The Huddle – Open Forum

Most people have burning questions about their money. The most common are:

  • Worrying about cash flow being tight.
  • Worrying about paying debts.
  • Worrying about outside forces that could hurt you, such as unemployment (if the economy goes into recession) or the risk of losing money with your investments.
  • Worrying that you are not getting ahead.
  • Wanting to buy something, such as a nicer home or car.
  • How to pay less tax.
  • How should you invest?
  • When will I be able to retire?
  • Worrying about how to pay for your kids’ education.
  • What happens if something happens to my spouse/partner?
  • Which of my worried and wants is priority?

This is where you can get answers to these important questions on your mind.

The Huddle is an open forum. Ask your question – any financial question or question about your life that has financial implications. Your money and your life are intertwined.

I will try to give you my wisdom from experience. Other readers may give their views. I may point you to articles to read. This will also be a source for me for future articles.

This is a safe place and constructive forum. The only rules are:

  • No personal attacks.
  • No specific investments.
  • No sales pitches.

What is your burning question?

8 Comments

  1. Penelope cumas

    I have no private or work (except for $125 monthly) pension. 1 have about $320,000 in investments and cash through a bank investment officer (clerk?). I am in good health (fingers crossed) and don’t know how to handle my money so that I can live decently without raising money. Right now, my rent is $850 but the landlord is planning on selling and I may be facing a $1000 monthly. I live alone.

    I’m giving too much information, but I hope,this just a beginning towards financial sanity? What do I do?

  2. Penelope cumas

    I have no private or work (except for $125 monthly) pension. 1 have about $320,000 in investments and cash through a bank investment officer (clerk?). I am in good health (fingers crossed) and don’t know how to handle my money so that I can live decently without raising money. Right now, my rent is $850 but the landlord is planning on selling and I may be facing a $1000 monthly. I live alone.

    I’m giving too much information, but I hope, this is just a beginning towards financial sanity? What do I do?

  3. Penelope Cumas

    I am truly confused. I thought the comment was above. Just don’t know how to use this site.

  4. Ed Rempel

    Hi Penelope.

    I can feel your worry. Why don’t we talk privately to see how I can help? I’m concerned about your privacy, since this is a public page intended for general discussions.

    Without knowing your situation, here are some general comments.

    Based on many other seniors I have worked with, there are some common strategies that often help.

    Many seniors have a very low income because they invest too conservatively. For example, they might have mainly GICs or bond mutual funds. Their investments don’t make enough money. Often, this is due to lack of understanding about investments. With some education about investments, it is possible that you will feel comfortable with different investments that can better support your lifestyle.

    Sometimes guarantees can help invest more effectively. Some seniors feel more comfortable with investments that offer more growth if they have guarantees.

    There are 2 main types of of guaranteed investments:
    1. Investments with principal guarantees.
    2. Investments that pay a guaranteed income for life.

    Many seniors also have much of their government benefits “clawed back”. In your case, you may qualify for GIS, which is clawed back by 50% of taxable income. If you can invest more tax-efficiently, you may qualify for significantly more government benefits.

    If you go to “Contact” on my site and give me a phone #, I’ll call you to see if I can help you figure out what to do, Penelope.

    Ed

  5. CaroleQuestions

    Hi, I would like some clarification on your Million Dollar Journey comment (May 21, 2013, 9:18 pm): “… Converting the tax deductible credit line back to a mortgage portion once the mortgage is gone or nearly gone sometimes makes sense anyway. The interest rate is lower on a mortgage and a small increase in the payment will actually pay off everything over time. The downside is that your tax deduction is smaller.”

    My questions is specifically related to that last sentence.

    I have paid off my mortgage and am using the maximum of HELOC that I had negotiated at the time. I would now like to increase it the HELOC as my home has increase in value but have run into to the HELOC rules. The banks have generously offered to create a new mortgage on my house but I am hesitating… If I understand Mr. Rempel’s statement correctly only 65% of the value of my home would be a true HELOC where the interest would be tax deductible. The additional 15% would be regular mortgage payment consisting of principal (not tax deductible?) and interest (maybe tax deductible???).

    Am I understanding this correctly?

    Thanks, CaroleQuestions

  6. Ed Rempel

    Hi Carole,

    I’m not completely clear on what you are asking, Carole.

    Are you using the HELOC and the additional amount you want to borrow all for investment purposes?

    To be clear, it is the use of the money that determines whether the interest is tax deductible, not whether you have a mortgage or HELOC.

    If you are borrowing 80% of your home value for investment purposes, you can only have 65% as a HELOC. The remaining 15% must be a mortgage with principal plus interest payments.

    In this case, the interest on the mortgage should still be deductible. The principal portion of the payment is not deductible. It is not an expense. You are paying down the mortgage.

    Does this answer your question?

    Ed

  7. Carole

    Hi Ed,

    thanks for the quick response and you understood my question perfectly. I was concerned about being able to deduct the principle and you have clarified that that portion would NOT be tax deductible. That is what I feared and I will need to work the numbers to see if it makes sense to go that route.

    Thanks again,

    Carole.

  8. Ed Rempel

    Hi Carole,

    Glad to help.

    With a mortgage, you get a lower interest rate than theh HELOC, which saves you money but is also a smaller tax deduction. Saving money is good, though.

    However, your overall payment is higher, because you also pay some principal.

    If you are investing 80% of your home value, you have to have at least 15% as a mortgage.

    It can be worth having more as a mortgage, because you can get the lower interest rate and borrow back the extra principal amount to invest. That gives you the best of both worlds – lower interest rates and the extra cash flow is invested.

    Without knowing details and your goals, it’s not a all clear to me what is best for you, but you have some interesting options, Carole.

    Ed

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