Money Matters

#MoneyMasterClass Recap-Week 45

November 7, 2020 /

This week we looked back at all the work we’ve tackled so far. Gail also started answering Money Master Class participant questions and touched on topics such as teaching kids about finances.

Looking Back

First, a look back at everything we’ve talked about so far this year–and it’s a lot! While I haven’t mastered all of these topics (investing, for example, is still foreign to me), I’m so encouraged to reflect on how focused I’ve been on improving my life financially this year.

Testimonies

Some participants shared encouraging stories of what they’ve learned and how far they’ve come.

Freezer Meals

Meal prep and freezer meals are a fantastic way to save money and stretch your budget. Cutting out the convenience of take-out can be a challenge. One of my ways is to have easy to cook, pre-made meals in the freezer that take no time or effort.

This entire thread has lists of people’s favourite freezer meals for your inspiration.

Money Management

For me, money management is truly something that threads throughout all aspects of my life. It’s helped me create healthy buying habits and a healthy attitude towards stuff as I no longer need excess, but am far more content with what I have.

Questions

As promised, Gail Vaz-Oxlade is sharing her answers to participant questions. (I’ve transcribed the Q & A’s below each embedded tweet to make them easier to read.)

Question:

I have watched you on TV for years. I instituted paycheque budgeting years ago because of you. Now I have a question. My husband and I separated a year and a half ago. I stayed in the house with the kids who are now 2 & 22. Both in University. I am now considering buying him out, however in doing that I’d have to take out a 30 year mortgage. I am 49. The new mortgage would leave me with only a couple hundred dollars leftover. Do I leave things as they are, build up my emergency fund ($3500 right now) and house maintenance fund because currently I have about $500-$600 each month to put away to buy him out in a year or two? Or do I buy him out now in case the house values keep rising?

Gail’s Answer:

You need that emergency fund MORE than you need to strap yourself to 30 yrs of payments that leave you very little wiggle room. As for the rising costs of houses, do you need all that house when the kids are gone? If so, keep your strategy. If not, start to entertain the idea of finding yourself something more in keeping with your NEW needs and wants.

Question:

When I am putting the spent amounts into the budget, I have some automatic to credit card payments that come off at the end of the month, and then I pay them before they are due. Do I put them in the budget as they come onto the credit card, or do I put them on the budget when I pay them off? I always pay them off before they are due. How do you handle the beginning of the month? When I look at my calendar it counts up the weeks and this year has 53 weeks in it! Do you begin the month when there are more days in the next month? Or do you just start on the first and end on the 30th?

Gail’s Answer:

You only record the “spent” money once under the appropriate category. Since you pay your CC off every month, I won’t drill down on that, but I will say you enter as soon as you’ve bought it (with credit or with cash). As for how to handle the beginning of the month, you can start your month anywhere, so you can go from Jan 1 to Jan 31, or you can go from Jan 5 to Feb 4…it’s what works for you.

Question:

Hi! I am in the very happy position of being 53 and financially flush. I own a condo and have a 215K mortgage, and have 61K in loans. I just sold my cabin for $274K. I plan to pay off the loans, top up my RRSP with $60k (how much I have available) and dump the rest into a TFSA.

What now? I have no idea what to do with $$ as I have always used it to pay off debt, but going forward more of my pay cheque will be mine ($3500 biweekly). I need a savings/investment plan, but have no clue what to do as my only savings plan so far has been to make monthly contributions to my RRSP (now at $119K–I have a work pension as well). I am happy to read books.

What do people do with extra money? I am terrified I’ll just spend it if I don’t have a plan. And I DO NOT want to invest in real estate. The homes I have had have got me into the good position I am in now, and I have been a landlord, but don’t want any additional responsibilities in life as I am trying to lighten my burden and enjoy what I have at this stage, which includes a lovely grandchild whose RESP I contribute to.

Gail’s Answer:

What a wonderful position to be in. Having that “extra” money is what comes from getting to Debt-Free-Forever! Getting that mortgage gone is your next step. Retirement mortgage free is a big goal, and you can do it! So look over your mortgage doc and see how often they’ll let you put money against your principal. If you have the option of increasing your monthly mortgage payment, do so. Every extra dollar you throw at your mortgage will go directly to the principal saving you loads of interest along the way. And have some fun too. Allocate a portion of that money ($200-$400 mo) to things that bring you joy.

Question:

As a public employee my job and income are very secure. How much should I have in my emergency fund?

Gail’s Answer:

While your job/income may be secure, life has a way of throwing spanners into the works: illness, disability, death of a loved one. You absolutely need an emergency fund and you should have a minimum of six months’ worth of essential expenses: the things you MUST have to keep body and soul together. So go over your budget with a highlighter and identify the must-have items, and then decide how much is your must-have amount. Save six months’ worth.

Question:

Girlfriend and I bought a house in May—mortgage is 5 year fixed, 2.44%. We’re paying accelerated weekly, payments are $448.44. We’ve utilized double up to increase it to a total of $700 up until September then dropped to $600.

I’m 29, she’s 25. I work a commission only job but past years have shown an income of $75K+ and she has a salary job of $53K. Limited RRSP’s for both of us ($10K for me, next to nothing for her). My TFSA sits at about $46K with $17K as emergency fund – it is maxed out for the year but will have nice contribution room next year due to withdrawing for home (if $6,000 is the net new for 2021, it will give me close to $50K contribution room)

She has $23K, mostly sitting as cash in high interest savings account (part of it being all cash is emergency fund but also trying to sort out plan moving forward) and will have plenty of room next year too. I put away minimum $900 per month to investing in various vehicles, she’s about $270 automated with maybe $100-$200 per month extra depending.

No debt for her. I do have a car loan (0% for longer than you’d like, for 6 years, 5 years remain) and I pay too much considering I’m working remotely these days ($530 a month).  Other than that no debt for us besides the mortgage.

House repairs…we do have a pool that isn’t in working condition and it’s something we’d both like for fitness and pleasure. Estimates are around $20-$25K to repair (would probably prefer for next year but we’ll see) and an unfinished basement at some point down the line.

Yes, marriage is in the plans but neither of us want anything big (or expensive) and are happy with our current situation. Yes, kids are wished for in the future. Being debt free and building assets is our ultimate goal at this point.

We’ve used the double up, certainly understand the power of it to apply directly to principle (amortization remaining has dropped to 261 opposed to 295 5 months). Do we go back to $700 or more on the double up or focus on the investing side (TFSA/RRSP)? The balance of investing for long term growth and paying off the mortgage—would love to hear your thoughts and suggestions.

Gail’s Answer:

You’re both still young and your mortgage principal is reasonable (you haven’t over-mortgaged) so let the amortization take its course and focus on investing for now. Soon enough, with the arrival of life & babies, things will change again and you’ll have to reallocate to cash flow. But while you have the time and the extra $$, go ahead and invest to your heart’s content.

Question:

One topic I’m not clear on is RRIFs…when I retire, what is the benefit to a RRIF vs an RRSP? I know I have to convert (I think) before turning 72. But before that, why not just keep my RRSPs and withdraw money from time to time?

Gail’s Answer:

You can claim the Pension Income tax credit if you are 65+, which lets you deduct a tax credit equal to the lesser of your pension income or $2K. If you have no other source of pension income, converting enough to claim the $2K makes tax sense. Plan on transferring $12K to your RRIF when you turn 65 then take $2000 a year from age 65 to 71 (inclusive) and your get $2K out of your RRSP tax-free for 6 years. Sweet, right?

BTW, you have to convert your RRSP to an RRIF by December 31 of the year you turn 71, not 72, so heads up on that.

Question:

How would you budget for the increase in the cost of food due to the pandemic? It seems like the prices increase each time I go to the store now.

Gail’s Answer:

Rising food costs (electricity costs, everything else costs) are part of the adjusting your budget cycle. When you find that a category is eating up more than it used to, you have to go back over your budget and decide what your priorities are: will you spend more frugally at the supermarket or will [you] adjust some other category so you have enough to buy what you want when you go shopping for food. It’s life m’love. This is where inflation becomes very real for people.

Question:

How do you treat conveniences? It seems like sometimes paying a bit more can help cut down on stress and on things like prep time. Ex. Buying mushrooms that are already cut up vs cleaning them and cutting them up yourself. It seems hard to quantify but if it seems to keep us from eating out (very expensive for a family of 4) it seems like it could be worth it..so I guess that has to do with willpower. Anyway I think this is becoming philosophical but I guess what I’m asking is what kind of conveniences are ok and where do you draw a line and call it a luxury? I would like to reduce stress with food prep (and increase nutrition – two little boys) but also not to the point I end up having lifestyle creep.

Gail’s Answer:

You get to do whatever you want with your money honey. As long as it’s your money (not credit) and you have covered everything you have to cover “must haves” you can decide how you want to use your “nice to have” $$. I do tell people to be smart about how they spend their money – consciously and with purpose – so if you decide to spend a little more for the convenience that’s completely your choice. If you find your costs are starting to creep out of control this is probably the first place you’ll end up cutting so enjoy the convenience consciously too.

Kids and Finances

Gail started talking about kids and finances in Week 11 where she shared a 5-point summary of her book Money Smart Kids.*

She continued the conversation in Week 16 and again this week.

Money is a Tool

Miser, Spender, or Avoider

Misers hang onto money at all costs, spenders are rabid shoppers, and avoiders turn a blind eye to all things financial.

With all those participant questions, Gail covered a LOT of ground this week. What advice did you find most helpful?

Missed last week? Check out my recap here: Week 44

New to the Money Master Class? There’s still time to get started!
Check out this Twitter Archive to see all of Gail Vaz-Oxlade’s #MoneyMasterClass tweets from the start.
Find the resources, spreadsheets, and quizzes here: Money Master Class
Check out my weekly recaps to get caught up.
Start here with the Money Master Class Intro and Week One Recap

Check out Gail Vaz Oxlade’s books here:*

Money Rules
Debt Free Forever
CEO of Everything
Money Smart Kids

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2 Comments

  • Jenny Pink

    November 8, 2020 at 11:54 pm Reply

    “Cook an extra large serving and freeze half. Nuke night instead of take out”

    Extremely reliable backup for know what to cook! And days when you’re too lazy to cook yourself lunch, too!

What are your thoughts? Let us know in the comments!