Wealth Check: I want to buy a house of my own – but I also love going on holiday

PA wants to reconcile her desire to own a property with her love of foreign travel and shopping. Our three financial experts help her out

The patient

Lydia McDaid is keen to start saving more so she can continue to afford regular holidays, but she also wants to start salting more money away so she can buy her own house in the next few years.

The 27-year-old from Hornsey, north London, is a personal assistant to a managing director and earns about £25,000. She has been in her current role for two-and-a-half years and is now looking for a new PA job on slightly higher pay.

She has two savings accounts, both with NatWest. At present, she has £900 in her main account and £100 in an Advantage Gold account. "My savings can fluctuate from £1 up to £3,000, depending on what crops up along the way," she says. "Paying for Christmas and car insurance renewal – along with this month's rent – will mean my balance drops."

But Lydia is set on building her savings again. "I want to squirrel money away into a fund I can use for 'luxuries' such as clothes shopping and holidays. If I'm disciplined, this will hopefully mean I can continue to go abroad three times a year, as I did last year when I went to Las Vegas, Ibiza and Greece.

"In recent years, I've been able to afford this by carefully planning my saving and spending budget. In addition, I try to take advantage of discounts and deals on my grocery shopping, and make use of cashback sites such as Topcashback when buying online."

Lydia has no overdraft or card debts, but she has just started a finance plan for her car, and is now set to pay £180 a month until 2017.

In September last year, she moved into a three-bedroom apartment with two friends. "My share of the rent is £377 a month," she says. "However, my boyfriend Blain lives with me, so we halve this. I pay around £60 for bills.

"Eventually, I would like to move into a place of my own – but know I will need a lot of time to save for this. That's why, alongside my shorter-term savings, I want to start saving in a 'house fund.'"

At present, Lydia has no investments and does not pay into a pension. She also has no protection policies in place.

The cure

Our panel of independent financial advisers commend Lydia for living within a budget and for not having an overdraft or credit card debt, especially as she is quite focused on short-term goals.

However, they urge her to focus more on her longer-term financial priorities, such as building cash savings both for short-term needs in a rainy day fun and for the longer term in a house deposit fund. They also advise her to join a company pension as soon as she can.

Check the car finance plan

Patrick Connolly from Chase de Vere says Lydia must understand exactly what interest she is paying on her car finance plan, and what penalties she might face if she wanted to pay off her debt early.

"If there are penalties, she might be best continuing to make payments until the plan ends," he says. "But in future, to avoid debt, she could consider building up savings which would leave her having to borrow less on a finance plan."

Balance short-term costs and longer-term planning

While Lydia's main objectives involve savings to meet short-term costs, John Ditchfield from Barchester Green urges her not to neglect her longer-term financial planning.

"I'm concerned she may be living a little beyond her means in prioritising car purchase and frequent travel ahead of regular savings, retirement planning and property purchase," he says. Mr Connolly agrees Lydia must make sure she gets the balance right between living for today and planning for tomorrow. "On the positive side, Lydia seems very organised and has a good understanding of her income and outgoings," he says.

Build savings for the future

Mr Connolly suggests Lydia should start putting money away for the future by splitting cash savings into three pots.

"The first could be used for short-term expenses such as holidays and the second to build an emergency fund," he says. "In the third, she could build savings towards longer-term goals such as a house purchase."

He says Lydia should look to save longer-term cash savings in a cash Isa, as all interest is tax-free.

Mike Lavin from Helm Godfrey adds that Lydia's potential increase in salary represents an excellent opportunity for her to increase her monthly savings. "But she should establish a savings arrangement soon after her new income kicks in to avoid getting used to having more disposable income," he says.

Save hard for a house deposit

As Lydia's rent and household bills are low, she should start saving for a house deposit.

Mr Lavin urges Lydia to think seriously about the sort of property she'd like. "She will then have a much better idea about the deposit she will need," he says. A mortgage adviser could give her an idea of how much she may be able to borrow – and what her repayments might be.

Mr Ditchfield adds that the Government's Help to Buy scheme might be an option worth considering. "This will mean she only needs a 5 per cent deposit," he says.

Start paying into a pension

While Lydia has other priorities, Mr Lavin says it is important she starts contributing towards a pension as soon as possible.

"The older she is when she starts contributing, the less time her pension money will have to benefit from investment growth," he says. "The cost of delaying is more significant than people think due to the compounding of investment returns."

Mr Connolly says the start point should be an employer's scheme – especially as many will pay in on behalf of employees. "Lydia should aim to join her new workplace scheme as soon as she starts working there," he says.

Look at investing a little further down the line

While Lydia's main priority should be building cash savings, Mr Connolly says she should also think about other longer-term investments, including regular savings into a stocks-and-shares Isa.

"This type of account works well alongside pensions, as pensions give upfront income tax relief but aren't flexible," he says. "Equity Isas can also be tax-efficient but are far more flexible – meaning Lydia could access her money when she wants."

Mr Ditchfield adds that saving as little as £50 a month into an equity Isa could be beneficial. "If Lydia did this over 10 years, this could produce savings of around £8,500," he says.

Check protection policies offered at work

Mr Lavin says Lydia should check what protection benefits are offered by her potential new employer.

"If income protection is not provided, she should consider taking out a policy, as this would provide a monthly income if she were unable to work due to ill health," he says. "Once she's on the property ladder, she will also need life cover to ensure the mortgage is covered should anything happen to her."

Mr Connolly adds that while a will is not urgent at this stage as Lydia has no dependants and relatively little to leave, she should think about drawing one up in future.

*

Do you want a financial makeover?

Write to Julian Knight at:

The Independent on Sunday, 2 Derry Street, London W8 5HF

j.knight@independent.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Arts and Entertainment
The Apprentice candidates Roisin Hogan, Solomon Akhtar, Mark Wright, Bianca Miller, Daniel Lassman
tvReview: But which contestants got the boot?
Arts and Entertainment
Jim Carrey and Jeff Daniels ride again in Dumb and Dumber To
filmReview: Dumb And Dumber To was a really stupid idea
News
people

Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt

Sport
Scunthorpe goalkeeper Sam Slocombe (left) is congratulated by winning penalty taker Miguel Llera (right)
football
Life and Style
A woman walks by a pandal art installation entitled 'Mars Mission' with the figure of an astronaut during the Durga Puja festival in Calcutta, India
techHow we’ll investigate the existence of, and maybe move in with, our alien neighbours
Arts and Entertainment
Sir Ian McKellen tempts the Cookie Monster
tvSir Ian McKellen joins the Cookie Monster for a lesson on temptation
News
i100
Travel
Tourists bask in the sun beneath the skyscrapers of Dubai
travelBritish embassy uses social media campaign to issue travel advice for festive holiday-makers in UAE
Arts and Entertainment
Jennifer Saunders stars as Miss Windsor, Dennis's hysterical French teacher
filmJennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress
Life and Style
tech
Sport
Nabil Bentaleb (centre) celebrates putting Tottenham ahead
footballTottenham 4 Newcastle 0: Spurs fans dreaming of Wembley final after dominant win
Life and Style
Sebastian Siemiatkowski is the 33-year-old co-founder and CEO of Klarna, which provides a simple way for people to buy things online
tech
Finacial products from our partners
Property search
Latest stories from i100
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

    Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

    £40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

    Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

    £45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

    Carlton Senior Appointments: Sr Wealth Manager - San Francisco - Inv AdvisoryFirm

    $125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager – In...

    Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

    $200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

    Day In a Page

    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
    Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

    The Boy in the Dress: On set with the stars

    Walliams' story about a boy who goes to school in a dress will be shown this Christmas
    La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

    Deaf community outraged by La Famille Bélier

    The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
    10 best high-end laptops

    10 best high-end laptops

    From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
    Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

    Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

    The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
    Susie Wolff: A driving force in battle for equality behind the wheel

    Susie Wolff: A driving force in battle for equality behind the wheel

    The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
    Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

    'No abs Adam' plans to muscle in on Usain Bolt's turf

    After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
    Calls for a military mental health 'quality mark'

    Homeless Veterans campaign

    Expert calls for military mental health 'quality mark'
    Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

    Meet Racton Man

    Analysis shows famous skeleton was a 6ft Bronze Age superman
    Garden Bridge: St Paul’s adds to £175m project’s troubled waters

    Garden Bridge

    St Paul’s adds to £175m project’s troubled waters
    Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

    Stuff your own Christmas mouse ornament

    An evening class in taxidermy with a festive feel
    Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

    Joint Enterprise

    The legal doctrine which critics say has caused hundreds of miscarriages of justice
    Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

    Freud and Eros

    Love, Lust and Longing at the Freud Museum