Wealth check: How to prepare for the trip of a lifetime

Travelling the world is on the cards for Jennie Hill, but she should not forget long-term plans for her finances.


The patient


Jennie Hill, 28, from north-west London, is planning the trip of a lifetime. Once the trainee clinical psychologist's current role ends in September, Jennie is all set to travel the world for six months.

"So far I have saved £4,000 for travelling," she says, "But given that saving rates are low at the moment, I need to know how to maximise my returns short-term so I can save for my trip in the most effective way.

But Jennie also needs to be able to manage her money while she is away. "I'd like to know the best bank to be with while I am away," she explains. "I know that Nationwide used to do free withdrawals abroad but no longer do this. I don't want to carry too much cash on my person while I travel, but also don't want to pay high fees to withdraw my money."

The cure

Jennie's top priority is to save as much of her monthly income as possible into her travel fund, but her financial planning shouldn't come to a halt while she's away, warns Duncan Carter, an independent financial adviser for Clearwater Financial Planning.

"Jennie should look at both the short-term intention of travelling in October as well as what she intends doing upon her return in the next 12 to 15 months," he says. "Travelling while you're still young is a fantastic thing to do, but the longer term also needs to be considered."

Savings

She has done well to save £4,000 so far, but Jennie is keen to step up her saving and interest rate as her departure date draws near. Her take-home pay is around £1,700 after tax every month, but as she only spends around £1,400 on her mortgage, bills, food and other living costs, there is plenty of room to add a significant sum to her travel money every month.

"To help identify where additional savings can be made, Jennie should keep a note of every penny spent each day throughout the month," says Philip Pearson, an independent financial adviser for P&P Invest. "This will highlight unnecessary spending, help set her monthly budget, and maximise the savings she could add to her travel cash before September."

Jennie's travel money is currently split between an Alliance & Leicester cash ISA and a savings account linked to her Alliance & Leicester current account. "My cash ISA is full for this year so I need another one for the coming tax year that I can access instantly when I go away," she adds. "I'd also like to keep £500 aside for emergency cash."

To make the most of her savings interest, Jennie is right to put her money into cash ISAs, the advisers agree. "Jennie's current ISA provider, Alliance & Leicester, offers an instant access ISA of 3.5 per cent, which is very competitive," says AJ Somal, an independent financial adviser for Uniec Financial Solutions. But if she can't access that offer as an existing customer, Barclays currently offers 3.1 per cent instant access, and Nationwide's instant access ISA is paying 2.75 per cent. Allowances for cash ISAs are increasing to £5,100 from April, so Jennie should make the most of the new limit to ensure she has the money she needs."

Offshore banking

"Having access to sufficient funds to support their travelling, without having to carry huge amounts of money around is a big dilemma for many travellers," says Mr Pearson. "The most obvious choice would be to consider a debit card, where transactions can be charged against an account and deducted automatically. The Clydesdale Bank International Current Account will be an ideal choice. A minimum balance of £2,500 is required to open the account – significantly less than normally needed for an offshore account. And the account can be used in sterling, euros or Australian, US or New Zealand dollars."

Jennie could also apply for a credit card to reduce the amount of cash she has to carry around. For example, the Post Office Mastercard doesn't charge customers for overseas use, but with a typical APR of 19.9 per cent, Jennie should start to clear that debt as soon as she returns.

Insurance, and a will

Meanwhile, to protect her from the financial effects of accident, illness, theft or loss of her possessions while she's away, Jennie's travel insurance should be as comprehensive as possible. This should cover worldwide travel, repatriation to the UK if necessary, medical treatment including any necessary hospital stays, lost luggage and personal items including her passport and travel documents.

Within the EU Jennie is covered for healthcare as long as she has a European Health Insurance Card (EHIC) which can be applied for online at www.e111.org.uk/ apply.html. She should also check the details of her home contents and buildings insurance policies to make sure she's covered for periods of extended absence.

Jennie is keen to create a will before she leaves for her trip – which is crucial for anyone who will be away for a long period – but because her property is jointly owned with her former partner, Jennie should change this to a "tenancy in common" so that her share goes into her estate in the case of her death.

Medium & long-term planning

While she is away Jennie will need to temporarily stop repaying her student loan. This should happen automatically as she won't be receiving a salary, but alongside any other standing orders or direct debits, Jennie needs to make sure she's only paying her mortgage and associated bills while she is abroad.

Jennie wants to keep £500 aside for emergency cash while overseas. However, once she returns, the advisers urge her to increase this amount to the equivalent of between three and six months of her salary – around £5,100. This will cover her mortgage and living costs if she is made redundant or becomes unable to work.

"Jennie needs to start thinking about longer-term goals and objectives for her life after travelling," says Mr Carter. "I know that retirement seems a long way off, but it will happen. Jennie needs to think about her ambitions for a retirement income and put a plan in place."

As an NHS employee, Jennie currently has an enviable final-salary pension scheme. But once she leaves her current post she will need a new way to save for older age.

"Once she is back in the UK, Jennie should continue with the habit of regular saving in order to build up her financial security over the longer term," Mr Pearson suggests.

"She could do this through an equity ISA and stakeholder pension. The ISA will provide access to capital if Jennie needs money in the medium term, whereas the pension will provide a boost to the benefits available from the NHS scheme at retirement.

"A stakeholder pension is designed to provide a straightforward, simple approach to saving towards your retirement. There is no initial cost involved, low annual management charges, and the plan benefits from tax relief, which will boost Jennie's personal contributions by a further 25 per cent for basic rate taxpayers," adds Mr Pearson.

Do you need a financial makeover?

Write to Julian Knight at the Independent on Sunday, 2 Derry Street, London W8 5HF

j.knight@independent.co.uk

PROMOTED VIDEO
News
newsBear sweltering in zoo that reaches temperatures of 40 degrees
Arts and Entertainment
Brendan O'Carroll has brought out his female alter-ego Agnes Brown for Mrs Brown's Boys D'Movie
filmComedy holds its place at top of the UK box office
News
Ian Thorpe has thanked his supporters after the athlete said in an interview that he is gay
people
Arts and Entertainment
Professor Kathy Willis will showcase plants from the Royal Botanic Gardens at Kew
radioPlants: From Roots to Riches has been two years in the making
Arts and Entertainment
TV The follow-up documentary that has got locals worried
Arts and Entertainment
Eminem's daughter Hailie has graduated from high school
music
Arts and Entertainment
Original Netflix series such as Orange Is The New Black are to benefit from a 'substantial' increase in investment
TVHoax announcement had caused outrage
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

News
One Direction star Harry Styles who says he has no plans to follow his pal Cara Delevingne down the catwalk.
peopleManagement confirms rumours singer is going it alone are false
Arts and Entertainment
Curtain calls: Madani Younis
theatreMadani Younis wants the neighbourhood to follow his work as closely as his audiences do
Arts and Entertainment
'Deep Breath' is Peter Capaldi's first full-length adventure as the twelfth Doctor
TVFirst episode of new series has ended up on the internet
Life and Style
Douglas McMaster says the food industry is ‘traumatised’
food + drinkSilo in Brighton will have just six staple dishes on the menu every day, including one meat option, one fish, one vegan, and one 'wild card'
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
Life and Style
Once a month, waistline watcher Suran steps into a 3D body scanner that maps his body shape and records measurements with pinpoint accuracy
techFrom heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Information Security Manager (ISO 27001, Accreditation, ITIL)

    £70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

    Biztalk - outstanding opportunity

    £75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

    Trade Desk Specialist (FIX, Linux, Windows, Network Security)

    £60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

    Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

    £35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

    Day In a Page

    Iraq crisis: How Saudi Arabia helped Isis take over the north of the country

    How Saudi Arabia helped Isis take over northern Iraq

    A speech by an ex-MI6 boss hints at a plan going back over a decade. In some areas, being Shia is akin to being a Jew in Nazi Germany, says Patrick Cockburn
    The evolution of Andy Serkis: First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes

    The evolution of Andy Serkis

    First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes
    You thought 'Benefits Street' was controversial: Follow-up documentary 'Immigrant Street' has got locals worried

    You thought 'Benefits Street' was controversial...

    Follow-up documentary 'Immigrant Street' has got locals worried
    Refugee children from Central America let down by Washington's high ideals

    Refugee children let down by Washington's high ideals

    Democrats and Republicans refuse to set aside their differences to cope with the influx of desperate Central Americas, says Rupert Cornwell
    Children's books are too white, says Laureate

    Children's books are too white, says Laureate

    Malorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
    Blackest is the new black: Scientists have developed a material so dark that you can't see it...

    Blackest is the new black

    Scientists have developed a material so dark that you can't see it...
    Matthew Barzun: America's diplomatic dude

    Matthew Barzun: America's diplomatic dude

    The US Ambassador to London holds 'jeans and beer' gigs at his official residence – it's all part of the job, he tells Chris Green
    Meet the Quantified Selfers: From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor

    Meet the 'Quantified Selfers'

    From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
    Madani Younis: Five-star reviews are just the opening act for British theatre's first non-white artistic director

    Five-star reviews are just the opening act for British theatre's first non-white artistic director

    Madani Younis wants the neighbourhood to follow his work as closely as his audiences do
    Mrs Brown and her boys: are they having a laugh?

    Mrs Brown and her boys: are they having a laugh?

    When it comes to national stereotyping, the Irish – among others – know it can pay to play up to outsiders' expectations, says DJ Taylor
    Gavin Maxwell's bitter legacy: Was the otter man the wildlife champion he appeared to be?

    Otter man Gavin Maxwell's bitter legacy

    The aristocrat's eccentric devotion to his pets inspired a generation. But our greatest living nature writer believes his legacy has been quite toxic
    Joanna Rowsell: The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia

    Joanna Rowsell: 'I wear my wig to look normal'

    The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia
    Bill Granger recipes: Our chef gives raw ingredients a lift with his quick marinades

    Bill Granger's quick and delicious marinades

    Our chef's marinades are great for weekend barbecuing, but are also a delicious way of injecting flavour into, and breaking the monotony of, weekday meals
    Germany vs Argentina World Cup 2014 preview: Why Brazilians don't love their neighbours Argentina any more

    Anyone but Argentina – why Brazilians don’t love their neighbours any more

    The hosts will be supporting Germany in today's World Cup final, reports Alex Bellos
    The Open 2014: Time again to ask that major question - can Lee Westwood win at last?

    The Open 2014

    Time again to ask that major question - can Lee Westwood win at last?