Wealth Check: 'I want to get on the property ladder – but I've got debts to clear'

Student Neelam Eman Ali hopes to swap her part-time work for a career in childcare. She needs to save to pay off her overdraft, and get a pension

The patient

Neelam Eman Ali from Watford in Hertfordshire wants to clear her debts and get her finances into better shape so she can start thinking about the future, and one day look at taking the first step on to the property ladder.

The 20-year-old is studying for a childcare diploma at West Herts College, which is due to finish next month, and lives with her mother in a rented council house.

While she doesn't pay rent, Neelam helps out with the household costs, including the phone bills, grocery shopping and petrol, thanks to a job as a crew member at a fast food outlet. "I've had the job for two years alongside my studies, but the pay isn't particularly good, and the working environment is quite hard, so I'd be keen to find an alternative place to work," she says.

When Neelam finishes her course, she plans on looking for a job in childcare. "But I'm also widening the net, and will look at other potential roles too, such as working as a receptionist or a PA," she says. "The problem is, I don't have much experience of this kind of work, so may struggle."

As Neelam has been studying and using money from her part-time job to help with the household bills, she has yet to squirrel any money away into savings. She also has debts to contend with. "I've run up £1,500 on my overdraft with Santander," she says. "I didn't even realise I had an overdraft facility until I'd gone a long way into the red. I am slowly paying this back, but it's going to take some time. On the plus side, I don't have any debts on cards or loans to worry about."

As yet, Neelam hasn't given much thought to pension planning; she also has no protection policies in place.

"My main priority is clearing my debts so I can start saving money," she says. "One day, I'd like to buy a flat, and also have enough money to go travelling.

"I'd like to take steps to sort my life and no longer live in a council area," she adds. "I'd also like to help my mum by taking steps to ease the financial pressures at home."

The cure

Our panel of independent financial advisers agree that while Neelam has a number of perfectly reasonable financial goals, some are simply unachievable at this stage.

They suggest the best starting point to achieve her objectives is by improving her employment position. They also urge her to begin budgeting carefully, deal with her overdraft, and look to build up her savings for the short-term, and eventually for the longer-term.

Review employment plans

While Neelam needs to improve her employment position, this is easier said than done in the economic climate, when many young people are struggling to find jobs, says Patrick Connolly from Chase de Vere.

"Nonetheless, Neelam needs to have some direction," he says. "She needs to ask herself whether she wants employment in the childcare field – or whether she is indifferent."

Given that Neelam isn't happy with her job at the fast food outlet, she needs to start proactively looking at the job market now, he adds. "If she can secure a new job which she enjoys – and which pays her more money – her overall financial position should improve markedly," he says.

Draw up a budget

At this stage in life, the best thing Neelam can do is get into some good habits with her personal finances, according to Christopher Wicks from Bridgewater Financial Services.

"She should begin by making sure she knows exactly how she spends her money," he says. "She should also keep a record of outgoings, and check the rates on phone tariffs and other household bills are competitive."

Useful comparison sites for comparing rates include uSwitch.com and moneysupermarket.com.

Deal with debts

Neelam's main priority should be to pay off her overdraft, as charges can be hefty, according to Mr Wicks.

Nick Evans, from One Life Wealth Planning, suggests Neelam may want to consider converting the overdraft into a personal loan over a period of say, three or four years.

"On the downside, it may cost her more in total to repay this debt – even allowing for a lower interest rate – as it will take her longer to pay it off," he says. "But the clear advantage is she can reduce her monthly outgoings. Overdrafts are one of the worst forms of debt, as it's so easy to build up debt unless they're used with great discipline."

Start to build up savings

Once Neelam has paid off her debts, her next financial priority should be to build up her cash savings.

"It's very important to have emergency cash savings," says Mr Connolly. "This will help to avoid the need to go into debt if money is required at short notice."

As a starting point, Neelam should start saving into a cash individual savings account (Isa).

"In the current year the limit is £5,760," says Mr Connolly. "All interest is earned tax-free."

If Neelam is able to build her pot of savings, this will also put her in a better position to achieve her longer-term financial goals, such as buying her own home.

"The key now is for Neelam to get into the habit of putting money into savings each month," adds Mr Evans. "Even if she occasionally has to take it out again, the habit will be rewarded. And, once she starts her new career, her earnings will hopefully increase – giving her the perfect opportunity to increase the amount she saves."

Don't ignore planning for the longer term

Right now, Neelam's huge advantage is her age, according to Mr Evans.

"As she's still young, she can be forgiven for not having thought much about savings, investing, pensions or protection," he says.

That said, Mr Connolly adds that she will need to think about putting money into pensions and other investments at some point.

"First and foremost, she needs to focus on paying off her debts and building cash savings," he says. "But once she's been able to secure a job which she thinks she will stay in for some time, she should look into joining any pension arrangements offered by her employer, and particularly if the employer makes contributions."

He also points out that while there's no desperate hurry for Neelam to start pension saving, the sooner she starts saving for retirement, the more time her money will have to grow into a decent pension fund.

Review protection further down the line

As Neelam has no obvious protection needs, she doesn't need to worry about protection products for the time being, says Mr Connolly.

"But when she manages to secure a full-time job she should review any protection benefits offered by her employer," he says.

Mr Wicks agrees that while life cover is not necessary in her current position, she will need to think about this insurance once she starts working and if she has a family.

Don't rely on getting married

While Neelam talks about wanting to get married in a couple of years' time, Mr Connolly warns her not to hold back on her financial planning because of this.

"Her planning should take account of her position today," he says. "It can then be tweaked if her circumstances change in the future."

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


Actress sees off speculation about her appearance in an amazing way

Arts and Entertainment
The last great picture - Winner 'Black and White' and overall 'Wildlife Photographer of the Year'
'Irritatingly Disneyfied': fashion vlogger Zoella

Carl Bernstein (left) and Bob Woodward (right) with former 'Washington Post' executive editor Ben Bradlee

The Washington Post editor helped Bob Woodward and Carl Bernstein bring down President Nixon

Life and Style

Board creates magnetic field to achieve lift

There have been various incidents of social media users inadvertently flouting the law

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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: The SThree group is a world le...

    Trainee Recruitment Consultant Birmingham

    £18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

    Trainee Recruitment Consultants

    £20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...

    Helpdesk Analyst

    £23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

    Day In a Page

    Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

    A new American serial killer?

    Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
    Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

    Sting to trap paedophiles may not carry weight in UK courts

    Computer image of ‘Sweetie’ represented entrapment, experts say
    Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

    Return to Fukushima – a land they will never call home again

    Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
    Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

    Wildlife Photographer of the Year

    Intimate image of resting lions claims top prize
    Online petitions: Sign here to change the world

    Want to change the world? Just sign here

    The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
    Ed Sheeran hits back after being labelled too boring to headline festivals

    'You need me, I don’t need you'

    Ed Sheeran hits back after being labelled too boring to headline festivals
    How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

    How to Get Away with Murder

    Shonda Rhimes reinvents the legal drama
    A cup of tea is every worker's right

    Hard to swallow

    Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
    Which animals are nearly extinct?

    Which animals are nearly extinct?

    Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
    12 best children's shoes

    Perfect for leaf-kicking: 12 best children's shoes

    Find footwear perfect to keep kids' feet protected this autumn
    Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

    Arsenal’s ray of light ready to shine again

    Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
    Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

    Moyes’ show of sensitivity thrown back in his face... by Ferguson

    Manchester United legend tramples on successor who resisted criticising his inheritance
    Two super-sized ships have cruised into British waters, but how big can these behemoths get?

    Super-sized ships: How big can they get?

    Two of the largest vessels in the world cruised into UK waters last week
    British doctors on brink of 'cure' for paralysis with spinal cord treatment

    British doctors on brink of cure for paralysis

    Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
    Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

    Lonely Planet’s Best in Travel 2015

    UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London