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Gail Vaz -Oxlade personal finance guru
Gail Vaz -Oxlade personal finance guru

Earlier discussion

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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.

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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