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Spend & Save

Wealth Check: 'All my spare cash goes on shopping. I can never say no'

Camilla Maddern has recently started work at a public relations company. As part of her business studies degree, she took a work placement for a year in London. But this added to both her student loan and credit card debt.

Camilla Maddern has recently started work at a public relations company. As part of her business studies degree, she took a work placement for a year in London. But this added to both her student loan and credit card debt.

Outside work, Ms Maddern enjoys going out with her friends at the weekends, including travelling. She also like to shop and admits that this is where most of her spare cash goes. "I can never say no to anything!" she says.

Ms Maddern would like to move closer to work, as she finds her current commute from her parents' house quite tough. She would also like to know how best to set money aside to own her own property in the future.

We put her case to Matthew Morris at R T financial planners, John Donaldson from Think Positive and Rory Percival at Destini Fiona Price.


Education: Business Studies degree from Bristol UWE.

Debt: Around £20,000. £14,000 student loans, £5,000 loan with Egg to clear all credit card debts, paying £150 a month.

Salary: £17,000.

Property: Lives at home.

Savings: None.

Investments: None.

Pension: None.

Monthly outgoings: Train £280. Loan £150. Housekeeping £100. Phone £100. Lunch £30 a week. Going out: varies.


Mr Donaldson describes Ms Maddern's situation as "having a mini mortgage around her neck", and points out that this is an all-too-common problem for new graduates.

With the minimum repayments, it would take Ms Maddern a full 22 years and three months to pay off her student loans. To clear the debt in five years would mean paying back £236.25 a month. But as the student loan attracts a low rate of interest, this might not be her highest priority.

Mr Percival points out that Ms Maddern's personal loan is also on quite a good rate of interest - 6.9 per cent - so it is probably not worth switching lenders at this stage. But he cautions that Ms Maddern should take care to make sure she does not increase her debt.

Mr Morris says that Ms Maddern could, however, look to repay her Egg loan early, assuming there are no penalties for doing this.

Paying back an extra £50 a month would cut the term of the loan by 10 months. Paying off another £100 would allow her to clear the loan even more quickly - assuming Ms Maddern can spare the cash.


Mr Morris calculates that Ms Maddern has around £290 a month available for going out and saving, once her fixed costs are taken into account. If Ms Maddern saves some of that money now, it will put her in a better position when it comes to buying a property.

Mr Donaldson cautions that if Ms Maddern is to improve her financial situation, she will have to say no to impulse purchases and cut down on socialising with her friends; she might even want to consider working some evenings or weekends.

He also says that although it might not be that convenient for Ms Maddern to live at home, her housekeeping is considerably less than any rent she is likely to pay closer to London. For now, that money is best kept for savings or paying off debts.

Mr Percival advises Ms Maddern to undertake a budgeting exercise, because how much she thinks she spends, and how much she is actually spending, might not match.

If Ms Maddern has any money spare, she should look at putting it into a cash Isa. However, even the best rates on the market will be below the interest she is paying on her loan. If her lender will not allow Ms Maddern to increase her payments, putting the money into a high-interest savings account is the next best option.


Planning ahead for buying a property is certainly sensible, even if Ms Maddern cannot afford to step on to the property ladder now.

To buy a property, Mr Donaldson says that Ms Maddern will need a deposit of five per cent of the property value. She would then be able to borrow three and a half times her salary, currently around £50,000.

In addition, lenders will take her other ongoing loan commitments into account, so her personal loan with Egg will reduce the amount available to buy a house.

Mr Percival says that Ms Maddern should not be too anxious to buy a flat at this stage. Property might become more affordable over the next few years, and her career might also take her to a different part of the country. Renting - or continuing to live at home - is probably the best option at the moment. Ms Maddern can use the money she saves to build up a deposit.

Advisers' views are given for guidance only