Wealth Check: 'How can I save when I have so many debts to pay off?'
Saturday 23 August 2008
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 email@example.com
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Pension mortgages: 'The advice I was given was wrong and now I face losing my home'
You'll need £220,000 for a minimum wage in your retirement
Minister's pension promise to firefighters challenged
Record average rents hit £761 per month - or £1,160 in London
Where can I get the best return for my £20,000 nest egg?
- 1 Planes go hybrid-electric in important step to greener flight
- 2 Antonio Martin shooting: Mayor says there should be 'no comparison' to Ferguson
- 3 Antonio Martin shooting: Police and protesters clash over teenager's death just five miles from Ferguson, Missouri
- 4 British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
- 5 Northern Lights in the UK: Stunning Aurora Borealis illuminates Northumberland sky on Christmas Eve
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
iJobs Money & Business
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
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