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.
Sunday 28 March 2010
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."
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."
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."
"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
Will your credit card rewards be scrapped following new EU rules on charges?
What would happen if you put a statistician in a casino with £1m?
Simon Read: 'The fight must go on over equality on expat pensions'
More people are switching current accounts – but what do the figures mean?
Pension freedoms: How to deal with cold calls from scammers
- 2 Why this father didn’t hide his daughter’s heroin overdose in her obituary
- 3 Company breaks open Apple Watch to discover what it says is 'planned obsolescence'
- 5 The most powerful passports in the world
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
iJobs Money & Business
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...
£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...
Day In a Page
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
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
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
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms