"We're 31 and we paid off our mortgage"

The Smart-Credit Solution

This couple is doing so many things right that it's hard to find areas where Joan and Tom can improve,” says Rosemary MacDonald, a credit counsellor with Family Services of Hamilton-Wentworth in Ontario. “The problem is, the money just isn't there. Tom's $54,000 gross annual income means that they have $2,583 coming in each month. That's not a lot.

“Joan and Tom have done an amazing job of not spending more than what's coming in, which is the only way to accumulate wealth, after all. If Joan wants to ‘start living,' as she puts it, she has some tough decisions to make. Is she willing to go back into the workforce earlier – even for one day a week? Can she do something from home right now so that she won't incur any day-care costs? If this isn't an option, then the couple will have to choose between a vacation and a new walkway.

“With their excellent track record of repaying debt, I'm not sure why they won't take out a home-equity loan to pay for the renovations they want. A $25,000 five-year loan will require payments of $500 a month. The tax savings Tom will realize next year will cover almost half of that monthly payment, and they'll have to find another $300 a month. Perhaps Tom can do an extra shift or two at work along with whatever Joan can contribute.

“For the smaller items on their wish list, they're going to have to free up money from other discretionary funds. Can they cut the clothing budget and pay for dance classes? This kind of budgeting takes stamina and attention to detail, so I suggest that they monitor their cash flow on a weekly basis and set up a weekly allowance system for each of them.

“Saving for both the kids' education and for retirement is a long-term goal that may have to wait until their income increases.”