Wealth Check: 'I'd like to get my home budget under control'

Sarah Clifford, 30, from Bristol, has concerns about |her household budget. She lives with her husband and 16-month-old daughter and wants a little more breathing space when it comes to everyday costs. “I just want to be able to have some spare money available that I can use for bills, clothes, holidays and even doing nice things,” Sarah says. “I’d really like some advice on how I can manage my household income more efficiently.”

Case notes

Salary: Sarah earns £16,500 a year.
Monthly outgoings: She contributes £1,000 towards food fuel, nursery fees, utilities etc.
Savings: Sarah pays into a Child Trust Fund for her daughter and around £20 into an ISA.
Mortgage: Fixed-rate repayment mortgage at 5.75 per cent interest.
Pension: Sarah contributes around 4 per cent of her income into a final salary pension scheme.
Debts: Sarah has credit card debts.

Three independent financial advisers offer Sarah their help this week: Marc Ruse of Fiducia Wealth Management, Ian Pealin of Evolve Financial Planning and Danny Cox of Hargreaves Lansdown....

Budgeting

The advisers agree that Sarah has done well to spot that she has a potential financial problem.

“The first rule to financial planning is write everything down,” says Marc Ruse. “It’s essential to be as detailed as possible. Don’t just write down a figure for household expenses; separate costs for gas and electricity, food, personal expenses, etc. Once you’ve itemised each area, it will be a lot easier to see where savings can be made.”

Danny Cox suggests categorising each type of payment into essential, important and the luxuries. “Savings can be made by stopping or reducing spending on luxuries and important items. Essential spending can’t be cut out, but the costs could be reduced,” he says. “Price comparison websites can check if there are costs savings to be made on utility bills for example.”

Sarah’s mortgage is fixed for five years and while the interest rate she is paying doesn’t look great at the moment, the penalties for an early exit probably won’t be worth it. Furthermore, when rates increase again, Sarah’s rate will become more reasonable.

Savings & Pension

Sarah’s credit card debts need attention before they become unmanageable. Sarah and her partner haven’t been able to stay debt free since Sarah went part-time to look after her daughter and her income dropped. She could consider using her premium bond savings to pay down her debt, as the interest she pays on the debt is far higher than the returns would be on the bonds.

Then Sarah should concentrate on the monthly payments on her debts, the advisers agree. Usually, savings should be put on hold until all debts are cleared, the advisers warn, but in Sarah’s case there are two exceptions.

“First, the couple should continue their monthly savings into the child trust fund for the daughter,” says Ruse. “Although it detracts from their everyday financial wellbeing, it’s very important to build up a separate nest egg for the next generation.”

The couple should also continue saving towards their retirement, particularly Sarah, who has a final salary pension scheme.

“Sarah shouldn’t underestimate the value of her final salary pension scheme,” says Ian Pealin. “It may, in fact, be her greatest financial asset.

Investments

“Sarah’s shareholding in a major bank has taken a massive hit recently,” notes Ruse. “It makes sense to crystallise those losses, cashing the shares in if possible, and using the proceeds to pay off some debt. It could be worth waiting for the values to recover, but she may be waiting a long time.

“In the meantime, Sarah shouldn’t be taking any other risk with her savings and investments. Her priority should be to eliminate her debt and then build up a cash cushion equivalent to around three months salary,” he adds. Then Sarah could consider a regular contribution to a general investment fund, which spreads and minimises risk.

Protection

Sarah has comprehensive protection policies in place, including critical illness and income protection, and an up to date will. “Life insurance isn’t very expensive,” adds Cox. “Sarah should check whether she has any death in service benefits attached to her employment. Life insurance and what happens on death is not a pleasant subject but is very important.”

For a free financial |check-up, write to Wealth Check, The Independent, 191 Marsh Wall, London E14 9RS; or email wealthcheck@|independent.co.uk

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

PROMOTED VIDEO
Life and Style
Britons buy more than 30 million handsets each year, keeping them for an average of 18 months
tech
Arts and Entertainment
Alloysious Massaquoi, 'G' Hastings and Kayus Bankole of Young Fathers are the surprise winners of this year's Mercury Music Prize
musicThe surprise winners of the Mercury Prize – and a very brief acceptance speech
Arts and Entertainment
TV Presenters Ant McPartlin and Dec Donnelly. Winners of the 'Entertainment Programme' award for 'Ant and Dec's Saturday Night Takeaway'
musicAnt and Dec confirmed as hosts of next year's Brit Awards
Arts and Entertainment
Orson Welles made Citizen Kane at 25, and battled with Hollywood film studios thereafter
film
News
video
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

    Finance Assistant - Part time - 9 month FTC

    £20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

    Marketing Manager

    £40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

    Market Risk Manager - Investment Banking - Mandarin Speaker

    £45,000 - £65,000: Saxton Leigh: Our client is a well-known APAC Corporate and...

    Compensation and Benefits Manager - Brentwood - Circa £60,000

    £60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

    Day In a Page

    Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

    A Syrian general speaks

    A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
    ‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

    ‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

    Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
    Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

    Fall of the Berlin Wall

    History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
    How to turn your mobile phone into easy money

    Turn your mobile phone into easy money

    There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes
    Independent writers remember their Saturday jobs:

    Independent writers remember their Saturday jobs

    "I have never regarded anything I have done in "the media" as a proper job"
    Lyricist Richard Thomas shares his 11-step recipe for creating a hit West End musical

    11-step recipe for creating a West End hit

    Richard Thomas, the lyricist behind the Jerry Springer and Anna Nicole Smith operas, explains how Bob Dylan, 'Breaking Bad' and even Noam Chomsky inspired his songbook for the new musical 'Made in Dagenham'
    Tonke Dragt's The Letter for the King has finally been translated into English ... 50 years on

    Buried treasure: The Letter for the King

    The coming-of-age tale about a boy and his mission to save a mythical kingdom has sold a million copies since it was written by an eccentric Dutchwoman in 1962. Yet until last year, no one had read it in English
    Can instilling a sense of entrepreneurship in pupils have a positive effect on their learning?

    The school that means business

    Richard Garner heads to Lancashire, where developing the 'dragons' of the future is also helping one community academy to achieve its educational goals
    10 best tablets

    The world in your pocket: 10 best tablets

    They’re thin, they’re light, you can use them for work on the move or keeping entertained
    Lutz Pfannenstiel: The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents

    Lutz Pfannenstiel interview

    The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents
    Pete Jenson: Popular Jürgen Klopp can reignite Borussia Dortmund’s season with visit to Bayern Munich

    Pete Jenson's a Different League

    Popular Klopp can reignite Dortmund’s season with visit to Bayern
    John Cantlie video proves that Isis expects victory in Kobani

    Cantlie video proves that Isis expects victory in Kobani

    The use of the British hostage demonstrates once again the militants' skill and originality in conducting a propaganda war, says Patrick Cockburn
    The killer instinct: The man who helps students spot potential murderers

    The killer instinct

    Phil Chalmers travels the US warning students how to spot possible future murderers, but can his contentious methods really stop the bloodshed?
    Clothing the gap: A new exhibition celebrates women who stood apart from the fashion herd

    Clothing the gap

    A new exhibition celebrates women who stood apart from the fashion herd
    Fall of the Berlin Wall: Goodbye to all that - the lost world beyond the Iron Curtain

    The Fall of the Berlin Wall

    Goodbye to all that - the lost world beyond the Iron Curtain