This & That: Doin’ Fine Edition

A Wrote: First, thank you so much for all the amazing advice on your shows, blog, website, etc. I have been watching and reading your advice for years and it definitely helped get me off to a good start financially.

My question is regarding retirement savings. My husband and I are both 26, debt free (minus the mortgage, which we are making extra payments on) and bring home about $100K combined, after tax. My husband’s employer has a defined benefit retirement plan, which is currently funded by about 7% of his income, although we expect that will increase in the coming years. My employer offers a defined contribution plan, where I put in 5% and it is matched by my employer. Additionally, we are each investing $250/month in our TFSAs.

The thing I struggle with is how to correctly account for my husband’s defined benefit plan? I would like us to be saving about 15% of our income for retirement, but I don’t know if counting his 7% input to the plan is really accurate, especially since that number could increase soon, without increasing the benefit upon retirement in any way. Since there is no guarantee that my husband will stay with this employer for his entire career, or that the company will not phase into a defined contribution plan down the road, I am struggling with how to account for this portion of our “retirement saving” in our budget. What’s your take?

Gail Says: I think you’re doing fine. You can’t manage EVERYTHING, you can only plan well for each eventuality, which you are already doing. Your company pension plan is, in essence a savings of 10% counting your employer’s contribution. And if you’re investing another $500 a month in TFSAs I expect that more than makes up for any “shortfall” in your husband’s future plan. If they do phase out the DBP and replace it, he will get credit for his contributions. Ditto if he moves jobs: a portion of that pension will be moveable as well. Relax babe, have a great life!

 

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.

 

J Wrote: I was laid off from my oil industry job in October 2013 with an excellent severance package. Since I will turn 65 in June 2014 my financial advisor says I can afford to retire now and maintain a modest standard of living with monthly withdraws from my RIF that would leave about $100,000 in my RIF account by the time I turn 90. Income from OAS and CPP will be about $1500 per month. My home is paid off; I own a new car and have no debt, so I think I have done everything right. But I can’t get past a life-long need to save and plan for a financial future! How can I get past the need to be hoarding my money? I find myself frightened to spend anything!

Gail Says: The savings ‘habit’ can be a tough one to shake when it comes time to stop saving. When I went through a difficult time and found myself in “super saving” mode, I actually had to add a line to my budget called “Pleasures” and make myself spend that money. It took a little time, but my mindset adjusted. And that’s what you need: some time so your mindset can adjust. Hey if you’re going to have $100,000 left in your RRIF at 90, you’re fine.  

Do up a budget for retirement. Figure out how much of your income will go to “needs” and how much you’ll be spending on “wants”. Knowing that there are places you can trim back should you need to (if the caca hits the fan in some way) will help bring you some peace of mind.

Make sure you allocate for taxes on your income, maintenance for your home, and whatever else you typically include in “planned spending” like clothes, travel, property taxes and the like. Each month, put this money in a high interest savings account. You’ll feel like you’re saving, but you’re simply making sure the money earns some return while you’re not using it. When you need to pay your property taxes, buy a new outfit or fix a window, you transfer the money back to your chequing account.

You’ve worked hard, planned well and done a good job of taking care of the future. It’s here now, so enjoy it!

 

S Wrote: I have been following your tips and budget builder for a few years now, mind you with some bumps in the road along the way. We are still working towards being debt free FOREVER, but I have a budget type question for you.

Currently it is just myself, hubs, and our 1 year old living in our home. I am a huge couponer and I do save a significant amount. However I CANNOT for the life of me get our grocery bill under $100 a week. I feel like this is a crazy amount for two people. Within that amount I buy our weekly groceries, as well as stock up on certain essentials that are on sale to keep our pantry stocked. But that is never more then $10 or so dollars of our budget… What do you consider a reasonable amount for a family of 2 1/2? That isn’t including baby things, as I work very hard to not pay much for diapers, and we cloth diaper as well. We live off our stock pile of toiletries I get with sales and coupons for free, or nearly free. So the $100 really is FOOD, produce, meats, bakery items, and dairy items. So I feel $100 or so is crazy for just the food of our groceries… What do you think?

Gail Says: I think you’re doing great. I wouldn’t expect an individual to make it on less than $50 a week. Does this $100 also include cleaning supplies like detergent? Unless you HAVE to trim because you’re going into debt, relax. You’re doing fine.