Andrew Griffiths is a business student who started his own online media company in Sunderland earlier this year. The move has made him start to think about finances and he now wants advice on making the most of whatever money he earns.
His aim is to move with his fiancée to New Zealand and buy a property within the next five to six years – "However, I have no idea of the cost involved in doing this at the moment."
Longer-term he hopes his business will be successful enough to give himself a decent income now and in retirement. "At the minute, my retirement is the least of my concerns and as such am not looking into this, as I hope by that time my business would be enough to support me," says Andrew. "I would like to keep working at what I am doing for as long as possible."
Income: £8,000 a year (bursary)
Monthly outgoings: £700
Giving advice this week are Colin Rothery of Throgmorton Financial Services, Lorreine Kennedy of CareMatters and Nick Lincoln of Values To Vision Financial Planning...
"This is a tough one to give any in-depth advice on because Andrew has a bursary of £8,000 a year and spends £8,900 – so where are the planned savings going to come from?" asks Nick Lincoln. "Basically, he has extremely limited means, he spends more than his bursary, his business is not yet producing an income, and he wants to buy a property in New Zealand and start a family. Until he has a reliable income stream all of his desires are pipe dreams and unobtainable. So his first step has to be to get his business up and running profitably OR seek paid employment."
To help get his business on a sound footing, Andrew should open up a business bank account, suggests Lorreine Kennedy. "The reality of most businesses is that income can be irregular and costs far higher than initially estimated. If Andrew does not already have a business bank account then he should consider setting one up," she says. "The major banks can offer free, often excellent advice for start-ups and if he has not already been in touch with his local Business Link then I would urge him to do so. Not only will they provide him with practical help, they may be able to help him obtain grants.
"He should also seek out the services of an accountant with skills in helping fledgling businesses and seek advice on how best to protect his business by registering his trademark or brand with the Intellectual Property Office."
Andrew should, as soon as possible, start saving regularly into a tax-free Individual Savings Account (ISA), says Colin Rothery. "The best way to build up the money he needs to move to New Zealand is to save regularly into a flexible, tax-efficient, accessible plan – an ISA," he says. "Given the relatively short timescale, risk is important as shortening time increases risk, however, paying monthly is a way of reducing risk. Quality providers such as InvescoPerpetual can offer equity ISAs from £50 per month."
However Nick Lincoln says the timescale is too short to risk investing in stocks and shares. "Any excess income over costs Andrew gets he needs to salt away in cash, because he will need the money for the deposit on the New Zealand property. He should look at cash ISAs for this, as every penny of income tax saved is a penny more for him. Investment-based ISAs and such like are not suitable because his timeframe is very short."
"Andrew and his fiancée should establish the costs associated with emigration," says Lorreine Kennedy. "Once they understand these costs, then they can start to set aside money to ensure they can afford to carry out their plans. As income grows, setting clear business and personal expenditure budgets will enable the couple to identify where savings can be made – this is something that should be considered throughout their working careers. When they do emigrate, it would be appropriate to seek independent financial advice in that country as legislation will be different from the legislation we have here in the UK."
Buying abroad when they move could be a mistake, says Colin Rothery. "I'd be inclined not to buy if moving abroad in five years' time," he says. "The costs with buying and selling and cash needed for a deposit and market movements may hinder rather than assist in achieving their goals."Reuse content