you’re young and healthy and the premiums are lower.

Private insurance — permanent or term — is way better than mortgage life insurance. If you go with term, make sure the policy will live as long as the mortgage. And a private term policy will likely cost you 1/3 of what you’re paying for mortgage life insurance, which BTW isn’t guaranteed to pay out since they don’t underwrite until you make a claim (at which time you may be SOL if they uncover something that lets them welch!)