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

Earlier discussion

Ask Gail Vaz-Oxlade Add to ...

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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