This & That: Credit Edition
N Wrote: Hi Gail, I think what you do is so wonderful that I wish there were more people like you around the corner that would help more people!! And a way to find these reliable people. Anyway, we are a one income family, we have an older child with health issues and a toddler. We are in debt and until recently have managed to pay double the amount due on our credit cards. We have recently lost a sales based commission position, which brought in money but unsteadily but we did rely on it. We no longer have that money and with the added pressure we were wondering if we should take money from our mutual fund to pay off our $14,000.00 in credit card debt. Our accountant said no, because credit card debt is not insured and if we ever had to file for bankrupcty they cannot come after us. I feel that we should get it off our backs, stop paying interest/finance charges and start focusing on saving? What do you think?
Gail Says: You do not say whether the money is in a retirement savings plan or outside one. If it is not in your RRSP, then the assets can most certainly be "attached" if you claim bankruptcy, so you would be far better off paying off the debt and creating some breathing room in your cash flow. Then you could rebuild your assets. Put away the damn cards!
Holly Wrote: Could making bi-weekly payments on a credit card help get the debt down sooner? I find it easier to budget big payments if I can split it by two pay checks.
Gail Says: The sooner you make your payments, the less interest you pay. So go ahead and make a payment bi-weekly.
T Wrote: I love the show. I have started to implement a good budget and we have paid off all of my credit card debt. My husband and I are now left with student loans and his credit card debt. We owe about the same amount on his credit cards and my undergraduate loan approx. 10K. He has had his interest rates dropped to 0%-2% on the debt and my student loans have 5%-6% interest rate on them. Just based on interest rates I would like we should pay off the student loans off first (they have about 4 years left on them) but since they are student loans I wasn't sure. Should we send all of our extra money to the student loans or the credit card with the highest interest rate first?
Gail Says: Since the lower interest rate is an opportunity to get rid of that consumer debt even more quickly, that's where I'd put my focus. Then snowball the money to the student loans.
E Wrote: I have been discharged from my second bankruptcy for 4 years now. I have a secured credit card which I have had for 2 years. I pay my bills on time, have started an RSP and a tax free saving account over the last 6 months. I currently have a credit score of 627. Can you please tell me what else I need to do to build my credit back. This seems to be a very slow process and I'd like to know what I'm doing wrong. I'm a single parent with one son getting ready for college and am trying to help with this as well.
Gail Says: What you did wrong was go bankrupt TWICE. What you're doing now is right, but you need to be patient, consistently demonstrate good financial management and recognize that it'll take some time for lenders to trust you again.
B Wrote: I am an 18 year old student who is planning to go to university in the upcoming fall. I have approximately 2 thousand dollars saved of my own and my parents don't have any money put away for me. I have one parent who is working and another parent who is retired, at fifty thousand dollars a year with four children and lots of expenses I'm not very confident about receiving very much financial assistance from my family. I am applying for bursaries, and scholarships as well as government assistance but my biggest concern is that I'm going to barely scrape by for the next four years and then come out of school with 60 thousand dollars worth of debt. How can I try to manage my money better so all my problems can be dealt with at least to some degree?
Gail Says: You're very smart to be thinking about the debt you may have when you graduate, and ways to minimize it. You don't say if you plan to live at home (in which case you'd just have tuition and school supplies) or if you plan to live away from home (which would be more expensive, but a different experience). In the first case, you can bank on spending about $9,000 a year, depending on your degree. In the second case, look at spending about twice as much. I have a bunch of worksheets on my site (look under my blogs in the "students" category).
It'll be important that you earn as much as you can as you go to minimize your overall debt at the end. Working the four months between school years will make a big difference. But you must apply early for jobs (start in Jan for a job in May). You may have to piece together work, doing part-time at several different jobs to make enough. Aim for about $500 a week. If you can also work part-time while in school, great! But don't let work detract for school.
If you live away from home, how you live (sharing space versus living on your own, cooking for yourself rather than eating out a lot) will also have a big impact on how much you have to spend. Remember that school is about learning and growing, not just academically, but also in life skills.
J Wrote: We love your show & follow your tips & use the jars! 3 years ago, we put $30 000 of consumer debt on our mortgage (due to my husbands large purchases he put on a line of credit). Currently, our mortgage is our only debt we have (no car payments either).
My husband now wants to put an extra $10 000 a year (on top of our weekly & top up payments) on the mortgage to pay it off sooner and remove the consumer debt portion. We currently do not max our RRSPs but do save 10-15% and we have an emergency fund. What should we do with the extra $10 000?
We are both 34 year old, I'm currently on Mat. leave but when not on leave, our gross salary is $115,000. Our current mortgage forecast is that we'll have it paid off in 19 years. Combined we only have $60 000 in RRSP, plus my husbands union pension.
Gail Says: Since the $30K you consolidated to the mortgage is consumer debt, your husband is correct in wanting to get that paid off sooner rather than later. You say you do not max your RRSPs but save between 10-15% of your income and have an emergency fund. So you're saving enough. I would follow your husband's lead to pay down the consumer portion of the mortgage debt. Once that's gone (a little less than 3 years), top up your RRSP and have some fun!
A Wrote: My husband refuses to believe that we can live without a credit card. He is just coming out of a bankruptcy and will be applying for a secured card "for emergencies." In spite of both of us learning the hard way how an "emergency" can pop up when it seems we have the means, he feels that getting this card is something that we need to do.
I would rather not do this. We are on week three of using our money jars and I can see a light at the end of the tunnel. He, however, says that if he doesn't get this card than we can't do things like rent a car when we (eventually) go on a vacation.
Is he right? Is there any way to secure rentals and such without the use of a credit card?
Gail Says: Your husband is correct that there are a number of things for which you need a credit card: car rentals, hotel bookings, and the like. And a credit card used wisely can help to rebuild your credit rating. If you are serious about using the card only for these types of things, then get your husband to agree not to use it for "credit." Before you buy anything, you must prepay the card. That way you are only ever using your own money. That'll keep you out of trouble.
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