This & That: All Kinds of Stuff Edition

A Wrote: Gail, this is both a success post, and a question post. I grew up in a single-parent household financed by a below poverty income. I have a healthy respect for the power and pitfalls of money, and more importantly, what it feels like to not have enough of it. I had a loving parent, and the best home she could provide and that was enough to give me the resilience for what lay ahead.

My success story:  When I left for University I did it with meager savings and, not-surprisingly, no financial support. I financed, concurrently, a BA and a B.Ed. to the tune of $40,450 is OSAP debt, despite working summers and minimizing my expenses. When I graduated I made a promise to myself that I would pay off that debt in

I accomplished a $100,000 education with only $50,000 of non-credit card debt (costing me $2100 in interest) which I paid off in a combined 5 years. I was fortunate to have never experienced the hell of credit card debt. I did all of this while saving an almost equal amount. No job was ever too menial; if it paid, I’d do it. Have you ever worked on a sewage truck? #funnotfun. I don’t live a life of excess or flash (case in point: I drive a low km 2006 white Toyota Corolla that I paid cash for). I’ve been both lucky in my jobs and tenacious in my goals and it has worked for me. Mostly…

Question: Gail, money scares me. It is a genuine source of anxiety as a result of my childhood and teenage experiences. That anxiety has proven useful. It helped me control my spending. Respect the consequences of debt and motivated me to eliminate it. But, now what? I really would love to buy a house one day, but I’m single and in the Toronto market where I live I feel like I will never, EVER be able to afford a home. With my debt gone I’m now saving $2000/month (on top of the maxed out $700/month in employer matched pension I contribute to.) I look around at my friends who all have brand-new things (cars, TV’s, clothes, furniture, homes etc.) and here I am renting a room in someone else’s house with a 10 year-old car, a 6 year-old laptop and not much else. I feel like I’ll never be able to afford a home in this market despite being a money earning, debt eliminating, saving-smart machine. Also, frankly, I don’t know how other people are able to buy homes and cars and stuff like they do. I know other people have their own stories, and they have no bearing on my own but what good is debt-free, financial restraint when it doesn’t seem to get me anywhere, or anything?

Eliminating debt was, for me, relatively easy, though plenty painful; though my anxiety worked in my favor. Now, all I feel is anxiety that my attitude, towards minimizing-debt and maximizing savings, is just keeping me from being able to set the post-debt goal and being able to start living a life that actually feels good, instead of a constant financial slog.

So, with those feelings in mind, how do I set a ‘spending’ goal without feeling totally discouraged at my prospects of achieving it? Especially when my money-spending anxiety says ‘don’t take on financial risks or debt’. Help?

Gail Says: Darling, how great is it that you’ve achieved what you’ve achieved. Well done. As for your future, you get to live somewhere in the middle of the two worlds you’ve described. You don’t have to take on the responsibility of home ownership right now in a market that is over-heated and very, very expensive. Nor do you have to live in a room on someone’s house. You can make your own home. Yes, you’ll have to spend some more money on rent, and you’ll have to make it cozy and ‘yours’, but that’s totally manageable if you’re able to sock away $2,000 a month right now. So you should ask yourself, what do I want my life to look like?

Take some time to think about it. Where would you like to live? What would you like your living space to look like? What would you like to be able to do? Then set about creating the life you want.

Often when we get into “debt repayment” mode, it’s hard to loosen the purse strings. But if you’re debt free, it’s time to start thinking about what you want your money to do for you.

 

R Wrote: I am a recent college graduate with a ton of school loans and credit card debit. I live with my parents and I can never seem to make ends meet even with a full time job. I have been watching a lot of Til Debit Do Us Part and Prince$$ hoping all the tips you give will be able to help me out. I have finally decided to grow up, get proactive and be accountable. I was wondering if one or more of your books would be helpful to me and if all the worksheets I would need (interactive budget, budget binder etc.) were included.

Gail Says: Debt-Free Forever will show you how to make a debt repayment plan, create a budget and set some goals. I think it’s probably the one to start with. I have an interactive budget worksheet and a spending analysis worksheet on my website under resources. 

 

J Wrote: My paycheque has a number of extra deductions coming off regularly (gym membership, monthly transit pass, pension contribution etc). How should I fill in the Spending Analysis Sheet? For the income, should I put in what I actually got paid as it shows on the Net spot or should I take out the individual items, put them in the appropriate categories, and figure out what my Net income is without all those extra deductions?

Gail Says: Figure it out before the deductions and then put the deductions in your budget as expenses. Your pension would go under savings, for example. 

 

M Wrote: You and I had a nice conversation on Twitter and I have followed you for quite some time. I truly miss your ‘Till Debt Us Part’ show. It really helped my husband and me – mostly me – get out of debt. I was a ‘Hostess/House Party Addict’. Thank you soooo much. —- This time I have a question. My Mother passed 1 week ago. (I miss her terribly). We just received her Death Certificates. Mom had some outstanding bills that the Nursing Home said not to pay, that their letter from Hospice (end of life care) would cancel all debts. Well, it didn’t. My Dad is feeling overwhelmed, thinking he now must take on these debts. I told him that he should just be able to send them her death certificate – since his name is nowhere on the accounts – and they will then write off the account. Is this true? Or is there new rules regarding the deceased and the debts they leave behind? Also, I was told I should get an insurance policy on my Dad to pay for any Funeral or end of life care he may need. How do I go about doing that and what is the best coverage and/or policy type? We live in Volusia County, Florida, USA.

Gail Says: I have some good news and some bad news…in the U.S. the estate of the deceased person owes the debt. If there isn’t enough money in the estate to cover the debt, it typically goes unpaid. But there are exceptions to this rule. You may be responsible for the debt if you:

co-signed the obligation;
live in a community property state, 
are the deceased person’s spouse and your state law requires you to pay a particular type of debt, like some health care expenses; or
were legally responsible for resolving the estate and didn’t comply with certain state probate laws.

So you’re going to have to do some homework to see if your state holds your father responsible for your mother’s expenses. 

 

 

M wrote: If I donate and get tax receipts how will this reduce my annual income tax? I would rather give that money to a charity that I believe in than to the government.

Gail Says: The federal tax credit is 15% on the first $200 of donations, and 29% on any amount over $200. Then there’s the provincial tax savings on top of that.   Since you live in Ontario, if you donated $10,000 to charity,

Your federal tax credit rate is 15% on the first $200 and 29% on the remaining $9,800. So your federal tax credit would be (15% × 200=30) + (29% × 9800= 2842) = $2872.
The provincial tax credit rates for Ontario for 2015 are 5.05% on the first $200 and 11.16% on the remaining $9800. Therefore your provincial tax credit is (5.05% × 200= 10.10) + (11.16% × 9800= 1094) = $1104.
So your combined charitable tax credit would be ($2872 + $1104) = $3976. 

If you haven’t made any charitable donations (or claimed them) in the last five years, you’d qualify for the First-Time Donor’s Super Credit, which gives first-time donors an additional 25% federal tax credit on up to $1,000 in donations. This is only in play until 2017.

Giving to charity isn’t something you do for the tax benefits. It’s something you do from the heart. We pay taxes for good reason. I know it’s all the rage to minimize taxes, and you should where you can. But remember that your tax money helps provide a lot of great services.