Not A Good Toy Story.

Bill Parrott |

Toys “R” Us has filed for bankruptcy protection due to its crushing debt load.  Toys “R” Us was taken private in 2005 by KKR & CO, Bain Capital and Vornado Realty Trust in a massive $6.6 billion leveraged buyout and this mountain of debt has finally caught up with this famous retailer of toys.[1]  Toys “R” Us has been trying to payoff $5 billion in debt with annual payments of $400 million in interest each year.[2]

As a kid, I went to Toys “R” Us on special occasions and it was awesome.   When I walked into the store I was met with sensory overload because the enormous store had thousands of toys piled high from floor to ceiling.   I usually had enough money to buy one toy so trying to decide between a board game, a Lego set or a frisbee was a challenge and almost too much to bear.  After spending an eternity, or what felt like it, in the store my mom would take me to Farrell’s to devour some much-needed ice cream.

Debt is a four-letter word when it comes to financial planning.  Too much debt can deliver a blow to your financial dreams.   How much debt is too much?  I’d recommend keeping your total debt payments to 38% of your monthly gross income.  If your monthly gross income is $10,000, then your total debt payments should be less than $3,800. 

What does total debt payments include?  Everything!  Your mortgage payment, car payment, credit card payment and so on.   I’ve completed many financial plans for clients and I’m always amazed when people tell me they don’t have any debt except for their home and car.  I remind them their mortgage and car payments are debt and they must be paid. 

What should you do if you have too much debt?  Here are a few suggestions.

1.       Take an inventory of your spending habits.  Review your last three to four months of bank and credit card statements to identify where your money is being spent.   After you’ve highlighted a few problem areas, try to remove them from your circle of spending.

2.       Turn off automatic payments.  I helped a client with her budget and she wasn’t aware of all the items she was paying for because of the automatic drafts.  She had set up the payments when her children were young and she forgot to turn them off when her kids were no longer using the services.  The payments were out of sight and out of mind. 

3.       Sign up for a service like to help you with your spending and budgeting.  Mint is a great resource and it can help you make better spending decisions.

4.       If possible, refinance your high interest rate debt.  Interest rates are at historical lows so take advantage of these rates to reduce your interest payments.

5.       If you have a high level of cash, use this money to pay off your debt obligations.  Cash is still earning close to 0% interest so you can use this money to pay off high interest rate debt.

6.       If your debt level is too much of a burden and you don’t have any other options, contact a credit counselor who can possibly help you with your budget and spending habits.

Toys “R” Us was founded by Charles Lazarus in 1957 and maybe this bankruptcy protection will help this once great retail chain rise from the dead.

“Lazarus, come out!” ~ John 11:43

Bill Parrott is the President and CEO of Parrott Wealth Management, LLC.  For more information on financial planning and investment management, please visit

September 20, 2017


[1], Jessica DiNapoli and Tracy Rucinski, 9/20/2017.

[2] Ibid.