Wealth Check: How can I manage my money better and get financially fit?

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Lindsey Brookes has been back in the UK for just over 18 months, following a long stint living and working in Japan.

Lindsey Brookes has been back in the UK for just over 18 months, following a long stint living and working in Japan. She is worried that since her return, she has not organised a pension or other regular savings. She wants to get "financially fit" and find out how to manage her money better.

She has recently moved to a company based in the M4 corridor, which Ms Brookes says is an advantage because it is "miles from random shopping opportunities".

Ms Brookes is currently renting but would like to buy a flat, preferably in the London area. She has no deposit and realises that with her current spending she is unlikely to save one up, so she would like help with reorganising her finances to achieve this.

We put her case to Anna Bowes at Chase de Vere, Elliot Nathan at Bradford & Bingley, and Ben Yearsley at Hargreaves Lansdown.


Salary: £28,000.

Debt: Personal loan £223 a month for 24 months with Alliance & Leicester, 6.6 per cent; £300 Barclaycard; £250 Alliance & Leicester credit card.

Property: Currently renting but would like to buy her own home

Savings: None.

Pension: None.

Investment: None

Monthly outgoings: Rent £600; bills £80; petrol £70; gym £64; groceries £120; going out £200; clothes about £80.


If Ms Brookes plans to buy a property, her priority has to be saving. Ms Bowes says that she should open a cash Isa account, which will allow her to save up to £3,000 a year tax free. Abbey currently offers one of the best rates: 5.35 per cent.

Mr Yearsley recommends that Ms Brookes starts by setting herself a budget. If she looks at how much she earns each month after tax, and how much she spends, she will be able to see where she can save and where money is wasted. Once she has examined her spending, she will be able to put money aside for a deposit and for contingencies. Mr Yearsley recommends that the contingency fund should be six months' salary.

Mr Nathan points out that, based on her current commitments and salary, Ms Brookes has about £250 a month of spare cash. She should put this into a high-interest savings account. When it comes to debt, it is unlikely that Ms Brookes can better her loan with Alliance & Leicester. She could, though, transfer her credit card balances to a card with a zero per cent initial rate.


One of Ms Brookes's financial priorities is to buy a property, ideally in London. However, this will not be easy. Mr Nathan says that traditional mortgage lending is based on 3.75 times her salary. She would, though, need to come up with a deposit. Any lender that offers mortgages based on affordability, such as Intelligent Finance, might allow her to go higher than £105,000.

A mortgage of 100 per cent or more is another option, but whether that will suit Ms Brookes depends partially on where she thinks house prices are going. Mr Nathan says that a mortgage such as the Together deal from Northern Rock could allow her to borrow up to £134,000. But she could be at risk if house prices fall.

Ms Bowes cautions that Ms Brookes will struggle to find a property within her budget in London - a figure of £200,000 is more realistic. But a lender who operates on affordability will take her rent payment into account, so this may allow her to borrow more. Mr Nathan and Ms Bowes say that Ms Brookes should also look at properties outside London.


Ms Brookes has no pension. The first step she should take is to check the details of her work pension scheme. Every employer with more than five staff members must offer "access" to a pension scheme, although they do not have to contribute to it. However, it may well be that her employer is willing to make a contribution.

If Ms Brookes does not want to join her work-based scheme, Ms Bowes recommends that she joins a Stakeholder pension from the likes of Legal & General or Axa, and invests in equity-based schemes, as these are the most likely to grow.

Mr Yearsley says that the sooner Ms Brookes starts saving for retirement, the more her funds will grow. Ms Bowes points out that as Ms Brookes has worked abroad, her National Insurance contributions are unlikely to be up to date. It'svital that she makes private arrangements. She will benefit from tax relief of £28 for every £100 she puts into her pension.

Advisers' views are given for information only.

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

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