Wealth Check: A study in how to deal with debt

Katherine Cox, a 22-year-old philosophy student in her third and final year at Leeds University, feels financially unprepared for life after graduation in July.

Katherine eventually plans to work for a volunteering organisation in South America but, as these positions are rarely paid, she hopes to get alternative employment for the time being, at a salary of about £15,000 a year.

In July, Katherine will move back into the family home and pay £50 a month towards bills and food, though ideally she would prefer to rent. Her current spending at university is about £500 a month on living expenses, which include bills, food and going out.

Katherine has taken out student loans of £3,000 a year, totalling £9,000, the last £1,000 of which will be paid to her in May. She hopes to have the loan paid back in three years' time.

She has a First Direct bank account, which is currently £500 overdrawn, and an HSBC Student Account, which is £1,000 overdrawn. The student account is currently free but will begin charging interest once she graduates. It is £1,000 overdrawn. In addition, Katherine owes £2,000 on a First Direct credit card.

Katherine's savings are all in Premium Bonds - amounting to £3,000 - which she does not want to use to pay off her debts.

We asked three independent financial advisers for their help: Philippa Gee of Torquil Clark, Anna Bowes of Chase de Vere and Chris Holmes of One Advice.


The first and most important thing to do is to draw up a sensible budget, says Anna Bowes. She should build in an amount she can realistically afford to pay off her debts each month.

Katherine may be able to apply for a credit card offering an interest-free introductory deal, so she can focus on paying off her debt without worrying about interest, but Bowes insists that Katherine must cut up the card so that the debt does not increase.

Philippa Gee suggests Katherine sees her bank manager to discuss whether some or all of her debt could be moved into a graduate overdraft that offers an interest-free period.

Even though her outgoings are relatively low, she still needs to see where she can reduce her spending, Gee adds - an internet site such as moneysavingexpert. co.uk might have some useful tips.


Gee says Katherine's career will be her most valuable financial asset. Given that it represents her best chance of getting on top of her finances, Gee is concerned that Katherine plans to wait until July to find a job. If she does not start the application process soon, she may find that many jobs have gone and she may face the summer months without any income.

Chris Holmes adds that when Katherine has the income stability provided by employment, it would be best to convert the credit-card and overdraft debt into an affordable loan.


Katherine has a fantastic opportunity when she moves back home, says Bowes, who urges her to forget renting for a while so she can clear some debt and build up savings for her South American plans. This is important to plan and budget for, as currently, at £1,000 a year, travelling is Katherine's largest expense.

The advisers agree that Premium Bonds are not the best way to save money, and Gee suggests moving the £3,000 to a tax-efficient cash mini individual savings account. Holmes considers the money a good safety net, and recommends that Katherine at least dips into her savings so that she can make the minimum repayments on her debts until she is working.

If other financial solutions are not available to her, Gee says Katherine may have to consider selling the Premium Bonds and using the money to repay her borrowings. But once she is working, she needs to promise herself that she will start saving to replace the money she has raided.

CASE NOTES: Katherine Cox, 22, Leeds

Personal: Katherine is in the final year of her studies at Leeds University.

Income: £30 a week from her parents; £1,000 student loan, which is still to come.

Monthly outgoings: about £580 a month on general living expenses and travel.

Debt: £9,000 in student loans, including the final £1,000 still due to her; £2,000 on First Direct credit card; £1,500 in bank overdrafts on two accounts.

Savings: £3,000 in Premium Bonds.

For a free financial check-up, write to Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

    £20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

    Ashdown Group: Marketing Executive - 6 month FTC - Central London

    £25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

    Ashdown Group: Junior Project Manager (website, web application) - Agile

    £215 per day: Ashdown Group: Junior Project Manager (website, web application ...

    Guru Careers: Software Engineer / Software Developer

    £40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

    Day In a Page

    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living
    Increasing numbers of homeless people in America keep their mobile phones on the streets

    Homeless people keep mobile phones

    A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before