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Three years later after the Financial Facelift, Lydia is still living in her two-bedroom condo. Both her sons have moved out, so she’s renting her extra room to students. She is collecting employment insurance benefits and suffering from repetitive strain injury. (Tim Fraser/The Globe and Mail)
Three years later after the Financial Facelift, Lydia is still living in her two-bedroom condo. Both her sons have moved out, so she’s renting her extra room to students. She is collecting employment insurance benefits and suffering from repetitive strain injury. (Tim Fraser/The Globe and Mail)

Financial Facelift Revisited

Temporary work takes its toll on Lydia’s retirement plans Add to ...

Three years ago, Lydia was struggling with health problems and bouts of unemployment. She was single again and was helping to put her two children through postsecondary school.

Lydia, who was 52 at the time, had been laid off from her job of 20 years as an executive assistant and was bouncing from one contract job to another. She was earning less than $4,000 a month and was dipping into her savings to get by.

“If I am not able to find permanent work, I may have to continue with temporary assignments indefinitely, which will mean continuing to eat away at my savings,” Lydia wrote in an e-mail at the time.

Looking down the road, she was thinking about selling her suburban Toronto condo in three years’ time – that’s about now – and moving back home to the East Coast where living costs are lower and she has family. She was also mulling going into a completely different field.

Her main goal at the time was to hang in until her younger son had finished high school and had begun college or university.

Living in an expensive part of the country was “particularly challenging” because of her fluctuating income, Lydia wrote. “I would love to have some advice on how I could further economize and at the same time move forward in the most positive way.”

Lydia’s condo was assessed at $234,000, against which she had a $78,690 mortgage maturing in 2015 with an interest rate of 3.56 per cent.

Heather Franklin, an independent Toronto financial planner, prepared Lydia’s Financial Facelift.

A good strategy to manage fluctuating income would be for Lydia to keep the money in her tax-free savings account liquid so she can draw on it as needed, Ms. Franklin said. Lydia could use this income to “smooth out the rough edges when required.”

Lydia’s monthly budget was already tight so it left little room for cutting, the planner said, but a thorough review of the family’s spending might turn up some modest savings. Lydia’s housing costs were about $1,500 a month. Ms. Franklin thought it might make sense for her to sell her condo and rent an apartment that was less expensive.

Lydia had asked whether she should renegotiate her mortgage, perhaps extending the amortization and capturing a lower interest rate. The planner urged caution. If her bank found out she no longer had a permanent job, it could turn down her application, Ms. Franklin said.

Now, more than three years later, Lydia is still living in her two-bedroom condo. Both her sons have moved out, so she’s renting her extra room to students. She is collecting employment insurance benefits and suffering from repetitive strain injury. She’s thinking of selling her condo – now assessed at $279,000 – in the spring. The market value could well be higher. If she does, she will move back home.

“I’ve had a lot of stress in the last seven years,” Lydia said in a telephone interview. “I feel like I really need time to look objectively at what’s going on in my life,” she adds. “I’m hanging in there. I still have the apartment. You know, you feel some time when things keep getting thrown at you, maybe there’s a message you should be getting. But I’ve been too involved in the scrabble of life to look at it objectively.”

Did the 2013 Financial Facelift help?

“The planner had advised against refinancing,” Lydia recalls. As it turns out, Lydia took the advice of a mortgage broker friend and shifted her mortgage to a line of credit. This has lowered her monthly payments because she has had to pay only interest on the outstanding amount. “This gives me some breathing room,” Lydia said in the interview.

Where Lydia’s been for a whirlwind ride is with her investments. Ms. Franklin recommended Lydia shift gradually from high-cost mutual funds to lower-cost exchange-traded funds. “I read up on ETFs, went to a seminar and actually did invest in one,” Lydia says. “I was trying to be more hands on, opening a do-it-yourself account at a discount broker. But I didn’t have the time or knowledge,” Lydia says. “Even though I had someone trying to help, it didn’t work out.”

At the suggestion of a friend, she switched to a full-service investment dealer. “That was a disaster,” Lydia recalls. In the end, she went back to the original bank adviser/sales person, who created a portfolio for her – of mutual funds and ETFs – based on her age and risk tolerance. The fees will be about $2,000 a year on a portfolio of $155,000, or about 1.3 per cent, Lydia says.

“A financial planner can give you advice, but it doesn’t always work,” she says. “I think I took a fair stab at it. But circumstances change, so I just keep rolling with the punches.” Since the facelift three years ago, she had a retirement analysis done at her bank. “It said I could retire by 63, but if I don’t work again, that’s going to change things.”

When she eventually sells her condo, she’ll be able to pay off her line of credit “and have some left over,” Lydia says. In the meantime, she says she cannot find a less expensive place to live in the Toronto area than where she is now.

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