Wealth Check: 'I want to halve the amount of time I work – and enjoy life more'
Saturday 17 May 2008
Sarah Canet, 38, from London, returned to the UK from Australia with a debt of £20,000 five years ago. Since then she has paid off her loans, built up £100,000 in savings, cleared the mortgage on her flat and built up a restaurant PR company. After working hard for her money, she's now keen to get her money working for her, while she enjoys life a little more.
"I work too hard," Sarah says. "I want to shut up shop for a while and create a better work-life balance. I'd like to be able to work hard for six months of the year, earn around £30,000, then take six months off to develop new projects, read, travel and study."
CASE NOTES: Sarah Canet, 38, PR, London
Income: after staff and other expenses, Sarah brings home £30,000 of her £100,000 income.
Monthly outgoings: she spends around £1,000 a month on food, travel, clothes and socialising, as well as council tax, utility bills and service charges.
Savings & investments: Sarah's investments include £100,000 in a Sainsbury's instant access account, £1,500 in a Barclays current account and £3,000 in a Barclays ISA.
Three advisers help Sarah with her goals this week: Aj Somal of Positive Solutions, Danny Cox of Hargreaves Lansdown, and Keith Churchouse of Churchouse Financial Planning.
Sarah thinks she can earn around £30,000 for six months' work, maintaining her current annual income. Aj Somal says she should consider investments which will also give her an income, but make the most of her tax-free savings allowances first. "Sarah should divert £3,600 from the existing £100,000 into a cash ISA this tax year and put up to £3,600 into a stocks and shares ISA," he suggests.
"She should then put £15,000 into an NS&I index-linked savings certificates. This is a deposit-based investment paying an interest rate in excess of inflation over a five-year term, and is free of income tax and capital gains tax."
He believes Sarah should put £67,800 in an equity-based unit trust or Oeic, which should increase her capital and give her an income, and then the last £10,000 should be put aside in a cash account as an easy-access emergency fund.
But Keith Churchouse suggests that because of her six-month plan, Sarah should consider a larger emergency fund of at least £15,000. "Sarah may want to consider putting £30,000 into premium bonds," he says. "Her capital will then be protected and she has the opportunity of tax-free winnings. Once she has established her working routine, she could reduce this amount, and make the money work for her elsewhere."
He adds that savings accounts offering over 6 per cent interest, such as Chelsea Building Society's 90 day notice account at 6.30 per cent, are common.
Sarah's investment situation is promising, but the advisers are concerned about her lack of pension provision. They urge her to start saving regularly. "A contribution of £250 a month would become £312.50 with tax relief," says Cox. "If this was invested until Sarah was 65, it could produce a fund of £315,000 which could produce a pension of £14,500 per annum, around £7,325 in today's money.
"But if Sarah were to boost her pension by making a lump sum contribution of £8,000 – worth £10,000 after tax relief – her fund could be £362,000 at age 65, producing an income of £16,697 per annum worth £8,429 per annum in today's terms." He recommends using a self invested personal pension (Sipp).
Churchouse suggests Sarah considers upping that to a total of £15,000, to make the most of the long-term accumulation, but says Sarah should not rule out a stakeholder pension product through a company such as Scottish Widows.
"Sarah should consider protecting her income against long-term sickness or absence," says Somal. "This can be achieved by taking out an income protection policy to cover a proportion of her monthly earnings – usually around 60 to 70 per cent – which would pay out after a period of absence from work."
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 email@example.com
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Pension mortgages: 'The advice I was given was wrong and now I face losing my home'
You'll need £220,000 for a minimum wage in your retirement
Questions of Cash: I checked in with Air France in time and still missed the plane
Minister's pension promise to firefighters challenged
Mark Dampier: Maybe boom, maybe bust, but we'll probably just muddle along
- 1 Planes go hybrid-electric in important step to greener flight
- 2 Antonio Martin shooting: Police and protesters clash over teenager's death just five miles from Ferguson, Missouri
- 3 Northern Lights above Britain: Stunning Aurora Borealis illuminates Northumberland sky on Christmas Eve
- 4 British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
- 5 New route to Mars could make manned mission much cheaper and easier
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
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
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
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
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens