Joleen knows she may never buy a home in the city where she lives but she's okay with that. At 32, she is doing well, earning about $84,000 a year in the public service.

"I would consider myself one of the slightly more modest means that you may be keen in highlighting, rather than the fairly well-off people who are often featured," Joleen writes in an e-mail. She has $28,135 in a registered retirement savings plan. On the other side of the balance sheet, she has debts totalling $25,740, through a line of credit and student loans.

"Should I continue aggressively paying down my line of credit or should I start saving with my RRSP again?" Joleen asks. Looking many years down the road, to when she retires, "I'm currently relying on my pension plan," she says, "but I would like the option to leave the public sector and not feel tied to a job because of the pension and benefits."

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Her short-term goals are to buy some sporting equipment for about $5,000 and take a vacation for $1,500 to $2,000.

"Any tips/tricks on good ways to save for nice-to-haves such as a new sailboard or a holiday?" Joleen asks. "I'm guilty of being exceptionally good at spending all of my money from paycheque to paycheque, which is why my savings only work when they're automatic and forced."

Longer term, she wants to save and invest so she is not dependent on her work pension. Her retirement spending goal is $80,000 after tax, although "I don't know if this is realistic." If she stayed in her current job to age 60, she would be entitled to about $50,000 a year, plus a bridge benefit to age 65.

We asked Heather Franklin, an independent, fee-for-service financial planner in Toronto, to look at Joleen's situation.

What the expert says

Because debts are repaid in after-tax dollars, paying off her debts should be Joleen's first priority, Ms. Franklin says.

"At her present rate, she will be debt-free in 18 months."

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Once the debts have been eliminated, she can redirect the money (about $1,700 a month) to three "distinct and important components," Ms. Franklin says: create an emergency fund; open a tax-free savings account and make further contributions to her RRSP.

To save up for her larger expenditures such as sports equipment and a vacation, Joleen could set up a separate savings account and arrange for automatic withdrawals from the account to which her pay is deposited.

"Automatic withdrawals are a prudent cash-management strategy, especially for those who may not be so inclined to save," Ms. Franklin says.

Joleen should set up an emergency fund to cover at least three months' living expenses; six months would be better, the planner says. She could either set up a separate savings account or hold the emergency funds in her TFSA.

"The monies within the TFSA can be withdrawn if required for an emergency and then recontributed the following year without any tax consequences," Ms. Franklin notes. The emergency fund should not be part of her retirement savings but instead "an easily accessible fund to see you through dire situations such as an illness or accident," she says. "A short-term issue shouldn't put your retirement savings at risk."

Joleen has a defined benefit pension plan, "an enviable position," the planner says. If she decides to leave the public service, though, she would have to do some serious saving to generate $50,000 a year by age 60 (retirement income equivalent to her work pension).

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She can supplement her pension plan with contributions to her RRSP, although contribution room will be limited. She can also supplement her savings through her TFSA.

Joleen's RRSP is invested in mutual funds, which may make sense for now. "However, as her investments grow and as she continues to contribute, Joleen might consider moving away from mutual funds to a more cost-effective investment choice, such as exchange-traded funds," the planner says. As well, she might want to spend some time learning about investing. "Financial literacy is an important life skill."

**

Client situation

The person: Joleen, 32

The problem: Should she pay down debt or save for the future?

The plan: Pay off her debts first and aim to be debt-free in 18 months. Then begin saving first for an emergency fund and then in her registered plans.

The payoff: She'll be in a better position to change jobs if she chooses to.

Monthly net income: $4,455

Assets: Cash in bank $600; RRSP $28,135. Total: $28,735

Monthly disbursements: Rent $1,110; transportation $355; groceries $250; clothing $150; line of credit $1,400; student loan $300; charitable $10; vacation, travel $160; dining, drinks, entertainment $395; grooming $20; club memberships $50; sports, hobbies $200; subscriptions $20; dentists $20; drugstore $35; health insurance $20; cellphone $75; group benefits $45. Total: $4,615

Liabilities: Line of credit $20,180; student loan $5,560. Total: $25,740

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