Wealth Check: 'How can I manage my finances as a mature student?'
Saturday 20 June 2009
Becky Pillinger has been working as a research assistant at a university for the past 21 months, but is hoping to start a four-year PhD in October. If she is accepted on to her chosen course, she will receive about £13,000 a year tax-free in funding, but will have to give up her present job. The 27-year-old wants to continue renting her current flat, which she loves, but is concerned it might be too expensive for a PhD student.
As a result she has recently slashed her spending, with some success, but is keen for extra help and advice. “I somehow got through pretty much what I received each month,” Becky admits. “I’m now trying to cut down on what I spend in order to be able to stay here. I don’t want to go into debt, but I want to keep living where I am without having to live on baked beans to do so.”
Becky has no dependants and contributes regularly to her employer’s pension scheme at present, paying 6.35 per cent of her salary while her employer contributes a further 14 per cent. Advice this week is given by independent financial advisors Ian Hudson of Hudson Green and Associates, Raj Shah of Blue Wealth, and Darius McDermott of Chelsea Financial Services.
Salary: Around £2,550 a month gross.
Monthly outgoings: About £563 in taxes, £1,195 on bills, food and essentials, £100 on repaying interest-free loan from parents, £100 on savings, £410 on other activities (clothes, holidays, socialising, entertainment) and £162 a month in pension contributions.
Savings: About £1,060 in a bank current account
Debt: £19,000 remaining on an interest-free loan from parents. No overdraft or other debt.
Spending and saving
“Becky has already made a sensible effort to control her spending by attempting to live on her anticipated budget,” says Ian Hudson. “There are some advantages to becoming a student again, most notably that her income tax, national insurance and council tax bills will reduce to zero.” Hudson suggests that Becky checks her utility bills are the cheapest deals by visiting www.uswitch.com, but feels that the majority of savings can be made through reducing spending on luxuries, eating out, holidays and entertainment: “That is not to suggest that she should live like a hermit for the next four years, but ultimately, sacrifices are going to be needed,” he says.
Both Darius McDermott and Raj Shah agree: “This is an area where she can make some serious saving, but it will mean swapping the Maldives for Margate and the high street for the Sunday market,” says McDermott.
Shah believes: “She may have to make a decision about study or lifestyle. Either she’ll have to move into a cheaper flat, or have a lovely flat and no money to do anything else.”
Both Hudson and McDermott feel that by keeping her savings in a current account, Becky isn’t making the best of her money. McDermott advises: “Becky should switch her savings into a cash ISA. Barclays is currently offering the best instant access rate at 3.55 per cent with a minimum deposit of just £1. This should be kept as an emergency fund.”
Hudson suggests diverting any excess monthly funds into a savings account: “One of the most competitive accounts is Barclays’ Monthly Savings Account, which offers a gross rate of 5.84 per cent (AER 6 per cent),” he suggests. “She can invest up to £250 monthly, which I believe represents an excellent opportunity and incentive to save.”
“Becky may also want to ask her parents if she can take a payment holiday on her loan repayment until she is earning more money,” Shah advises.
McDermott adds: “While it is admirable that Rebecca has no debt at the moment and wishes to remain clear of it, she may consider negotiating a small interest-free overdraft as a precaution to avoid any nasty bank charges. Some months she may be on the breadline, so an overdraft, if utilised correctly, may help her over any lean periods.”
Hudson wonders if the outstanding debt to her parents can be insured: “It might seem inappropriate to suggest life assurance, but actually it is not – her parents would suffer financial loss if she had an untimely death; therefore it would be sensible and cost-effective to insure against that chance, however remote.
“Her parents can effect the policy in their names, or she could effect it herself, putting the proceeds into trust for them. The debt can be insured for just £5 a month.”
“Fortunately, Becky does not appear to be from |the ‘spend-today-worry-tomorrow’ generation Britain has reared,” observes McDermott. “Unlike many of her age group, she is thinking about her future and how she will fund her retirement. She is fortunate enough to be a member of the university’s final-salary pension scheme; however, when she returns to employment she must not only start again, but increase her monthly contributions, as currently her contributions will fall well short of the retirement income she aspires to.”
Shah agrees: “I understand why she wants to stop paying,” he says, “but if she can pay something into a pension it’d be easier for her when she starts working again. The cost and impact of a delay is something she needs to consider.”
For a free financial |check-up, write to Wealth Check, The Independent, 2 Derry Street, London W8 5HF; or send an email to firstname.lastname@example.org
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Culinary experts in The Netherlands thought it was 'fresh' and 'tasty'
Of all the computers Apple has ever made there’s only one that Steve Jobs had to sell his car to finance
Actress sees off speculation about her face in an amazing way
Marvel has released first teaser trailer week early after it leaked online
The sound of Goodfellas mafioso Frankie Carbone demanding $250m in “damages” would be chilling enough on film, let alone in real life.
- 1 Nokia no more: Microsoft drops once-ubiquitous mobile name – in favour of its Lumia brand
- 2 Renee Zellweger on plastic surgery: 'I'm living a fulfilling life and I'm thrilled that perhaps it shows'
- 3 Banksy not arrested: Internet duped by fake report claiming artist's identity revealed
- 4 Australian café owner sparks debate after saying 'No' to having unruly children on premises
- 5 Paralysed man Darek Fidyka walks again after treatment by British doctors on brink of 'cure' for paralysis
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Residents should throw a street party and mix with immigrant neighbours, councils told
Russell Brand threatened with arrest after filming outside Fox News headquarters
London bus driver 'kicks gay couple off for kissing'
iJobs Money & Business
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...
£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...
£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...
Day In a Page
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village