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Dear Rob: 'Am I headed for financial ruin?' Add to ...

Rob Carrick: Financial messes are a relative thing. If you scroll up this discussion to an earlier question on debt, I think you will get some perspective on your situation. Put another way, you are OK. You have options. The question I have is: How well are you able to keep up with your mortgage payments and service your other debt? Are you behind? If so, you need to step up now and take steps to ensure you don't fall into a worsening debt spiral. I think you're another candidate to visit a credit counselling agency. They can assess your full financial picture and then advise you on what to do about your house and the rest of your debts. Let me address a few of your other comments. You say you're 40? Then you have time to work on your retirement savings once your debts are addressed and, anyway, not everyone's going to be retiring at 65 in the future. You may actually want to work longer. You say you have a child who would be going to university or college in 5 or 6 years? There are student loans available and, also, what's so wrong with a kid working for a year or two to build up money for post-secondary education? As I said before, you have options. Go get some help and start reviewing them.

Sarah: Hi Rob. I'm in my early 30s and just started making a decent living. We own our home and owe about $180k on the mortgage. I owe around $16k in student loans after all these years it kills me that they're not paid off, I can't stand that I never seem to be able to make a dent in that debt I have no savings to speak of and don't really know where to start - pay down the student loan debt first? Start saving aggressively and then make a lump sum payment? Pay more on my mortgage?

Rob Carrick: Hi Sarah. You've got the house and a decent living, and that's great. It tells me that if you have the financial smarts and resources to buckle down and pay off that student debt. Put it ahead of everything. Don't renovate the house or buy a new big-screen TV -- put the bucks on your student loan. If you're not already on a monthly payment plan to get the loan paid off, then get on one. Figure out the max you can reasonably afford to pay every month and pay it. If you get a lump sum available, say from a tax return, put that against your student loans as well. When the loans are paid off, you can turn your attention to building up your savings.

Paul: I am 25 years old and a recent graduate from university. I have a stable job with the federal government and my current annual income is $56,000. This figure should rise to approximately $70 in the next 4 years. I am currently live in downtown Toronto, paying a rent of $1300 (utilities included). This figure represents nearly 40% of my after tax income. I don't foresee being able to purchase a home as I plan to enter an MBA program next September at a cost of $25,000. At the same time, I can't seem to save more than a couple hundred dollars each month. Am I headed for future financial ruin? Is going back to school to increase my earning potential a good investment even if I have to take a $15,000 loan to pay for it?

Rob Carrick: Hey, Paul. Going back to school is an investment in yourself and will almost certainly bring you a higher salary and better advancement opportunities in the years ahead. You're young, so I definitely see the benefit of doing the MBA as soon as possible. But what about working a while longer to benefit from your projected salary increases? In that way, you would be in a position to save more towards your tuition fees. Or, you could take a correspondence MBA and complete it gradually. As to your rent bill, it's a lot. What options do you have for cutting your rental costs? I don't think you're headed to financial ruin, but you do need to make some hard decisions about that you can reasonably afford to do.

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