Money Makeover: I have no savings, no pension and one bank account. Should I start panicking now?

Money Makeover

NAME: Kathryn Conchie

AGE: 34

JOB: Secretary in central London

SALARY: about pounds 16,000

Ignoring a problem can be hard work. But Kathryn admits she manages it most of the time, adopting a "head-in-the-sand" approach to her money. "I'd like someone to help me take the fear out of the attitude I have ... which is that my money is better off under the mattress!" she says.

Her financial affairs are beautifully simple. She has one account, with the Halifax, for her money, and no cheque book or credit cards. "The attraction for me in having one account is I don't have to keep tabs on it ... but I'm sure there's a downside to that," she says. In Kathryn's case the snag is that she has no savings, no pension and no financial protection should something go wrong.

She's been working through two temping agencies since July, and is happy to carry on that way. She left one permanent job in April, then started another which she didn't like. "I don't want to get my fingers burned again," she says. But ultimately she'd like to get into a desktop publishing job - possibly working in magazine production.

She lives with her husband in a flat they bought in January. Of the two of them, she is the main breadwinner, as her husband is a part-time student.

Philippa Gee of independent financial advisers Gee & Co in Shrewsbury (01743 236982) says: "You may think your situation looks a bit grim, but it's not reaching `panic stage' yet. You've not only survived the stressful and expensive process of buying a home and taking out a mortgage, but also continued to live within your means - which is important.

Now you need to concentrate on building up some savings so you feel more in control. After all, you want to be able to fund that big holiday you have your eye on for next year. You use cash for virtually all your outgoings, and only use cheques where absolutely necessary. To identify where `all the money is going' you need to isolate one month's income and outgoings. The income side is relatively simple. Don't forget to check your Halifax statement to see whether all the payments you thought you had received from the temp agencies have actually been credited to your account.

The expenditure side is a little more complicated because you use cash so much. You'll have to manually record what you have spent each withdrawal of money on and then add on any cheques and and direct debits. When you're doing this, you may well find that that an old direct debit hasn't been cancelled or there could have been a double charge which you hadn't noticed. If it does nothing else, this exercise will let you see where your income is being spent and where you may be able to economise. Even if you found you could free up pounds 25 each month, this would give you a total of pounds 300 a year.

Once you have decided just how much you could save, set up a standing order to have that sum automatically paid into a separate account - as a discipline. You should consider opening such an account with the Halifax, since your cardcash account is already there. Even though it may not pay the best interest rate, having the two accounts at the same bank will give you the control you want. Add more money to this account whenever you can.

You say you do worry about having no pension planning. But if you start contributing to a pension plan now, this will mean taking on board another long-term commitment. Yes, funding for pensions is important, but it might be better to review the matter when you've moved into your new career.

You might be able to join an employer's scheme then, anyway. Incidentally - you said you remember being a member of the NHS Superannuation scheme for a short while. Although your entitlement may have been `encashed' at the time, you should check because there may still be benefits which you are unaware of.

As far as life insurance is concerned, the mortgage is covered. But with both of you relying on your income, it might be worth thinking about taking out further cover. This will only add to your outgoings, but premiums can start at pounds 5 per month. Home contents insurance is another issue. You feel it's not worth the expense, but you should think just how much it would cost to replace the contents of your flat.

Could your income stretch to this? A low-cost, basic contents policy may well be appropriate. Other types of insurance like income protection, critical illness or private medical insurance are just not feasible right now. It's more important to analyse your outgoings, identify any potential savings and build up whatever you can in a second account. This will give you the confidence to concentrate on your career. There's no need to panic - better times are on their way!"