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(Fernando Morales/The Globe and Mail)
(Fernando Morales/The Globe and Mail)


Portrait of a woman who owes too much Add to ...

After eight years and three degrees, Polly finds herself with a debt load way out of proportion to her $63,000 annual salary. Month after month, she sinks deeper in the hole by spending far more than she earns.

Polly, who is 34 and lives in Toronto, found a good job last year as a social worker. If she stays with the same employer for the next 31 years, she will retire with a defined benefit pension plan that will pay her $49,000 a year. But that’s a long way off.

“I am drowning in student debt,” Polly writes in an e-mail. Exacerbating the problem is the steep monthly payment Polly is making on a credit union loan for more than $50,000 for which her parents co-signed, putting up their home as collateral. She has another $50,000-plus in student loans on which she is paying interest only, plus about $4,000 in credit card debt.

When she can, Polly teaches Pilates classes in the evening, although her job often involves working overtime. Short term, she knows something has to change.

“By the time I pay off my debts, phone, food, gas and rent, I have no money,” she writes. “This is challenging as I work really hard and actually had more money as a student,” she adds.

Polly has asked the credit union to lower her monthly payments, but it refused. She is paying interest only on her student loan, but may have to seek further relief when she has to start repaying the principal in a few years. She has even explored filing for bankruptcy but that would leave her parents on the hook for the loan they guaranteed.

“I should mention that I am not willing to spend less on good (organic) food and vitamins ... just in case you were thinking that might be a way to save money,” she writes.

We asked Heather Franklin, an independent Toronto-based financial planner, to look at Polly’s situation.

What the expert says

Polly will have to continue to press the credit union to lower her monthly payment of $1,055, Ms. Franklin says. If the lender refuses, she may have to resort to dealing with a credit counselling agency to assist her.

Polly’s goal is to repay the credit union loan in about five years – just about the time she will have to start repaying the principal on her student loan as well. So it is reasonable to suppose she will be on the debt treadmill for another 10 to 15 years.

In the meantime, she will have to cut her monthly expenditures, Ms. Franklin says. “Sacrifice and compromise must be seriously considered.”

First, she must stop using the credit card. “Put it in water and freeze it,” the planner says. Polly could also consider taking in a roommate.

But the real squeeze will be on discretionary spending. “Reduce or eliminate it,” Ms. Franklin says. “Irresponsible spending on discretionary items has contributed to her debt problem.” Such spending includes alcohol, entertaining, dining out and gifts. As well, she could shift her cellphone to pay-as-you-go instead of paying for an expensive monthly plan, and dump her car in favour of public transit.

As for her other short-term goals – travelling to Morocco, hiking the Camino de Santiago in Spain and drinking mint tea in Turkey – Polly can forget about them until her debts are paid off, the planner says.

Polly says she is not willing to compromise on organic food, but it costs nearly twice as much as non-organic food, Ms. Franklin notes. She also spends quite a bit on vitamins and supplements.

“One can eat very healthy for far less than $100 dollars a week.”

On the income side, Polly may want to explore teaching more fitness classes, perhaps expanding her evening classes to weekends, the planner says. Polly enjoys teaching Pilates. “Play to that strength and increase the number of classes she teaches.”

While she’s paying the piper now and for the foreseeable future, Polly’s long-term goals may be achievable if she retires with a good pension plan. She is worried, rightly, that she will still be in debt when she is 65. But she could be debt-free by the time she is 45 if she puts her mind to it. Then, she could start planning for her long-term goal: “Buy land near water to build a place to hang my hat.”

Client Situation

The Person

Polly, 34

The Problem

How to claw herself out from under a mountain of debt.

The Plan

Cut discretionary spending, press lenders for lower payments. Try to make a little extra money teaching Pilates.

The Payoff

Light at the end of a long tunnel and the comfort of knowing that her long-term goals can be attained.

Monthly net income



None yet, although her pension plan will grow in value over time.

Monthly disbursements

Rent $1,000; transportation $265; groceries $400; clothing, dry cleaning $60; credit union loan $1,050; student loan interest $255; credit card $100; gifts, charitable $65; vacation and travel $150; fee for certificate course $200; dining out, entertainment $250; other discretionary $192; vitamins, supplements $50; telecom $110; other $50; professional association $74. Total: $4,271.


Credit union loan $53,500; student loan $51,390; credit card $3,500. Total: $108,390.


Special to The Globe and Mail

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