Wealth Check: I want to clear my debts and start saving'

Rory Toner, 24, a software developer from Belfast, is determined to buy a home within four years, but has debts to clear before he can start saving for a deposit. He has five years' worth of student loans and a £1,400 overdraft to clear before he is 27, when his bank will start to charge for it. He also wants to retire on £30,000.

But Rory is unsure of the best way to manage his financial priorities. "The main thing that concerns me is how to maintain a balance between savings and building a deposit for a house and paying off my debts," he says. "I just don't know the best way to approach it."

This week three financial advisers help Rory with his money: Raj Shah of Simply Independent, Arthur Dornan of Carterbar and Mel Kenny of Radcliffe and Newlands.

CASE NOTES: Rory Toner, 24, software developer, Belfast
Income: £21,000 a year.
Monthly outgoings: Rory spends around £1,750 a month, or £21,000 a year, matching his income. His living expenses cost around £1,100 a month, including rent and bills; £50 a month goes on holidays; a further £180 on unforeseen costs and treats – socialising, meals out, entertainment and DVDs; and around £420 of Rory's monthly salary goes on income tax and National Insurance.
Savings and investments: Rory has no investments, and is not contributing to any savings, but wants to start saving for a deposit to buy a house.
Debt: Rory's overdraft is between £1,400 and £2,700. There is also around £18,500 outstanding on his student loan.

Debts and homebuying

Dornan and Shah agree that Rory needs to deny himself some indulgences in order to make inroads into his debt. "He recently managed to pay off £1,700 over a four-month period, so if his living expenses include a few non-essentials, he can cut back," says Dornan. Around £75 a month should clear Rory's overdraft by the time he is 27.

"If Rory is looking at buying a house worth about £100,000 then he is going to need a deposit of at least £5,000 assuming the current mortgage situation does not worsen," adds Dornan, who says Rory needs to be saving around £150 to £200 per month in order to accumulate his deposit.

Investment

An ISA would be the best way for Rory to save. Kenny suggests that he saves up to £300 per month with Scarborough Building Society's My Savings ISA, a regular savings ISA with interest of 6.25 per cent variable per annum tax free. In three to four years' time, this could be used to pay off the overdraft and go towards a property deposit. For full flexibility, Egg's cash mini ISA has a 6.05 per cent variable per annum tax free.

Rory could invest in an equity-based ISA which is likely to offer greater returns than a cash-based one. There are pitfalls, however.

"Rory has a cautious attitude to risk and so his options are limited. He may wish to look at the BlackRock UK Absolute Alpha Fund," Kenny says.

He adds that as Rory may need to be prepared not to withdraw funds from an equity-based ISA for at least three to four years, he should not invest in one too heavily as that would mean risking not meeting some of his shorter-term objectives.

Pension

The advisers are concerned that Rory's pension plans are too ambitious, but Shah says that putting away £250 a month should be sufficient to generate Rory's desired sum in retirement.

Shah warns, "Should Rory choose to put a smaller amount into his pension, it would be vital that this figure is increased and reviewed annually to ensure that he doesn't get a nasty surprise come retirement."

If Rory's employer doesn't contribute to a pension scheme which he could join, Mel Kenny advises considering making contributions to a personal pension when he becomes a higher-rate tax-payer.

"Since 6 April 2008, contributions made by a basic-rate tax-payer only enjoy 20 per cent tax relief. If Rory sets aside a sum via his ISA and moves this to a pension when he is a high-rate tax-payer, he would enjoy 40 per cent tax relief on the same sum," Kenny says.

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 e-mail cash@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Suggested Topics
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

    Recruitment Genius: Sales Assistant / Buyer

    £15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    Day In a Page

    Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

    Greece referendum

    Greeks say 'No' to austerity and plunge Europe into crisis
    Ten years after the 7/7 terror attacks, is Britain an altered state?

    7/7 bombings anniversary

    Ten years after the terror attacks, is Britain an altered state?
    Beautiful evening dresses are some of the loveliest Donatella has created

    Versace haute couture review

    Beautiful evening dresses are some of the loveliest Donatella has ever created
    No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

    No hope and no jobs in Gaza

    So the young risk their lives and run for it
    Fashion apps: Retailers roll together shopping and social networking for mobile customers

    Fashion apps

    Retailers roll together shopping and social networking for mobile customers
    The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

    Gaping hole at the heart of the European Union

    Treatment of Greece has shown up a lack of genuine legitimacy
    Number of young homeless in Britain 'more than three times the official figures'

    'Everything changed when I went to the hostel'

    Number of young homeless people in Britain is 'more than three times the official figures'
    Compton Cricket Club

    Compton Cricket Club

    Portraits of LA cricketers from notorious suburb to be displayed in London
    London now the global money-laundering centre for the drug trade, says crime expert

    Wlecome to London, drug money-laundering centre for the world

    'Mexico is its heart and London is its head'
    The Buddhist temple minutes from Centre Court that helps a winner keep on winning

    The Buddhist temple minutes from Centre Court

    It helps a winner keep on winning
    Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

    Is this the future of flying?

    Battery-powered planes made of plastic, and without flight decks
    Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

    Isis are barbarians

    but the Caliphate is an ancient Muslim ideal
    The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

    Curse of Brink's Mat strikes again

    Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
    Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

    'The ministers talk to us about miracles'

    Why Greeks are cynical ahead of the bailout referendum
    Call of the wild: How science is learning to decode the way animals communicate

    Call of the wild

    How science is learning to decode the way animals communicate