Me and My Money

Wife earns lots, husband has debts, she won’t pay...

Posted November 25, 2011
Originally Published September 17, 2009

Q: My wife makes over $125,000 a year and I earn $60,000. I want to retire in three years on a reduced pension. But I’ve got $25,000 in credit card debt at 12 per cent thanks to 17 years of child support payments including university tuition. The support payments just ended. We own our home worth $425,000 with a $265,000 mortgage and we split everything 5050. Basically, I am on my own with this debt. Should I get a lower interest credit and how long will it take to pay off? I think I can afford $600 a month. Peter D.

A: “On my own” speaks volumes about your relationship with your wife. The two of you are sleeping in separate bedrooms financially.

You can’t turn back the clock but sharing expenses based on what you earn would have been a more equitable way to go. Allow me to summon Karl Marx. “From each according to his ability, to each according to his need” provides an excellent template for financial sharing within a relationship, even when some of the expenses, like child support, were not incurred jointly.

With $600 in monthly payments you won’t even making the minimums. You are going to have to come up with more and you must have been doing so to date, either that or you are in arrears. With the child support gone you should also have some extra cash. To eliminate the debt in three years you need to make payments of $840 monthly.

If you transfer your balance to a lower interest rate card or a personal line of credit you’ll cut a couple of months off. Even if your wife believes this debt is all on your shoulders try to convince her to apply for a home equity line of credit where you’ll likely get the best interest rate. At 6 per cent you will pay less than half the credit card interest over three years, roughly $2100, versus over $4800.

Perhaps your wife doesn’t trust you, worries about the stability of the marriage or is simply a miserly soul. Whatever the reason for the strict separation of finances your job is to work together to get rid of the debt which will lead to a healthier and happier retirement.

Q: I am a bit different than most of your writers because I earn lots of money ($162,000) and have no debt. But I also rent a condo for $3200 a month and spend (waste?) everything I earn on clothes, travel and entertainment which I love. I have been very poor at saving anything including in my RRSPs. My dilemma is whether to keep working at my draining 65 hour a week job or follow my heart and go back to school. I’m 48 so it is now or never. Magda P.

A: Before you decide what to spend your money on you need to figure out where your heart really wants to be. There’s nothing wrong with fashion, food, fab shelter and travel if that’s what lights your fire. The heart tugs obviously have more to do with your job and a feeling you are wasting your life rather than a belief that you are wasting your money because you admit to loving the spending but not loving the job.

Give yourself a year of living differently. Audit a class, go to free student events and consider downsizing. You don’t need to live in a basement but $1600 will get you a very nice apartment and nearly $20,000 in your pocket after a year.

The trick here is to re-focus your life away from your wallet and see if you can replace the spending with the kind of things your heart is pulling you toward. At the end of the year you will have money in the bank and if you decide to stay put you can catch up your RRSP contributions for a nice tax break.

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