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Gail Vaz -Oxlade personal finance guru

As businesses cut jobs and working hours every day, we're all worrying about money. How do we spend less, save more and manage debt better?

Every week on her television show, Til Debt Do Us Part, personal finance guru Gail Vaz-Oxlade helps couples figure out what it means to live within their means. Gail is also the author of the book, A Woman of Independent Means.

Gail says that money is the number one cause of failed marriages. Rare is the couple that agrees on how the pot should be divided and the bills paid. Most families are in debt, and with debt come family arguments, tears, tantrums and marriages on the verge of divorce. You can also check out her blog on

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Gail joined us for an online discussion at noon on Friday about keeping your head above water in a recession. She answered your questions in a live email exchange. Your questions and her answers appear in the space below.

Editor's Note: editors will read and allow or reject each question/comment. Comments/questions may be edited for length or clarity. We will not publish questions/comments that include personal attacks on participants in these discussions, that make false or unsubstantiated allegations, that purport to quote people or reports where the purported quote or fact cannot be easily verified, or questions/comments that include vulgar language or libellous statements. Preference will be given to readers who submit questions/comments using their full name and home town, rather than a pseudonym.

Sonali Verma, Globe Investor: Happy Friday, everyone, and thanks for joining us. We have a lot of questions, so let's get straight to them.

Martha D. from Brampton writes: I watch your show routinely. Great show.

Gail, I've been telling friends for 20 years now that the biggest bang for your buck is to make extra payments on your mortage. I was told long ago that the rule of thumb on a 25 year mortgage, with accrued interest, and no pre-payment on the prinicipal outside the bank's small application, was you'd have spent 2.5 times the value of your house by the time 25 years is up. So, a $200,000 purchase will end up costing you $500,000, 25 years down the road. That's a lot of after-tax dollars out the window!

Can you verify this? I think it was based on interest of around 6 or 7%.

Gail Vaz-Oxlade: Martha, in large part it depends on how much of a downpayment you have, but the general rule of thumb is that on a 25 year amortization (at about 7%), you'll pay more than double the cost of the home, and if you take a 40 year amortization (which were being touted just a short while ago), you pay more than three times the original cost of your home by the time the mortgage is paid off. Thank goodness the 40-year-mortgage has gone buh-bye! But the 35-year-mortgage is still alive and well and willing to eat up your money. On a $200,000 house you'll pay over $300,000 in interest! OMG!

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There are dozens of ways to trim mortgage costs, the easiest of which is to go with an accelerated weekly mortgage payment. Virtually no pain... Lots of gain.

Kate from Fredericton writes: My boyfriend and I try hard to be smart about our money. We have just purchased out first home. We purchased at the higher end of our price range but we are not struggling to make ends meet as we both have well paying jobs. We are, however, hoping to get married within the next two years.

The issue that we are having is that after the mortgage payment, car payments (2), RRSP investments, insurance, etc there is nothing left over to go into savings. I certainly do not want an elaborate wedding, but would like to have around $12,000 to $15,000 to play with!

Is it wrong to borrow to pay for the wedding? We would prefer to save a large portion of this money, but how do you get water from a stone? We are trying hard to stay out of unnecessary debt as he works in an unstable sector of the economy and don't want to be caught off guard should something happen to his salary.

Gail Vaz-Oxlade: Kate, yes it is wrong to borrow to pay for a wedding. A wedding is a consumable, and it's always wrong to use money you haven't yet earned to buy something consumable. As for getting water from a stone, while you say that you're not struggling to make ends meet, you also have no wiggle room in your budget. And you're right to be concerned about carrying your existing load on only one income should something unforeseen happen. That's why you need a big fat healthy emergency fund. And that's why you don't want any consumer debt. Hey, get another job to pay for that wedding.

Dave Donovan from Ottawa writes: First, my wife and I love Till Debt Do Us Part --- we watch it often for a reality check on spending... with success, I think.

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We both recently finished University (my wife finished 2 years ago, I finished last summer). We have also both found stable jobs with relatively generous defined-contribution pension plans. For the first time, we are finding ourselves with money left over at the end of the month. We have a combined before-tax income of about $140,000, are 28 years old, and the only debt we have is student loan debt from my wife at about $20,000 - she pays about $1000 a month at an interest rate of about 3.5-4% (I managed to escape Unviersity debt-free).

We currently rent but are looking to buy a home in the next 1-2 years. We have about $10,000 to invest right away, and plan to put away about $2000 a month between us going forward. Over the long term, we are trying to figure out the best way to save/invest money - specifically, I am trying to figure out how to effectively use RRSPs and TFSAs to our advantage, and I'm finding things a bit confusing. How much should we be putting away into RRSPs and TFSAs right now, and what is the right mix? Does it make sense to clear the student debt first, or put more into savings?

Gail Vaz-Oxlade: Dave, congrats on being in a really good place financially. You should be maxing out your TFSA each year, so you can each contribute $5,000 a year individually. Set up an auto debit to a high interest savings account for $400 a month now for each of you. That's done. As for the RRSP, first you'll have to find out what your contribution room will be since you both benefit from DCPs and those contributions are taking into account in calculating your RSP limits.

Okay, now do the same thing with the auto debits to your RRSPs. Two down. Still have money left...great! Time to set a goal for home ownership. What kind of house? Where? How much downpayment will you have? If you decide you want to have $50,000 down, and you plan to buy in five years, you have 60 months to save that money. You know what I'm going to say next, right? Yup, set up an auto debit to a high interest savings account and have your $833 a month moved where you can't spend it but it can grow to the downpayment goal you've set. Good luck.

Casey R. writes from British Columbia: Hi Gail, I have just started a new serious relationship with a 50 year old woman. I am debt free and advocate your financial philosophy. However this new lady of mine has opened up as to her true financial situation. She has a good secure career but has considerable debt because she is too generous to ex spouse, siblings and her adult children. She has been given poor financial advice in owning investment rental real estate. Any advice as to how to approach this situation without chasing her away, but I do not want to support her while she is debt laden. Thank you in advance.

Gail Vaz-Oxlade: Casey, you're sensible to be concerned. I suggest that you keep your finances separate at this point in your lives. Figure out what it'll cost for you to share your lives together and then you can each contribute proportionately to the common pot to pay for those costs. Everything else including debt, ex-spouses and children, are dealt with on an individual basis. Would that work for you?

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Sandra Winter writes from Toronto: Hi Gail. I totally enjoy your show and your website. Your advice is so sound and helpful - thank you!

In this economy, my husband and I are debating the merits of paying off individual debts (car, loan, visa) versus increasing our mortgage to create a single payment. One of us would like to continue paying our individual obligations and possibly reconsider our options when our mortgage renews next year, while the other is attracted by a recent offer from our bank. The bank calculated that a single payment would repay all of our debt in less time than if we continued one-by-one payouts. Financially we're not in any difficulty (thankfully!), and most of our obligations are reasonably low interest, but a mortgage consolidation may require CMHC insurance and we would incur a penalty for breaking the existing mortgage.

One of us thinks this simply sounds like a profit opportunity for the bank, but early debt freedom would be most welcome indeed. Is the bank's offer too good to be true? Thanks for the opportunity to 'speak' personally, and thank you in advance for your answer!

Gail Vaz-Oxlade: Sandra, I'm not sure if the bank's offer is too good to be true, only doing the math can tell you that. I will say, however, that it might be wiser to pay off the debt as it currently exists (once you've gotten your interest rates down as low as possible by negotiating or doing balance transfers) and then use the bank's strategy once the loan amount a) doesn't push you to CMHC levels, and b) the mortgage renews and there's no interest penalty. Do the math and see what works best for you in the long run. Good luck.

Neil McPherson writes from Kitchener, ON : Would you please be kind enough to let us know the top 4 or 5 things about which we should educate teenagers with respect to responsible money management?

Gail Vaz-Oxlade: Neil, I blog about teaching kids about money a lot on my site. This is one of my bug-a-boos. Go to my site and search "prepping kids." To answer your question, here are the big skill-sets I think they need:

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  • How to live on a budget.
  • How to manage a bank account.
  • How to comparison shop.
  • How to manage bills and other paperwork.
  • How to save for a goal.
  • Credit is NOT disposable income.

Deanne writes: I am in the last five years of my current professional career before I can retire. I am planning on moving into another career when that time comes, if all goes well. I also live in a part of the country, Newfoundland, where real estate has been on a upward trajectory, with no signs of slowing down. The natural resources of this province, oil and nickel, are fueling this prosperity.

Surprisingly, I do not own a house. I do, rather, share a house with a family member, but I am not the owner. I am debt-free and do have ample resources. Am I missing the mark, by not being invested in real estate? As an investment, should I make the move?

Gail Vaz-Oxlade: Deanne, home ownership is much more than an "investment", it's a lifestyle choice. It makes sense to own a home if you're rooting. If you're likely to move around a lot, home-ownership may be more of a pain in the ass than it's worth. Only you can say if this is something you should be doing.

If you think you're ready for home-ownership than you need to save a downpayment. When I tell people they should have a minimum of 20% of the purchase price for a downpayment on a home, they balk. TWENTY PERCENT! How are we ever going to come up with that kind of money? Here¹s the thing about NOT having 20%: You immediately make the home more expensive because you have to incorporate mortgage insurance fees into the equation.

You'll also have to calculate your carrying costs. Home ownership is NOTHING like renting. You¹ll have utility costs. You¹ll have taxes. You¹ll have insurance. And then there¹s maintenanceŠ the cost everyone likes to ignore.

Don't forget to figure out your closing costs. Some experts say to estimate 1.5% of the value of your home for closing costs. There are legal fees and expenses, a home inspection fee (don¹t skimp), adjustment costs for things like pre-paid property taxes, an appraisal fee, land transfer tax, title insurance, an interest adjustment, a property survey (maybe), water quality inspection if you¹re living in a rural area, and hook-up fees for setting up your new services like a phone line. And don¹t forget GST.

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Them's the basics.

Andy Paterson writes: Love the show. Love the no bull, straight shooting approach.

My question: I am very fortunate in that my company has just paid out a nice bonus. I stand to get about $7,000 (net). Currently my wife and I rent a townhouse (960/mo heated). We have three teens and we'd love to get back in the real estate market using the 7K as part of a down payment.

I'm concerned that we still have about 15K in credit line debt. We can easily make the payments - our monthly take home income is about $4,200. We are looking at a home that's about $225,000. With home prices and interest rates down, I'm afraid we might not get a better chance. Should we whack down the debt or maintain our payments and go for the house?

Gail Vaz-Oxlade: Andy, gawd, what a tough question. In any other market my answer would be an absolute 'PAY DOWN THE DEBT'. But you're right about the current market. However, I'm still loath to tell you to move into home ownership when you're walking around with debt.

You say that you can easily make your payments, but if you have enough money to live on why are you going into debt on your credit cards? Hmmm. What to do...what to do... If it were my money, I'd whack it against the debt and then bust my butt to rebuild it fast (extra jobs, selling stuff, cutting costs, and you won't have the debt repayment any more either, right?) for the homeownership goal. Good luck.

Sarah and Tim write from Mississauga: Hi Gail, Til Debt is required viewing in our home. Both my 11 and 15 year olds will even watch reruns ;) We're debt free and loving life!

Question: What do you think of the US strategy to spend their way out of the current economic downturn? What do you think of our government's strategy by comparison?

Gail Vaz-Oxlade: Sarah and Tim -- Does our government have a strategy? Hmmm. As for the U.S. focus on spending it's way out of a recession, it was spending that got us into the mess they're in. Regardless of what The Spurts are saying about what happened it boils down to a very simple thing: people were spending more money than they made, they were saving nothing, and they had used more credit than they could ever afford to repay. Even as the U.S. slid into the hole at the end of last year, the pundits were saying, "buy, buy, buy."

The only way for us to have a financially sound foundation as an economy or as individuals is to balance what we spend with what we make, and create real wealth - not that stuff that can disappear into the ether with the flip of a switch. I've been saying for a long time that "equity" is just another word for "borrowing potential", and I'm quite tired of being told I'm richer than I think. We're not.

We're in deep doo doo and until we come to the realization that the only way to be safe is to have enough money saved to give us some options, we're just going to be rationalizing our Desire to Acquire. I do believe that when the crap hits the fan, as it has now, it is the government's job to spend the money it hasn't been spending on infrastructure (yes, it's time to fix what's broken) to keep employment levels at the reasonable level so people can earn money to buy food.

And I do believe that the rapacious interest rates lenders have been using to buoy up profits should be tempered with the desire to help people turn their personal situations around. The fact that lenders can borrow money at 0.5% but are lending it to qualified borrowers at 16% is ridiculous! I can't believe that the pay-advance loan industry is still getting away with the outrageous interest+fees crap it's been pulling for so long. That being said, individuals have a BIG responsibility for keeping their financial house in order. No one makes a body go out and buy a big-screen TV, and while a vacation is often described as a "need", it is not. So we're going to have to learn to live within our means.

Cecilia writes: First, I would like to thank you for your words of wisdom and guidance in the world of money management! How I wish I had paid attention earlier...sadly I am a late bloomer!

I am 56 yrs. old, divorced for 4 yrs and receiving spousal support after 33 yrs. of marriage and being a stay at home mom. I have 3 grown children all independent and in university. In 2004, once the kids were launched, I went back to University and graduated 2 yrs ago with a Masters degree in a field with excellent job opportunities. However, due to the recession, I have been laid off and am now unemployed!

I have no savings, no RRSPs, rent a home (with a low rent), have just paid off all my university costs and have little debt. This summer I will receive an inheritance of approx. $150,000.00. My dream is to buy a small home and try to pay it off in 10 years, (a challenge in Vancouver's overinflated real estate market). I am afraid that my mounting uncertainty and panic (my new career was supposed to be the answer to my worries) will cause me to take a wrong turn while planning my financial future...and I am running out of time. What do you recommend for late starters like me? Is it too late? The more I learn the more paralyzed I feel.

Gail Vaz-Oxlade: Cecilia, late bloomer or early bloomer, it is only important that you have bloomed! Good for you for getting debt free too. You're doing well, and now it's important not to panic. I'm not sure what you career is, but the first question I would ask is this: Are your skills portable? If you can find another place in the country to work, then you can put those skills you've worked so hard for into high gear. As for you $150K inheritance, that won't go far in the real estate market you're currently in, but may take you a nice long way to mortgage-free in another location. I know that the ties that bind are often tight when it comes to staying where we've rooted, but you might want to consider the options available in another location.

If relocation is out of the question, I would strong recommend you get yourself a first-class financial advisor and let him or her help you decide how best to invest that money for your retirement. Since you do not currently have a job, you can't get a mortgage. If you are hell-bent on home ownership, then the only other thing I might suggest is that you find two or three like-minded people who you could share your home with - yes, roomies - and use the income from them to pay down your mortgage as fast as possible. (At least one of them should be handy with a screwdriver!) Good luck.

Helen writes: I have watched your show frequently and enjoy it very much. One situation that I have not seen you discuss on your show, is how to make a decision when one partner in a marriage wants to go back to school. I am in the situation where my husband (51 years) wants to go to grad school to pursue a degree that he started 16 years ago and never completed. He was laid off from his job in Decmber 2008 and still has not found a new job. So he is thinking seriously of going back to school. He currently has a BSc degree, one university level certificate and 2 advanced diplomas from a community college. He has also started taking courses in different college level programs. With all of these qualifications, he has not been able to get a good career job.

My question is, how can we balance out his desire to pursue a graduate degree against the working time left (I'm 55), the costs of returning to school (school costs, lost wages and lost pension contributions), and the risk of not being able to get a job when completed (especially if he is 2 or 3 years older).

We own our own home (still with a pretty big mortgage), have no debt. I have a some investments in RRSPs and will get a small work pension when I retire. My husband has very little in terms of retirement savings and, so far, no work pension accummulated. I would appreciate your advice on this. On the one had I would like to support him in returning to school to fulfill his dream. On the other hand, I am very concerned about paying off the house before retirment and saving enough in order to have a decent retirement and to move to BC where housing is very expensive but where all of our children and their families live. Thanks for your advice on this.

Gail Vaz-Oxlade: Helen, it's great that your husband wants to go back to school to make his brain even bigger. I'm all for bigger brains! Here's my question: How much of his desire is rooted in his inability to get a job? Very often, when you've been job hunting for a while without success, you look for things that you can do that would be productive to fill in the spaces in your work-life. If this is what school is, that's NOT a good reason to do it. However, if he has a strong focus on what he wants to do next, the "amount of time you have left" - the fact that he's pushing 60 - is less relevant than how long he intends to keep working at his new passion. Investing as ton of money to retire in 5 years makes no sense. Working for another 15 years means the investment could pay off just fine.

Just as important, however, is your family's ability to stay afloat and build some assets for the future. If you still have a pretty big mortgage, and very little in the way of retirement assets, then you may not have the luxury of living a student's life, unless you're prepared to cut back significantly on your costs. That includes both the fixed costs - like housing - and your luxuries, be they large or small.

Mind you, there are lots of people who having a passion to learn and the need to work manage to bust their butts to do both. I had an uncle who got his doctorate and became a very successful professor while working (along with his wife) to raise three children.

It isn't easy to do two jobs (school and work), but life isn't easy. The pleasure must come from within, from the satisfaction derived by what you're accomplishing. And if going back to school is really what he wants to do, you will find the way to make that dream a reality. You can have anything you want, if you're prepared to work hard for it. Good luck.

Anne writes: I am a 25 year old recent university grad looking for work. What things should i start doing/planning to get myself on a good financial footing and/or to establish good behavioral patterns? A little bit about me: I am trained as an architect, am debt free, sometimes abuse credit cards, pay a pretty good rent in montreal ($500/mo), live with my boyfriend who has a good job as a programmer, have an RRSP and life insurance (set up by my parents), and some money saved away for the distant future to start a buisness (in 20 years). Any suggestions?

Gail Vaz-Oxlade: Anne, congrats on getting out of school with a good degree and no debt. And I want you to go home and hug your parents for helping you get such a good foundation in place. The fact that you "sometimes abuse credit cards" means you should NOT carry them with you. Put them away somewhere safe and only carry as much money as you plan to spend in a day.

The next thing you want to do is get a good handle on what your costs are to keep having a great life, so make a budget and start tracking your expenses. It'll be good practice for when you go into business for yourself, because well-run business know where every cent has gone. Speaking of which, you'll want to set a goal for that biz start-up you're planning. Dreams have a way of dissipating into the ether if there's nothing written down. So write it down. Make is specific, as in "I'll need $20,000 to start"… fill in your own number. Create the steps for getting there. If you're planning to buy a home, for example, and you want to have a $30,000 downpayment in 5 years, you'll have to set aside $500 a month ($500 x 60 months = $30K) to get you there. Doing nothing for four years and then running around wondering how to make it happen in year five is just dumb.

Have you and your boyfriend done the "full disclosure" thing with each other? Are you on the same page in terms of how you manage your money? How many children you'll have? Who'll do the dishes? These are conversations partners seldom have, and then are shocked to find out just how little they know about their Best Buddy. I have a list of things you should talk about on my website (search "getting married"). Good luck.

Caroline Dickens writes: Firstly, I have to thank you for doing such a great job. My husband and I are a month into your plan and we love it! Our financial situation was not dire but we figured we would take the opportunity to tighten up our finances and it's working well. We no longer argue about money!

Here is my question. When we have money left over in our jars, what should we do with it? Should we add it to our debt pay down or should we spend it on a family treat, like dinner out or something? Responsible or enjoy? Another question, we are potentially about to come into a small inheritance, likely under $10K. Do you recommend that we put this entirely on our debt or save it, or both? We do not have any credit card debt or a car loan but are carrying a large home equity loc balance. The interest rate on the LOC is prime.

Thanks Gail! Keep up the great work!

Gail Vaz-Oxlade: Caroline, the money in the jars sometimes has to accumulate. You don't have car-repair costs every month, nor do you have to buy clothing or gifts every month. Once you think you have enough for whatever may come up - please do no underestimate - then you can use the money for whatever your heart desires. Having lots of money left means you're also off on your budget and you should go back and re-calculate so the jars come out right. Make sure you have a healthy emergency fund, and make sure you're having some fun. As for the $10K, if you have consumer debt, that's where it goes. I'm glad you and the hubster aren't arguing about money anymore. Good for you guys.

Toby in Vancouver writes: We are a family of three (5 year old daughter), and we are expecting a second child in November. Our tw br. condo isn't big enough to accommodate our growing family and is on the market with a pending offer. We are hoping to take advantage of the slow Vancouver real estate market and buy a larger house. While we have no debts other than our current mortgage, we had planned to use the apply what we were paying in strata fees and car loan payments (to be paid off in May 2009) towards the bigger mortgage payments.

My husband and I are currently employed and have pensions. We expect things to be tight over the next 5 years and may have to forego RRSP contributions for 4-5 years while our second child is in daycare. We only have a few thousand dollars in savings. Are there circumstances where you are ok with a larger percentage of people's incomes going towards housing? Any advice?

Gail Vaz-Oxlade: Toby, I'm fine with you spending whatever you want on whatever you want providing your budget balances and you aren't using credit. Since you have no debt, the 15% allocated to debt repayment can easily be added to your housing budget. Like you guys, I had to forego RRSP contributions for a few years when my kid were young and all my money was going to the mortgage and nanny. I caught up aggressively as soon as I could. Please don't strap yourself too tight with the new house. You never know when the banana peel will magically appear under your feet!

Skelly writes: Hi Gail - My husband and I love your show, and watch it every chance we get. I think we're OK financially, but there is always room for improvement. I've looked at and tinkered with your budget and I absolutley love it, and can see it working in my house.

My only problem is this: Both our paycheques are on a bi-weekly basis, and your budget breaks it down by week. I'm having trouble figuring out how to get it started, using my biweekly pay. I can't ever seem to find enough to fill the jars with each pay. Right now I allocate my loan payment to one pay, and mortgage to another, and it's worked, but I really want to try your budget, but can't seem to figure out how to make the switch. Can you help?

Gail Vaz-Oxlade: Skelly, the budget is actually a monthly thing; it's the jars that are broken out weekly. Hey, if doing it bi-weekly works better for you, just do the math and make it so. I'm not sure why you can't find enough to fill the jars unless you've allocated too much money to each budget category and are over-spending. As long as the budget balances, you should have the money available for the jars. You may need to do the food and transportation weekly, and use another rhythm for things like clothing and gifts and entertainment. Good luck.

George V. writes: Several years ago, I watch you on a program and you were discussing and RSP Mortgage. I am considering an RSP Mortgage along with a conventional lending product to finance my home purchase. I do know that I need to have the RSP Mortgage (portion) insured.

What are some things of which I should be aware should I undertake this financing option?

Gail Vaz-Oxlade: George, this is a big question... Okay, fees... Figure out the one-time fees like the mortgage set-up fee, appraisal and legal fees. Then there are the ongoing fees like the RSP admin fee and the mortgage admin fee. Most people believe you should have a mortgage of $100K or more before these fees are covered. Since mortgage rates are really low right now, this is doubly important since if you're paying high fees and earning a low return your RRSP will languish. I will tell you that at one point I had an RRSP mortgage and I loved it! But you need a smart advisor to get you through the process.

Connie writes: We are 41 and my hubby makes 20-30K (he is a sales guy so it may be smaller this year). I make 80K on a disability pension. My company has filed for bankruptcy and it looks like we will at some point lose my income. We have no debt (except the mortgage).

Budget approximate (it varies):

6000 in

2700 Housing (mortgage, utilities, taxes)

750 Food (I have 5 family members and a couple of unofficial foster kids who almost always eat here)

400 Auto gas (own our cars outright)

300 Rogers bill (lots to cut here if necessary)

700 charity

450 savings

200 entertainment

300 other (haircuts, school stuff, sports for kids)

How do we prepare? I don't think I can work (unless I can find something that I can do a couple hours a day).

Gail Vaz-Oxlade: Connie, you make $80 K on a disability pension? Really? Wow! If your income is going away then you have to find ways to cut costs and replace some (or all) of the income you are losing. You may have to sell your home and downsize. And you should be working now to build up a big, fat emergency fund while you still have your income. Good luck.

Joanne writes: My husband and I are both employed and collectively net approximately $5600/month. He is 31 and I am 28. We both contribute to RRSPs ($400 and $250 respectively), we own our house ($1200/mth), have approximately $1000 owing on credit cards and no other debt except a car loan that is $10,000 at 5%.

Our expenses are as follows: House $1200, Utilities $300, Car Payment $800 (accelerating the payments), Car Expenses (gas/insurance) $375, Groceries $350, Entertainment/Retail purchases $1200, additional savings of $600-$1000 whenever possible (we would like to put a lump sum on the mortgage of $10,000 by the end of the year).

With a new baby on the way (June), and my salary being cut in less than half for the next year (from $2200 to $840/month), how should we be allocating our new monthly income (approx. $4240)? Should we continue with the same RRSP contribution? Should we cut down on our car re-payment? I think our Entertainment budget could be reduced but the baby costs will probably eat up the savings there… We would also like to start contributing to an RESP.

What are your suggestions?

Gail Vaz-Oxlade: Joanne, cut back on the accelerated car payments... Just cover the main payment amount while you're on mat leave. Cut out the retail purchases, and redirect that money to your Mat Leave Fund... The money you'll use to supplement your lower income when you're off with the baby. You may have to forego the mortgage prepayment this year. Make sure you still make your max RRSP contribution. Just don't claim the deduction against your lower income. You'll want that deduction when you go back to work. Get rid of the credit card debt completely! Congrats on the baby. It's the funnest job ever.

Tanya K. writes from Calgary: Gail…love the show!

Once you have paid off your big debts (house, car, education), where should you put your new found surplus? My husband and I are contemplating a second property (vacation or income) but is that sound? Are you just as wise to put it into savings? We're already pretty good about putting money away for savings, RESPs so we don't want to fritter away the extra.

Gail Vaz-Oxlade: Tanya, hey, if you have no debts and you've got your expenses under control, you're saving lots, you have a healthy emergency fund, then you should be having some fun with your money. Why not? In and of itself, money is just a means of exchange. What you exchange it for is in part determined by what you want from your life. Would you love having a second home? Then make it so. Would you love taking the kids on great vacations and showing them the world? Hey, if you have the money and the time, why not? You don't always have to stash away the loot. Sometimes spending it to make a great life is just the ticket. Having taken care of all the details, you've earned the right to have some fun.

Piezy writes: Hi, love your show. I have a question about cancelling credit cards. Don't worry, I don't have any credit card debt and pay off my balance in full every month. Somehow over the years I've accumulated several credit cards, many of which I don't use. I've heard that cancelling credit cards can negatively effect your credit rating. What do you think about me cancelling a few of the most recently acquired credit cards?

Gail Vaz-Oxlade: Piezy, this is a myth that many people believe. Cancelling credit cards that you haven't been using doesn't negatively affect your credit history. If you have a card with a strong history, that's the card you want to keep the history on. But it doesn't have to be the card you use. You can simply not use that card without cancelling it and the history will stay up. Once you've used the card you really like for a year or so, and established a sound history on it, you can cancel the other card.

So choose the card you like the best - lowest fees, best bells and whistles - and use that card regularly. If you have a different card with a strong history, lock it away, but don't cancel. Cancel everything else that you haven't been using.

Sonali Verma, Globe Investor: Gail, thank you very much for sharing so much of your time and expertise with us. We really appreciate it. And thanks, also, to all our readers who participated in the discussion.

Gail Vaz-Oxlade: My pleasure, and I hope y'all have a lovely weekend.

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