I don't have enough money to max out both my RRSP and my kids' RESPs. Which one should I do?
When your kids are small, make your own RRSPs your priority. Your children have 25 years to make use of an RESP from the time it is started, so by starting late you're giving them an extension. But you can only make contributions until each child is 17, so it's a good idea to get started by the time they're five or six. Anything you can contribute is worthwhile, and don't forget that the government will match anything up to $2000 with a 20% grant.
Think of using the tax refund from your RRSP for the kids' RESPs. And you might also gently nudge the doting grandparents, aunts and uncles to contribute to RESPs in lieu of gifts. An RESP is truly a gift that lasts.
How can I save when just living takes all the money I've got?
It's very tough when you're stretched to the limit. If your situation will probably change in a few years, you might be able to make up for not saving now. But if you think you'll be at this same level for some time, you really need to create a cushion for yourself. First, be very clear what is a want and what is a need. One of your needs is to save 10% of your earnings. If you can have that taken off your paycheque before your get it, you won't notice it so much. Allocate enough money to cover your needs, then plan what you want to do with the rest.
When you plan what to do with your discretionary income, you won't be as likely to let it slip through your hands. If there's hardly anything left, get creative. How can you have the same amount of fun for less money? There's usually a way if you put your mind to it.
Oh, and one more thing--no matter how tempting it might be, don't get into debt.
I'll be forced to retire in ten years, but I only have a few thousand put away. If I start saving like mad now, will I have enough?
How much is enough in retirement depends entirely on the individual. Use the Retirement Savings Calculator to determine your own Enough Number. You can see where you'll be if you save at different rates, retire earlier or later or adjust your projected retirement income up or down.
By all means, start saving like mad now. I've seen people turn their situations around in only eight years. You might not have enough, but at least you'll have something. You might need to look at working beyond your forced retirement so you can keep contributing to your retirement savings and give your money more time to grow.
While you're saving, remember to reward yourself along the way. Without a few treats, you may just give up.
Should I borrow for my RRSP?
If you can afford to pay your loan off in a year, borrowing for your RRSP is a terrific idea. You can use the tax refund to pay back part of the loan, then pay off the rest more quickly making payments at the original level. When you've finished, keep making the payments--only this time they go into your RRSP. When you've finished paying for the original life of the loan, borrow the same amount again at the same payment level. Now you can invest more and you'll get a bigger refund, so you will pay off that loan even earlier in the year. Keep doing this and within a few years you won't have to borrow anymore and you will have established an RRSP saving habit.
If you can't afford to borrow enough to max out your RRSP, just borrow what you can comfortably pay back in a year and follow the same plan. Your RRSP room won't go away. You can pay into it later when you can afford to.
We have a good relationship, except that we can't talk about money without getting into a fight. How do we come to some kind of agreement?
Without realizing it, people have deep-seated attitudes toward money. The four main types, Savers, Spenders, Builders and Givers have different financial approaches. If you're a Giver who needs to spend time and money taking care of other people and you're living with a Spender who needs to shop, there will be conflicts.
Neither attitude is right or wrong. It's important for you to identify your two basic money attitudes and allow room in your finances so that each of you can fulfill your need. Allocate an amount that the Giver can give and the Spender can spend each month.
Learn more about the different types by clicking on Attitude on the navigation bar. Or for more detail, read Chapter 1 in the book.
How can I get out of debt?
It's simple in theory: start spending less than you bring home. But in practice it's hard, especially in today's credit-crazed environment. What you need to do is separate your needs from your wants, then cover your needs and ignore your wants until you're out of debt.
I always ask my clients to keep track of every cent they spend for at least a month. Once they've done that, we analyze where their money is going. We set aside what to keep for their bottom-line needs, then decide which of their wants can be given up or postponed until the debt is paid. If you've never done this exercise, give it a try. You'll be surprised at how much money you might be spending on things that don't mean that much to you. The book has a whole chapter on this process, or you can go to the Retirement Savings Calculator and use the Cash Flow Statement as your guide. Just remember: record every purchase, no matter how small.
Pay off your highest-interest debts first, then move on to the next-highest. If you have a number of different debts, you may be able to consolidate them at a lower rate of interest than you're paying
I also recommend the psychological trick of paying everything in cash instead of credit or debit cards when you're working on becoming debt free.
Encourage yourself with this thought: once you're out of debt, you get to keep all your money for yourself. Add up the interest you have paid and still have to pay and think of what you could have bought instead.
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