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Gail Vaz–Oxlade is the no–nonsense financial expert and author from the hit shows “Til Debt Do Us Part” and “Princess”. She will be making a rare public appearance to speak at Mohawk College on February 19th to help you tackle your money issues. Gail is a Jamaican immigrant who started off as a legal secretary soon after she came to Canada in her teens. She worked her way up at a sales job and since has become one of the most famous Canadian financial experts. In her shows, she counsels people that are in debt up to their eyeballs with their out of control spending and slaps them with a huge dose of reality.
When it comes to student loans, Gail has some commonsense advice for students. Make sure that the job you hope to get with your college or university education pays at least as much as your student loan is worth. “One of the rules in my new book ‘Money Rules,’ is that you should not graduate with more debt than your net income for one year. So if you are going to have a job where your net income (after tax) is $35,000 a year, then your student loan shouldn’t exceed $35,000... You should not take on more debt than the job is going to pay in one year... [If you do] you’re never aggressively paying down the debt.”
When you get that student loan, remember that it is a loan and will have to be paid back. So get those ideas of shopping and dining out, out of your head. “...it’s this idea that if I’m going to be in debt anyway, I might as well have a great time...party debt. People say to me, ‘how do you solve the problem? Like how do you get out of debt,’ and I say you make more money. They say, ‘well do you know I am working hard enough,’ and I go no, you’re not. Back then, you were spending money you hadn’t earned yet. Now it’s time to earn the money to pay it back... This idea of defaulting to the student loan system and using the 10 year repayment plan, that is ridiculous”
Once you’re out of school, Gail wants you to realize that you’ll need to work your tail off to pay back your party er I mean student loan. She has little patience for young people that are maxing out their work time at 37.5 hours per week. “Don’t be such a wussy. You’re young. You don’t need that much sleep. When you were in university you had no trouble burning it at both ends. Get a couple of jobs. Devote one job to debt repayment. It’ll take you a couple of nasty years but then you get your life back.”
We are all living in a material world but do not be seduced. Gail is warning all of you; it is not yours to have, at least not yet. You have to be willing to wait and work for it. “The thing is you can’t have it all at the same time. You can’t pay off your student loan, save for a wedding, buy a house, get pregnant and have a baby. It’s ridiculous to think that you can accomplish all of that at once. And all you’re doing is setting yourself up to be miserable because you can’t do it. Be more realistic about what it is that you can achieve and want less. Part of why we feel the way we do, like we are missing things is because we want too much. Want less.”
Don’t feel too bad if all of your friends are buying houses and you’re still living with mum and dad. Gail didn’t buy her first house until she was in her thirties but she had a 20 per cent down payment. “...people say, ‘well you know, I need to get into the market now,’ and I go no. Because all you’re doing is setting yourself up again to fail. All you need is one reversal of fortune, you can’t keep the house, you’re out of your depths. Why would you do that to yourself’?”
When it comes to retirement savings, the sooner you start the better. “The longer you wait to save for retirement the more you have to save... 18 per cent [of your income] in your forties, if you start in your 30’s it’s the 10 per cent rule, if you start in your 20’s its 6 per cent... If you are in your 50’s you will have to save more or delay retirement.”
Then there is the question of where you should keep your retirement savings; RRSP (Registered Retirement Savings Plan) or a Tax Free Savings Account. Gail says it really depends on your tax bracket. “If your income is low and will likely stay low, then you are probably better off with a tax free savings account... If you are starting really late (saving) so if you are in you mid to late 50’s, unless you are in the top tax bracket [or] unless you suddenly went and got a great job ... I would say a tax free savings account would do you more good...”
“Everybody else, including young people who may not be in a high tax bracket now but fully expect that their incomes will grow over time quite dramatically, they should be using an RRSP. Proviso is that when you make the contribution to the RRSP ...don’t ask for the tax refund. You don’t have to claim the deduction immediately; you can just put the money in the RRSP and hold onto the deduction until your tax bracket goes up, then claim the deduction. That will offset any income tax you have to pay later when it is time to pull the money out...”
No matter what age or income bracket you fall into, learning how to take control and manage your finances is one of the most empowering things that a person can do for themselves. Gail will be answering all of your financial questions on February 19th. For more information visit mohawkcollege.ca and gailvazoxlade.comV
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