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; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
Arts and Entertainment
The eyes have it: Kate Bush
music
Arts and Entertainment
booksNovelist takes aim at Orwell's rules for writing plain English
Arts and Entertainment
Al Pacino in ‘The Humbling’, as an ageing actor
filmHam among the brilliance as actor premieres two films at festival
News
Fifi Trixibelle Geldof with her mother, Paula Yates, in 1985
people
PROMOTED VIDEO
Sport
Mario Balotelli in action during his Liverpool debut
football ...but he can't get on the scoresheet in impressive debut
Environment
Pigeons have been found with traces of cocaine and painkillers in their system
environmentCan species be 'de-extincted'?
Arts and Entertainment
booksExclusive extract from Howard Jacobson’s acclaimed new novel
News
i100
Arts and Entertainment
A Pilgrim’s Progress is described by its publisher as “the one-and-only definitive record” of David Hockney's life and works
people
Sport
Loic Remy signs for Chelsea
footballBlues wrap up deal on the eve of the transfer window
News
i100
Arts and Entertainment
Art
Arts and Entertainment
Elizabeth McGovern as Cora, Countess of Grantham and Richard E Grant as Simon Bricker
TV
Life and Style
Instagram daredevils get thousands of followers
techMeet the daredevil photographers redefining urban exploration with death-defying stunts
Arts and Entertainment
Diana Beard, nicknamed by the press as 'Dirty Diana'
TVDaughter says contestant was manipulated 'to boost ratings'
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

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

    C# .NET Developer (PHP, Ruby, Open Source, Blogs)

    £40000 - £70000 per annum + Bonus+Benefits+Package: Harrington Starr: C# .NET ...

    Data Analyst/Developer (Good education, Data mining, modelling,

    £40000 - £70000 per annum + benefits+bonus+package: Harrington Starr: Data Ana...

    Law Costs

    Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

    Day In a Page

    Alexander Fury: The designer names to look for at fashion week this season

    The big names to look for this fashion week

    This week, designers begin to show their spring 2015 collections in New York
    Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

    'I like Orwell's writing as much as the next talented mediocrity'

    Will Self takes aim at Orwell's rules for writing plain English
    Meet Afghanistan's middle-class paint-ballers

    Meet Afghanistan's middle-class paint-ballers

    Toy guns proving a popular diversion in a country flooded with the real thing
    Al Pacino wows Venice

    Al Pacino wows Venice

    Ham among the brilliance as actor premieres two films at festival
    Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

    Neil Lawson Baker interview

    ‘I’ve gained so much from art. It’s only right to give something back’.
    The other Mugabe who is lining up for the Zimbabwean presidency

    The other Mugabe who is lining up for the Zimbabwean presidency

    Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
    The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

    The model for a gadget launch

    Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
    Alice Roberts: She's done pretty well, for a boffin without a beard

    She's done pretty well, for a boffin without a beard

    Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
    Get well soon, Joan Rivers - an inspiration, whether she likes it or not

    Get well soon, Joan Rivers

    She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
    Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

    A fresh take on an old foe

    Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
    Fashion walks away from the celebrity runway show

    Fashion walks away from the celebrity runway show

    As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
    Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

    Meet the stars of TV's Wolf Hall...

    ... and it's not the cast of the Tudor trilogy
    Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

    Europe's biggest steampunk convention

    Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
    Don't swallow the tripe – a user's guide to weasel words

    Don't swallow the tripe – a user's guide to weasel words

    Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
    Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

    Daddy, who was Richard Attenborough?

    The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor