Choosing between Higher Education, Loans and Family: Million Dollar Journey

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Choosing between Higher Education, Loans and Family Posted: 21 Jun 2010 04:30 AM PDT This is a column by regular contributor Clark. A friend of mine who holds a Masters in International Studies had a dilemma a while back about whether to pursue her dream of getting a doctorate from Switzerland’s Graduate Institute of International and Development Studies now or take care of immediate concerns and put off the degree until later. The friend in question has nurtured her dream to study in Europe for a long time and has a passion for the subject as people who go for doctorate degrees should. She got married while in grad school and became a mother within the last year. While she was pregnant, she discussed her goal again with some of her friends, including me, at a get-together and being the personal finance enthusiast, I chimed in with my money-related thoughts. I had questions about her financial situation and learned that she and her husband had student and credit line loans totaling ~$35K. Her husband makes a decent income and she was on the verge of completing her schooling at that time. They were renting and, except for the car payment, had no other consumer debt. Below are some of the areas we touched upon. 1. Income. Since the husband (though willing to move) may not be able to make as much money if they relocate, they’ll have to make do with her scholarship/aid (she was confident in getting one). I do not know about employment opportunities for people on spousal visas in that country but I guessed it was not going to be easy. 2. Loans. With a baby to care for and loans to repay, it seemed prudent (to me) to take care of immediate concerns. Finding a job in Canada and working to pay off loans aggressively was a good solution. If the dream lives on after a few years, then they’ll have an option of going overseas with loans repaid and hopefully some savings to support them. The kid could get international exposure at a young age and they could decide how they want things to go from there (settling or returning). 3. More Debt. They may need to borrow money if they are relocating immediately to cover initial expenses (there was no emergency fund per se, despite this not being an emergency situation). 4. Relationships. Maintaining a long-distance relationship by letting the husband take care of the loans and the baby (with help from her parents and in-laws) was an option but she, unsurprisingly, rejected it immediately. 5. Unfulfilled Dream. There was a possibility that the dream may never materialize as other things take precedence. Some friends were opposed to putting off the dream/passion. They suggested talking to the lenders about deferring student loan payments, selling off the car, borrowing from parents to pay off the credit line, and going to live (study) the dream. My friend did not give any indication as to which side she was leaning and we parted ways. After months of limited contact through a few emails including a mass one about the birth of her girl, we met again. She mentioned that she’ll be starting a new job in the fall and added that she had two offers – one, a temporary position for a year with better pay and the other, a permanent one with lesser pay; she had chosen the permanent one. There was an element of sadness about the decision and I realized that familial and financial considerations had taken precedence. She said that she had no immediate plan for the higher education and will let life take its course for the next few years. I’m going to go ahead and say that the dream may have disappeared forever (I hope I’m wrong). It is not impossible that she may pursue it in a few years but chances have dimmed considerably. Do you think there was a lack of proper planning in her case? I do not have experience with delaying student loans. So, I am wondering under what circumstances a borrower can seek deferment of student loan payments? Does it matter if it is a federal or private loan? Have you let any dream/passion take a backseat to concentrate on other things? Do you think you will chase it at a later date? About the Author: Clark is a twenty-something Saskatchewan resident employed in the manufacturing sector. He repaid around $20,000 in student loans and has been working to build his investment portfolio as a DIY investor (not trader) while nurturing plans to retire early. He loves reading (and using the lessons learned) about personal finance, technology and minimalism. Popular Posts: How capital Gains Tax Works How Dividend and Interest Income Tax Works Registered Education Savings Plan (RESP) Top Cash Back Credit Cards in Canada Questrade Review Are Hybrid Vehicles Worth it? Tax Free Savings Account (TFSA) Copyright 2010 MillionDollarJourney – All Rights Reserved

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The Importance of Paying Attention to Financial Statements: Million Dollar Journey

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The Importance of Paying Attention to Financial Statements Posted: 01 Jun 2010 04:30 AM PDT This is a column by regular contributor Clark I’ll relate my experience to underscore the significance of paying attention to your finances – not just the saving and investing parts but also the all-important records of those money transfers/contributions. I contributed to my TFSA account for 2009 in May of that year and rested in content that I had been prudent in taking advantage of the newly introduced savings vehicle. Since financial institutions do not issue an official contribution receipt for TFSAs like they do for RRSPs, I viewed my monthly statement, verified that the contribution was listed and let it be. Fast forward to Feb 2010: I filed my income tax return and the tax software (forms) did not have any line about TFSAs. I figured that financial institutions would report to the Canada Revenue Agency (CRA) directly and I had no further part to play. After receiving my Notice of Assessment (NoA) from the CRA, I found that the summary section listed that I had a TFSA contribution room of $10,000 for the year 2010 (the extra $5000 was carried over from the unused room for 2009!). The NoA mentioned that I need to contact my financial institution if there are any errors in the contribution room given on the summary. Despite seeing this, I waited for another couple of weeks thinking that financial institutions may have until April (the tax filing deadline) to report 2009 TFSA contributions. Call it laziness or naivety (or anything else that you find appropriate) but that is what I did! Sometime in early April, a light bulb went off in my head and I realized that I have to take responsibility for my money. When I contacted my financial institution, they were surprised and said that all contributions had been reported – there went my generosity of giving financial institutions time until April to report TFSA contributions! They asked for a copy of my NoA as proof and promised to do the needful. I learned that my report had been rejected by the CRA the first time around due to some error in the data elements. A few weeks after my intervention, I checked the TFSA section of My Account on the CRA website to see that the contribution had been accepted and showed up correctly. It is entirely possible that my case was an unusual one and someone from the financial institution may have noticed my rejected report in a few months and corrected the situation. As long as I did not contribute over $5000 for 2010, I would not have been penalized. Nonetheless, I’ll share a few lessons I learned from this experience – some new, some refreshers. Never Assume. It is possible that TFSA being a new savings vehicle, there were problems, since parties had to get used to the requirements. However, do not assume anything! Be it the time when institutions file their reports or the pace of processing. Contact someone, preferably your financial institution or the CRA. Watch your Money. Keep track of your monthly expenses and net worth, so that you know where you stand. Alternately, you could try one of the money management software tools – Quicken and Mint spring to mind. See Where you Stand. If one so desires, they could also get obsessed with net worth tracking and see where they stand among people in their age group, with similar education or years of experience, etc. by browsing profiles on NetWorthIQ. Be Diligent. Please check your statements when they arrive – bank, discount broker, credit card, mortgage, utility bills, etc. If there is an error, contact the necessary institution as soon as possible. Unless there is a strong reason not to, sign up for the electronic version of your bills and statements, so that you can save them on your computer, back them up easily and preserve some trees along the way. Be Patient. Once-in-a-while, you might create a fuss over nothing (if it was just slow pace of processing) but most times, it will be worth the effort. Care about your Finances. No one cares more about your money than you – not even your financial advisor; if he does, then you have a problem, since you’ve become a mere supplier of funds without any knowledge about how (and if) that capital is creating more for you (hopefully, it is!). Have you had a similar experience? Did you respond swiftly to rectify the error? Or make assumptions like me that the problem will fix itself? About the Author: Clark is a twenty-something Saskatchewan resident employed in the manufacturing sector. He repaid around $20,000 in student loans and has been working to build his investment portfolio as a DIY investor (not trader) while nurturing plans to retire early. He loves reading (and using the lessons learned) about personal finance, technology and minimalism Popular Posts: Canadian Discount Brokerage Comparison Top 6 ways to Save on Auto Insurance High Interest Rate Savings Accounts MBNA SPG Credit Card Review Questrade Review Are Hybrid Vehicles Worth it? Tax Free Savings Account (TFSA) Copyright 2010 MillionDollarJourney – All Rights Reserved

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