'Island' girl

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Tough-talking money expert Gail Vaz-Oxlade says women must learn to control their financial future (PHOTO BY SHANNON J. ROSS)

Lecture preview

• You and Your Money with Gail Vaz-Oxlade -- Author and TV money maven discusses how to get out of debt and stay there
• Feb. 9, 7:30-9 p.m.
• Canad Inns Polo Park
• Tickets $45 at www.youandyourdollar.com or phone 254-2595

The world according to Gail

On credit scores: "Everybody's under the impression that you should do whatever it takes to have the best credit score going. It's a total myth. The credit score was never meant to be a tool for granting credit. It was a marketing tool for determining who's likely to be a profitable customer. So the people who make minimum payments on their credit cards have a higher credit score than the people who pay their balance off in full."

On debit cards: "It's cash, and that's how you have to think about it. The problem is it's plastic, so you can use it without ever looking at your balance. And if you have overdraft protection on your account, you're screwed. You can actually use your debit card to get into debt."

On the economy: "I don't believe in adjusting how you deal with your money for the economy. If your personal economy is sound and you have all the pieces in place -- spending plan, emergency fund, disability insurance -- to make your foundation really solid, then what's happening in the general economy will have less of a negative impact on you."

 

Calculate your disposable hourly income

Here's an example for someone who nets $24,500 a year, works a 45-hour week and 50 weeks a year:

Net income ($24,500) -- yearly expenses ($21,300) $3,200

Divide that by number of hours worked annually -- 45 (hours) x 50 (weeks) 2,250 hours/year

$3,200 divided by 2,225 $1.42/hour

To buy a coat that costs $260 would require about 183 hours of work

No man is an island. But Gail Vaz-Oxlade insists every woman become one in her financial life -- especially before partnering up and becoming a "peninsula."

The feisty personal finance guru and author admits that analogy has earned her a lot of flak from folks who maintain marriage is the union of two hearts AND bank accounts, and that standing on your own fiscal feet negates love and trust.

"I had a whole bunch of people write to me saying, 'If you're married you're in it together, blah, blah, blah.' All I'm saying is that you have to have your own financial identity and be self-sustaining before you can partner in a healthy way," says Vaz-Oxlade, who used to write a blog called Be an Island. Then Be a Peninsula.

Too often, she says, women think that once they're in a relationship, they're financially safe, that their partner will be their safety net.

In your fairy tale dreams, sister.

In her latest book, the no-nonsense host of the reality TV shows Til Debt Do Us Part and Princess sounds a wake-up call for women who may still be harbouring the delusion that anyone -- partner, parent, accountant or even financial planner -- is coming to their financial rescue.

The advice in It's Your Money: Becoming a Woman of Independent Means (HarperCollinsCanada, $21.99) is gender specific, Vaz-Oxlade says, because it's not just about money. It's about empowering women to take control of a part of their lives that, until now and for various reasons, they may have ignored or wished away.

"Money doesn't know X from Y chromosomes. That's true, but apparently society, our work environment, our legal system -- just about every social construct you can imagine -- has yet to catch up," she writes in the 435-page guide.

"Most financial-planning books assume a person will continue to earn an income without snags for the majority of life. They seem to abandon women who must deal with significant changes like motherhood, divorce, widowhood, disability and caring for the elderly. Yet it is at these very moments that we need guidance, support and information."

Of course, it's hard to become an island if you're adrift at sea. So whether you're just bobbing along, blindly tossing your debit and credit cards to and fro; barely staying afloat or drowning in debt, the first step is to chart the waters.

"You start by figuring out right now how you're using your money -- where it's going, what you're doing with it and whether or not you're happy with what you're doing," the Jamaican-born Vaz-Oxlade says during a phone interview from her home east of Toronto.

That might mean collecting six months worth of receipts and bank statements and going through them with a fine-tooth comb to find out where you're spending, then adding them up and dividing the total by six to determine how much you're spending on average each month.

Once you've got a clear picture of your financial reality, it's time to create a "spending plan," Vaz-Oxlade's preferred term for budget because it's more descriptive of the end goal: financial independence.

She walks her talk, bringing home the day's receipts and entering them into her spending journal. And the end of the month, she re-enters the amounts into a spreadsheet against her budget to see how much she spent and where.

Most people don't keep track of where their money is going, she says, because they think it's too much work or too much of a pain in the butt.

And most of us underestimate our expenses, she adds, because we forget the things that don't occur consistently -- gym memberships, house and car insurance, haircuts, vet bills, gifts, bottles of wine to take to dinners and parties. Never mind those little incidentals.

"How can you tell me you don't have money to save if you're buying $5 coffee and you smoke, or you go to the bar and drink beer and eat wings? You do have money to save; you're choosing not to save it."

It's critical that we learn to distinguish between wants and needs, says Vaz-Oxlade. As host of the Slice TV series Princess, her job is to rehabilitate entitled young divas (and a few dudes) who rely on loved ones to bankroll their lavish spending habits.

For a real eye-opener, she suggests calculating the "relative value" of an item you're considering purchasing. That relates to how long you have to work to come up with the cash to buy the object of your desire, and it's calculated using something called your "disposable hourly income -- the amount you make hourly that's above and beyond what you need to cover your butt." (It can take an astonishing number of work hours to buy a new winter coat.)

One of the obstacles to women achieving financial independence (at least the ones who have become peninsulas), Vaz-Oxlade says, is their tendency to put everyone else's needs first, whether it's their spouse and children or their parents.

"So whether it's the idea of putting Janie in dance lessons or putting away $200 a month for retirement savings, Janie gets her dance lessons.

"When does your turn come? If you're waiting until you're 62 to wake up and realize you're up the creek without a paddle, I'm here to tell you it's not a pretty picture."

carolin.vesely@freepress.mb.ca

Republished from the Winnipeg Free Press print edition January 24, 2012 C1