Home' Trinidad and Tobago Guardian : October 18th 2015 Contents 6SBG FINANCIAL ROAD MAP
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt OCTOBER 18 • 2015
Gabby, aged 32, is an admin-
istrative professional and a
single mother of two young
children. When the children s
father left, Gabby moved into
a smaller apartment and
assumed all of the family s financial respon-
sibilities on her salary of $9,000 after tax. She
desperately needed money to make a smooth
transition into the new place and had no choice
but to borrow from anyone who was wiling
Her list of creditors is long and includes,
friends, relatives, banks, non-banks and hire
purchase companies. When all sources of credit
dried up, she started juggling her monthly
payments on loans, utilities and now, most
worrisome of all, the rent. Arrears letters started
coming in, while every other phone call is a
from a debt collection agency demanding pay-
ment and threatening legal or some other type
of "serious" action.
Apart from her monthly debt obligations,
Gabby still has to meet all other basic needs
including: rent $2,500, groceries $1,300, taxi
fares $600, day care $800, personal care $300
and other miscellaneous expenses $300.
Apart from owing $3,500 in rent, Gabby is
worried that the hire purchase company is
moving to repossess her fridge, stove and
washing machine if she doesn t pay something
on the three accounts soon. Balances, pay-
ments and late fees on each item respectively
are: $11,000, $2,700, $2,500; $917, $225, $269;
and $30 for each appliance. The interest rate
on all accounts is 36 per cent APR.
Gabby also has arrears on a finance company
debt, a bank loan and a credit card. Balances,
monthly payments and late fees or charges
are: $7,900, $7,000, $5,700; $595, $447, $143:
$35, $25, $55 (Includes overlimit fee of $30)
The interest rates on these accounts are 41
per cent, 18 per cent, and 30 per cent respec-
tively. She owes two cousins a total of $4,000
and had promised to pay back $400 per month
but could not continue and relations have
become a little strained.
Some utilities have also been disconnected
because of non-payment. These include: cable,
home phone and Internet with balances and
previous monthly payments of: $1,200, $1,800,
$900: $299, $300 and $250 respectively. These
accounts are now in the hands of debt col-
lectors but do not attract any further charges.
Gabby is desperately seeking some solution
to dig herself out of this pit of debt.
Nick's assessment and advice
Gabby s situation is often one of the most
difficult aspects of a separation or divorce,
especially when living expenses and other
obligations may have been shared, but now
squarely rest on the shoulders on one person.
Apart from the dire debt situation, the fact
that Gabby has no savings makes the family
more susceptible to further financial misfor-
What would she do if there was a medical
or other type of emergency? Her credit rating
is anything but good so the chance of a con-
solidation or refinance is quite remote. Even
if she could borrow, how would she be able
to pay the installments?
When a person is faced with a situation to
choose between a loan payment and food or
medication for a child, the survival instinct
kicks in. Gabby naturally started juggling bills
just to stay afloat and, in so doing, payments
accumulated. As long as there is an overall
negative cash flow something has to be sac-
We can assume that most of the debts are
unsecured with the exception of the hire pur-
Gabby needs to survive and, in doing so,
she has to make some tough decisions. Not
everything can be paid as arranged so she has
to focus on the critical items. These include
rent, appliances, emergencies and then out-
standing debt. She has to have a plan that will
ultimately solve the problem, not make things
The good news is that her salary more than
adequately covers her month living expenses
which add up to $5,800 leaving $3,200 to deal
with savings and debt. Yes, savings!
The flip side to giving into intimidation is
ignoring creditors altogether.
Debt collectors are relentless and will try
to squeeze blood from stone but they fully
well know if a person does not have, they sim-
ply cannot pay regardless of how scary they
are.Communicating with creditors is essential
but one must also be realistic with the promises
one makes. She should never promise what
she cannot deliver, however, something is
better than nothing and no creditor will refuse
even the smallest of payments. Their job is to
press for payment and the debtor s job is to
pay without hurting himself or herself finan-
Gabby can pay everyone out of her $3,200
and still have some money left over for savings.
Sounds impossible? Have a look at Table 1.
Rent and hire purchase accounts
These are the most critical debts she owes
and deserve the most attention.
Even though several other debts have high-
er interest rates, none of them can take away
her appliances at least in the short term.
We suggest that Gabby step up her pay-
ments to the hire purchase accounts and try
to not miss any subsequent payments. We
also suggest that she makes a concerted
effort to pay the rent on time and a little
something extra besides what is owed.
In either of these cases, the debts will
eventually be regularised and eliminated.
The payment on these will then be rolled
over into the next most critical debt.
Finance company, bank and credit card
These three debts attract high interest and
severe penalties. If these costs are not paid,
the balances and charges will increase. The
key with these is to identify the monthly
costs and pay that alone until better can be
done. This ensures that the principal will
not go up and, when cash flow permits, she
can address it then.
When she can pay extra, the credit card
should be the first thing she brings within
the limit. She will avoid the over limit fee
of $30 and it is also the smallest of the three.
Family and utility bills
While these do not attract interest, they
should still be paid to take some heat off her
back. Small regular payments are the key
and creditors will see she is making an effort
and may be more accommodating and
When we tally up all of the allocations we
have $368 left which she must commit to
saving in case of emergencies.
DIGGING OUT OF DEBT
Links Archive October 17th 2015 October 19th 2015 Navigation Previous Page Next Page