Precious Gibson, a shoe store manager, won praise from her adviser for saving for retirement.
Planner William Cantrell asked Precious Gibson how much she owed on her mortgage. He expected an estimate. She fired back a precise response: $20,035.45.
Within the next hour, Ms. Gibson, a 40-year-old divorced mother of three teenage daughters, produced many other figures that complicate her financial plan - she owes $16,000 on six high-interest credit cards, more than $11,000 on a loan from her retirement plan, and about $6,000 for other bills, mostly medical.
Ms. Gibson, manager of a Payless ShoeSource store, makes $33,500 a year and is having trouble keeping up with all the bills. Her desire to help pay college costs for her daughters will put a further strain on her budget.
“I would like to be able to go to the store and buy food without worrying about what bill won't be paid,” she remarked.
“We have to look for ways to free up money,” said Mr. Cantrell. “She wants to get to the point where she's not so frazzled about monthly expenses. Minimum payments are just choking her.”
One of Ms. Gibson's goals - college for her children - will be easier to attain than in most households. Because her ex-husband is on the staff at the University of Toledo, the daughters will get free tuition, leaving the family to pay for other college costs. Ms. Gibson, a former UT student, is enrolled part time at Owens Community College.
She has worked for Payless and predecessor firms for 18 years and has accumulated nearly $29,000 in profit-sharing and 401(k) plans. “I give her credit for thinking of retirement,” said Mr. Cantrell. “A lot of people her age don't.”
Mr. Cantrell said Ms. Gibson may be a candidate to consolidate some loans and balances, and if her credit were better she might be able to refinance her mortgage, currently at a high 9.875 percent.
The mother might get some relief from credit-card debt through a credit-counseling agency that could negotiate better terms, Mr. Cantrell said. He urged her to see whether she can borrow more, without penalty, from the 401(k) plan to pay off some high-interest debt.
“She needs to explore any opportunity to lower costs,” he said.
Mr. Cantrell suggested Ms. Gibson increase her retirement-plan contribution to 3 percent to maximize employer matching and consider a more aggressive and diverse portfolio than the existing one that has only 20 percent in stocks.
Last, he noted, Ms. Gibson needs to get a current will and a health-care power of attorney or living will, to set up her affairs in the event of her death.