Faith has its Price
The Weisses are serious about observing the tenets of Judaism. Can they afford to meet both their family’s spiritual and material needs?
Financlal Post Magazine November 23, 2007
Tammy and Ari Weiss have tried everything to save money. They don’t have cellphones or cable TV. They favour road trips over extravagant vacations. They buy their groceries on sale. Their two small cars save money on gas while busting the suburban myth that you can’t have kids without a minivan. The couple has never paid for daycare or a nanny, thanks to work schedules that allow Tammy, 36, to be home in the afternoon and Ari, 39, to work from home in the mornings. Regardless, the Weisses are financially squeezed. They feel they are being pulled in too many directions and just aren’t sure where their financial priorities should lie.
Why? As observant Jews, Tammy and Ari Weiss are trying to tackle heavy expenses that their religious beliefs require on Tammy’s part-time salary of $26,000 and Ari’s full-time income of $51,000. Among those costs are synagogue membership fees and the expense of kosher food. On top of that, they pay $6,000 a year into RESPs for their three young children, and make small RRSP contributions for themselves. And finally, there is an expense on which they will not scrimp: sending their kids to a private Jewish day school. “For us, Jewish education is essential,” Ari says. “Being a knowledgeable Jew involves learning Hebrew, Bible studies, laws, history and literature.”
In Ontario, the only faith-based schools to receive public money are Catholic schools; Jewish education is funded through tuition fees. For the Weisses, tuition costs generate a healthy return at tax time – about $9,000 – but that sum pales in comparison to the fees they pay, which are more than $30,000 a year for all three children during elementary school, rising to $45,000 in high school. At the moment, Tammy and Ari’s parents help with tuition costs, giving the couple about $10,000 a year. The parents, however, are nearing retirement, and the Weisses aren’t sure they’ll receive such generous gifts in the future. They could appeal to the Jewish Board of Education for a subsidy, but don’t like the idea as anything but a total last resort. “Still, every year we get the forms and wonder, ‘Is it time to ask?'” Tammy says.
On the upside, the Weisses have a relatively small mortgage of $75,000, thanks to their efforts to pay it down quickly and financial help from their parents when they bought their home five years ago. Recently, Ari upped the mortgage payments to $555, biweekly. That will give the Weisses full ownership of the house in five years, freeing up cash to spend on their children’s educations and other needs. But the Weisses aren’t sure this is the best step. Higher mortgage payments are diverting money they’d otherwise save. That’s cash they could use for child-related expenses – everything from bar and bat mitzvahs, to helping their kids through university and with buying first homes.
Still, Ari stresses, “We’re not living hand to mouth. We have a comfortable life and a nice house. The kids aren’t going to school in rags.” What the Weisses really want to know is whether they’re on the right track by trying to pay down their mortgage quickly, and whether that will leave them with enough money in the future to provide for their children – and maybe even save a little for themselves.
What the experts say
Rob McClelland, a financial adviser with Assante Corp. in Toronto, says that while the Weisses have to budget carefully, their financial issues aren’t permanent. “This is a 10-year problem,” he says. They just have to free up some cash to get them through the expensive years ahead.
Fortunately, the Weisses can do this by taking a break from making RRSP and RESP contributions, McClelland says. They’ve already been diligent savers. As a result, they have a head start on their retirement savings, with about $132,000 in cash, pensions and investments inside and outside RRSPs. McClelland says that base allows them to stop putting money aside until the kids are out of private school.
On top of that, the Weisses have also built up a sizeable RESP ($26,000). McClelland says they can afford to stop making their annual $6,000 contributions and spend that money on tuition now. “Their education expenses will actually decrease when their kids go to university, especially if they stay close to home.” Besides, he adds, “their mortgage will be paid off by the time their eldest goes to university.” That will give them the cash flow to pay for the education. As a final measure, McClelland suggests the Weisses change their mortgage term to seven years, lowering the payments to offer a financial cushion.
Daniel Stronach, president of Stronach Financial Group Inc. in Toronto, agrees with McClelland’s assessment, in general. But he also says the Weisses might want to consider reversing their mortgage strategy: If they were to extend the amortization period to 25 years, making biweekly payments of $192, they’d free up more than $700 a month – money they could set aside for any number of expenses.
Stronach further suggests they consider setting up a line of credit to pay for extras, such as bar and bat mitzvahs, which they can afford if they take a longer mortgage term. “What’s wrong with borrowing to enhance your lifestyle?” he asks, adding that the Weisses will need good insurance policies if they take on debt.
Both advisers also have other suggestions. For starters, Stronach says they should apply for subsidies from the Jewish Board of Education. McClelland, meanwhile, suggests they cash out $7,600 they have in non-RRSP savings to help with tuition when their youngest starts day school next year. He also suggests the Weisses rethink their investments, noting that they’re too conservative for their age, with most of their money in low-yielding bonds.
All told, though, McClelland and Stronach say the Weisses have options. They only have to choose their trade-offs. Whatever they decide, the planners say the Weisses need only remember one thing: No matter how thrifty they are, they just can’t pay for everything today.
Tip of the Month: You can keep the faith in financial planning
If religion is important to you, you may be able to find financial services tailored to your beliefs. The Ottawa-based group Advisors With Purpose, for example, has launched a ?Christian financial counsellor? designation. Major banks, meanwhile, are showing interest in Shariah-compliant financial products for Muslims, such as loans and mortgages, while other institutions already have programs in place.