Wealth Check: Balancing the needs of work, study and travel

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The Independent Online

Mark Perrott has worked for the past six months as an accounts clerk, and during the past three years he has worked mostly to fund his travel expenses and his social life.

Mark Perrott has worked for the past six months as an accounts clerk, and during the past three years he has worked mostly to fund his travel expenses and his social life.

He hopes to start a university course in 2005 as a mature student, and wants to know whether he can fund this through working during his course, or whether he needs substantial savings beforehand. Mr Perrott will then decide whether to look for better-paid work for the coming year, or whether he can do voluntary work in a developing country. He would also like a one-month holiday in Brazil, which he expects to cost around £1,000, and then ideally spend a couple of further months travelling.

We put his case to Mark Dampier, at Hargreaves Lansdown, Patrick Connolly, at John Scott and Partners, and Colin Jackson, at Baronworth Investment Services.

MARK PERROTT, 25, ACCOUNTS OFFICER

Salary: £20,000 a year.

Debt: No outstanding loans, and no credit cards ever held.

Property: Renting.

Savings: None.

Investments: None.

Pension: None.

Monthly outgoings: Rent £300; Travel £120; Gym £55; social spending £500; other £100.

SPENDING

Mr Perrott is lucky that, unlike many people his age, he has no debt. As Mr Dampier points out, this means that he has developed valuable budgeting skills, which will stand him in good stead if he goes to university. However, Mr Perrott should not underestimate the cost, which can reach £10,000 a year.

Mr Connolly says that Mr Perrott currently spends what he saves, a habit he will have to change if he does become a student. Although Mr Perrott spends quite a lot of money, and presumably time, socialising, he may not be able to do this when he is at university. If he works to fund the course he might not have the time; if he does not work, it is likely that he won't have the funds.

Mr Jackson recommends that Mr Perrott cuts back his spending as much as possible, in order to be in a strong position for university. He says it is unrealistic for Mr Perrott to plan to travel to Brazil, when his net income only just covers his outgoings.

SAVINGS

If Mr Perrott is to study, he needs to save. At the moment he does not save at all. Mr Connolly suggests that setting up a monthly direct debit to a savings account will help ensure that he does put some money aside.

Mr Dampier recommends that Mr Perrott opens a mini cash Isa (Abbey pays 5.35 per cent), even if he only puts in a few pounds each month. Mr Dampier says that there is no point in Mr Perrott putting money into longer-term savings, such as investments or a pension, until he has a more permanent job. At the moment, flexibility is the key.

Mr Jackson agrees that the more savings Mr Perrott can put away now, the easier his time will be at college.

PROPERTY

Given the cost of going to university, if this is what Mr Perrott plans to do, then he needs to make all his other financial arrangements support this goal. Although voluntary work can be fulfilling, Mr Jackson feels that Mr Perrott would be best off disregarding that option for now.

Instead he should take the best-paying job he can find, to maximise his savings. He cautions that, even with the best budgeting in the world, because Mr Perrott has no savings, the idea of travelling, or taking a holiday before going to college, is extremely unrealistic.

Mr Dampier recommends that Mr Perrott researches university costs, in order to come up with a realistic budget. He can then start to save as much as he can afford.

Mr Connolly says that inevitably, Mr Perrott will have to compromise. If he does voluntary work now, he will almost certainly have to take on part-time work during his degree. If he takes paid work now, he might not have to work, or at least not work as much, next year. But taking as much as four months off for travelling and holiday could seriously prejudice his university plans.

Mr Dampier does make one other point. Although Mr Perrott is keen to go to university as a mature student, in financial terms at least studying does not always repay the investment.

Getting a degree will not necessarily guarantee Mr Perrott a better career than if he opts to stay in the workplace. Some university courses do lead to jobs with attractive salaries, but not all do. Ultimately, Mr Perrott may have to choose between studying and his other ambitions.

Advisers' views are given for guidance only.

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