Case study: Getting a handle on debt

By Staff | December 9, 2013 | Last updated on December 9, 2013
3 min read

The situation: living the good life

Jordan was a 33 year-old marketing professional working at a large multinational consumer goods company. He lived a comfortable, yet modest lifestyle, but enjoyed spending money on dinners and drinks with friends. He’d also caught the travel bug, and went on somewhat-pricey annual trips.

Jordan never spent a lot of time managing his finances. He considered himself to have common sense about money, but knew he was no guru when it came to accounting and taxes, much less investing. His salary had always been sufficient to cover his expenses. And, by putting a little aside each month, he could save for his trips without dipping too much into his credit cards.

The problem: things change

A few months ago, Jordan’s expenses went up dramatically. All at once, his condo was hit with costs for urgent repairs, his hydro bill rose sharply, and he purchased a new living room suite on his credit card.

He also started dating a new girlfriend—which meant more dinners out and other entertainment expenses. All of a sudden, Jordan found he was struggling to meet monthly expenses.

Perhaps most important, Jordan had recently sat through a serious discussion with his father’s financial advisor, who stressed the need to start thinking about investing for retirement. The urgency of the advisor’s discussion left Jordan a little concerned: He’d always thought retirement was a long way off, but as the advisor explained, every year that went past was another year of compound growth lost forever.

The solution: taking action

The first step in getting a handle on debt is to assess where you stand.

Jordan took an inventory of his debts, listing each one, along with the minimum monthly payments. He prioritized those debts according to how much they cost—high interest credit cards at the top of the list, lower interest next.

Next, Jordan created a detailed monthly budget. He kept a small notebook on hand to record his daily expenses, and gathered his bank statements and receipts at the end of the month.

By keeping track of his expenses, he could see where his money could be better allocated.

Jordan also set a savings goal for an RRSP, which he opened with his father’s advisor. He included a small monthly contribution to his RRSP as part of his monthly budget. By making contributions regular and automatic, he’d be removing the temptation to spend.

In working through the budget, Jordan immediately identified some unnecessary luxuries.

First on the list: lunch out at work. Jordan calculated bringing lunch from home saved about $10. Throw in a morning or afternoon latte, and he could shave $15 off his daily expenses. Sounds small on the surface, but over the course of a month these savings alone could easily pay his monthly RRSP contribution.

In the end, it wasn’t necessary for Jordan to compromise on the things he deemed important. He freed up enough funds to keep the new dining room suite, take out his new girlfriend any time he liked and even contribute a little to his RRSP. All that was required was a commitment to doing a household budget.

That, and a little determination. staff


The staff of have been covering news for financial advisors since 1998.