Benjamin Francis, 23, from Brighton is a recent graduate with significant debts and no savings. He is worried because he has no financial buffer, but struggles to save anything. "I am concerned that I have no savings set aside for a rainy day," he says. "Especially in the current economic climate.
"I want to save a deposit to rent a flat in London. But I pay considerable sums to commute to work, and when electricity or water bills come in, I have to borrow the money or wait for my next pay day."
Benjamin Francis, 23, Brighton
Income: Benjamin earns around £25,000 a year
Monthly spending: Benjamin's £1,400 worth of outgoings include rent, commuting, utilities, council tax, debt repayment and pension contributions
Debts: Benjamin has £4,000 on a credit card; a £1,750 overdraft, £2,000 on a car loan; and around £500 on store cards
Savings: shares worth £1,500
Pension: £25 a month
Three independent financial advisers offer Benjamin guidance this week: Jason Witcombe of Evolve Financial Planning; Ajmer Somal of Positive Solutions; and Raj Shah of Simpli Independent.
Debt & Expenses
With over £8,000 in unsecured debts on credit cards, store cards, overdrafts and car loans, Benjamin needs to cut down his borrowing before he can start saving, the advisers agree.
His budget is very tight, with little left over at the end of the month to save, but Jason Witcombe believes he can still cut costs. "Benjamin needs to have a good look at his expenses to see if there are any items that could be cut out," he says. "He could spend almost nothing on his phone, for example, by receiving rather than making calls, and by using email." He could also consider cheaper accommodation, cancelling any unnecessary direct debits, and shopping around to reduce his utility bills, ploughing the extra cash into paying off debts.
He should prioritise paying off his most expensive debts first. "Benjamin should try to clear his overdraft, credit and store cards first, as these will charge the highest rate of interest," Ajmer Somal advises, adding that he may even wish to give back his car to save on the loan.
"Benjamin unsuccessfully tried to switch his total credit-card debt on to a 0 per cent-interest deal, but he should be able to move at least some of it on to such a deal," adds Raj Shah.
Once Benjamin moves to London, he can reduce the £370 he pays to commute, which costs him almost a quarter of his net income, Witcombe says. "But until he begins to cut down his debts, he won't be able to move and save more," he adds.
Savings & Investments
Once Benjamin's debts are more manageable, he can save for the deposit and financial security. "He should consider saving his extra disposable income in a cash ISA," suggests Somal. "One he can contribute to monthly, and thus build up a lump sum."
Benjamin has also built up a portfolio of individual shares worth around £1,500, mostly due to employee schemes, but the advisers believe they are not appropriate for his current situation. "Unless Benjamin is prepared to put in the time and effort to research them, investing in individual shares is a big risk for someone who is risk averse," Witcombe warns. "They are a luxury he can't afford to keep and he should sell them to help pay off debts."
Benjamin puts £25 into a pension scheme every month, but by contributing to his employer's scheme he could double his money. "He should join his employer's pension scheme as it offers employer contributions matching his own savings every month," says Somal.
All the advisers also recommend that Benjamin looks into his employer's long-term sick pay scheme to find out if he is eligible.
To find an independent financial adviser in your area, visit www.unbiased.co.uk
For a free financial check-up, write to Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS; or email firstname.lastname@example.org