Wealth Check: 'I'd like to start a business and buy property'
Saturday 22 August 2009
Rachael Mc-Carthy would like to buy her own house and start her own business - but with the 24-year-old living at home with her parents in Bradford, the prospects look bleak. "I work full-time for two independent bars in Leeds as a back of house manager but would like to be in a position to start my own business in two to three years," she says.
"I'd also like to be in a position to buy a house by then and be financially secure within 10-15 years. Is this possible?"
Rachael says her parents' money worries have been passed on to her and she really wants to save and get financial security as soon as possible. She works in the hotel and leisure industry and hopes her business degree will help her fulfil her dream of working for herself. "I have also been assisting on a business start-up to widen my knowledge of starting a business and gaining the skills and resources I will need to do this for myself," she says.
But she worries about not being able to save enough and is also concerned about getting into debt. Can our experts help ease her worries and guide her towards achieving her ambitions?
Income: £1,170 a month after tax.
Monthly outgoings: £330 tax and NIC, including £22 student loan deductions. £420 car costs, including £150 loan repayment.
Other: £46 a month on the gym.
Rent/mortgage: Lives rent-free with parents.
Debt: Paying off a £7,500 car loan.
Advice this week is given by Dennis Hall of Yellowtail Financial Planning, Kevin Anderson of Budge & Company, and Mike Pendergast of Zen Financial Services...
The experts urge Rachael to get into a savings habit as a matter of urgency. They point out she has £704 left over after she has met her fixed monthly expenses but doesn't currently save any of the cash. "What is happening to this money?" asks Mike Pendergast. He suggests that Rachael keep a record of the bits and pieces that she spends and sets a budget for things like lunch, coffees and clothes. "It may be worth setting up a monthly standing order to a savings account to ensure you aren't frittering your surplus income away," he says.
Dennis Hall advises Rachael to be more proactive. "Rachael should set up a direct debit to save a fixed amount of money to be taken from her account as soon as she gets paid. Normally the best place to save would be in a cash ISA where she can earn the interest without deduction of tax, however right now Barclays has a regular savings account paying 4.25 per cent EAR for 12 months, which after basic rate tax comes down to 3.4 per cent."
Kevin Anderson says: "Staying at home offers the best opportunity to save and it is important to establish a savings culture as soon as possible, even if just a small amount. Cash ISAs offer an excellent savings vehicle. Money does not have to be tied up and access can be immediate if required with no loss of the tax-exempt status. Rachael should set a fixed amount each month and have this transferred to an instant access ISA, such as Britannia Building Society's regular saver instant access ISA paying 3.1 per cent."
"Rachael's desire to own her own property is commendable but is not at the moment realistic. She should stay at home and maximise her earnings potential for as long as possible," says Anderson. Hall agrees. "Rachael's goal of buying a house in two to three years time looks unworkable unless she can start to save enough money for a reasonable sized deposit and the additional fees that buying a property entails."
Rachael is keen to move out of her parents' home so Pendergast suggests she consider renting to begin with. "Renting a property can be seen as dead money as you receive no long-term benefits, but it can be useful in times where property prices are falling as it enables you to time your property purchase and buy at a more financially beneficial time."
Running her own business
Rachael needs to prove she can save and manage money if she wants to fulfil her ambition, says Anderson. "Her current savings culture will need to improve to show to any potential investors in her new venture that she has stuck her own money into her dream."
If Rachael is to succeed in her plan to start her own business, she may have to put off buying a home, says Hall. "Coupled with starting a business the home ownership goal looks even further away, as most people starting out in business find themselves working for very little income in the early years as their business takes off. Not all businesses are successful however, so the burden of a mortgage debt on top of everything else might be too much pressure."
"At some point Rachael is going to have to start thinking about longer-term savings, especially if she wants to retire at 55," says Hall. "Savings made into a pension now, however modest, will have much longer time to work and make the job of saving for retirement that bit easier. A stakeholder pension can be started from as little as £20 per month, with a cap on charges so that they represent good value even for small regular savings. Pension savings should be regularly reviewed and increased as and when circumstances allow, £20 per month for example will not buy much of an income in retirement."
Pendergast advises her to look at insurance. "As a single person living at home, income protection would be useful as it would ensure Rachael still receives an income if she is off sick."
- 1 Tunisia hotel attack: Locals form 'human shield' to protect hotel from gunman Seifeddine Rezgui
- 2 Russian officials ban yoga because it's too much like a religious cult
- 3 German ethics council calls for incest between siblings to be legalised by Government
- 4 Ginger Pride festival to take place next summer, organisers say 'time of bullying gingers is over'
- 5 Facebook rainbow profile pictures likely being tracked by social network
The moment a Queen's Guard soldier lost it and drew his gun at annoying tourist
Greece crisis: IMF was pushed around by Angela Merkel and Nicholas Sarkozy – and now it is being humiliated
Greece crisis: The wider lesson is that it’s time to abandon this failed experiment in currencies
'I wish the BBC would stop calling it Islamic State' – David Cameron unleashes frustration at broadcaster
Pentagon accuses Russia of 'playing with fire' over nuclear threats towards Nato
They are neither a 'state' nor 'Islamic': Why we shouldn't call them Isis, Isil or IS
iJobs Money & Business
£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...
£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....
£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...
£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...
Day In a Page
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.