Wealth Check: 'I want to pay off my debts and save'

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Ed thinks cutting back on his living expenses, such as his mobile phone, might help him achieve this. His contract with O2 costs him £30 a month for 100 free minutes and 100 free messages. He pays for an extra 150 messages but always goes over his limit. We asked independent financial advisers Justin Modray of Best Invest, Anna Bowes of Chase De Vere, and mobile phone specialist Anthony Ball, of OneCompare.com, for their help.

Case notes

Ed Layt, 23, Hertfordshire

Personal: Ed works as a marketing executive for the University of Hertfordshire. He earns £22,000 a year

Debts: Having recently graduated, Ed has a student loan of £15,000 plus an overdraft and credit card debts be paid off.

Savings: None

Pension: None

Monthly outgoings: Living expenses £900; holidays £500 a year.


Ed should prioritise the order in which he pays off his debts, starting with the most expensive, says Justin Modray. The student loan is a low priority, as the rate of interest is charged at the rate of inflation, making it interest-free in real terms.

Ed will find that 9 per cent of his earnings above £15,000 a year are automatically deducted to repay the loan and Modray wouldn't suggest making additional payments. If his current credit card does not benefit from an interest-free offer, Ed should move to a card that does. Many providers have 0 per cent introductory deals, so it would be worth Ed shopping around to find a provider willing to oblige. This leaves the overdraft as the priority, as the interest charge is likely to be high.

Ed's student loan is likely to be ignored for mortgage purposes, adds Anna Bowes, and, as the interest is very low, there is no hurry for Ed to pay this debt off more quickly, especially if he can earn more interest on his savings. Ed needs to get into the habit of sticking to an affordable budget.


Modray suggests setting up another bank account from which all direct debits and day-to-day expenses are drawn. Ed could then transfer a fixed amount each month to that account to live off, leaving the surplus to clear his overdraft more quickly.

Anthony Ball says that Ed should switch his mobile phone network and handset. A top deal is Video Talk and Text 1100 from Three, with a new LG U8380 handset for £8.50 a month after cashback. That would give Ed 600 minutes of any network calls each month and 400 texts.


For holiday or Christmas money, Bowes recommends that Ed take advantage of the excellent regular savings accounts that are available. Bradford & Bingley's Monthly Savers Account pays 10 per cent interest, fixed until 1 December.

Assuming he gets a good credit card deal then Ed should be in a position to start saving once he has cleared his overdraft, says Modray. Shorter term, he should focus on building up a cash buffer. A cash ISA would be ideal as interest is paid tax-free. The Halifax ISA Saver Direct offers a rate of 5 per cent a year.


As a permanent member of staff at the University of Hertfordshire, Ed should have been enrolled into the local government pension scheme, which is a valuable final salary scheme, says Bowes. He should speak to his personnel department.

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