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."
Independent Partners: See how much you could save by switching credit cards. Compare now
Geoffrey Macnab does not like the comedian's big screen debut
Look beyond the usual shows for the best festive telly
elephant appealThe first 23 lots in our charity auction have now gone. But there are 22 more still up for grabs
The battle for control of Stieg Larsson's £30m legacy
- 1 Bonuses for goals and top four finish as Luiz Suarez joins Premier League's top three earners
- 2 Sun will 'flip upside down' within weeks, says Nasa
- 3 #Teamnigella: It’s the only side to be on
- 4 Christmas comes early: Justin Bieber is 'retiring from music'
- 5 Burglar steals video tapes of child abuse, hands them into police
Exclusive: Young people ‘want UK to stay in Europe’: Four in 10 adults aged 18 to 24 are ‘firmly in favour’ of membership, poll shows
Tom Daley ‘is gay because his father died’ says UK evangelist
Iain Duncan Smith leaves Commons food banks debate early
Kiss and yell: Italian protester charged with sexual assault after kissing riot police officer
PM denies two child limit for benefits is part of Tory welfare policy
Anachronistic and iniquitous, grammar schools are a blot on the British education system
- < Previous
- Next >
iJobs Money & Business
£Negotiable: Citifocus: High calibre individual with institutional client serv...
£120000 - £150000 per annum: Cornwallis Elt : Programme Manager, Strategy Lead...
£55000 - £120000 per annum: Pro-Recruitment Group: The Financial Services Tran...
£600 - £700 per day: Harrington Starr: Client based in West London is looking ...
Day In a Page
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A Grade II-listed home with six bedrooms, secluded landscaped gardens and views across Hadley Green
A Grade II-listed mansion with two apartments and a cottage, near Gretna Green
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew
A two-bedroom maisonette set on the top two floors of a period building, close to Kentish Town Tube.
Take advantage of the extra space provided by former stables and outbuildings at this five-bedroom farmhouse.
This three-bedroom Victorian terrace is near to Queen’s Road Peckham station, Nunhead station.
A five-bedroom modern house with terrace, swimming pool, Zen treehouse and large carp pond
An unexpected gem with four bedrooms, remarkable vaulted reception and a galleried study area
A five-bedroom house in one of Lymington's most sought after tree lined avenues, moments from the marinas and sailing clubs
A grand early 19th century B&B close to the historic harbour, with four en suite bedrooms
A four-bedroom, 17th century home with walled gardens, a landscaped terrace, cellar and open fires
A six-bedroom house with five bathrooms and four reception rooms spread over 4,000sq ft of luxury living space
A stunning three double-bedroom apartment with two decked terraces in the exclusive gated community, Bromyard House
A 10-bedroom period, family home amid beautiful surroundings in the centre of the Wentworth Estate in Longcross village
A stylish three-bedroom apartment with two bathrooms and private landscaped garden, moments from Fitzroy Square
A Grade II-listed Elizabethan barn with landscaped gardens, exposed elm beams and four bedrooms, all with lovely views
A six-bedroom family home, dating back to 1280 with four reception rooms, barn, swimming pool and tennis courts in Harwell
A spacious two-bedroom flat, refurbished to a very high standard with private landscaped garden, close to Kentish Town station
An exceptional two-bedroom apartment with balcony and underground parking in the centre of Richmond
A one-bedroom, luxury, duplex apartment in the grand landmark building, Imperial Hall
Run a fabulous boutique shop, live above it in a one-bedroom flat and let a second one-bedroom flat that comes part and parcel
A Grade-II listed, thatched cottage in Hundleby village, with five bedrooms, a coach house and three and a half acres
A spacious two-bedroom flat in the heart of Hoxton Square with wooden floors and roof terrace
A five-bedroom family home with stunning pool and gym complex set among two acres of land
A six-bedroom period house with heated swimming pool and a separate two-bedroom annexe cottage in Townlake, £795,000
A spacious and contemporary two-bedroom flat arranged over three floors, with garden patio close to St George Square, £600,000
A one-bedroom flat in a beautiful Regency building opposite the beach in Kemp Town, £190,000
A two-bedroom flat with London skyline views close to Surrey Quays. £395,000.
A seven-storey tower with three bedrooms and a stunning roof terrace. Guide price: £850,000.
A 16-bedroom country pile with nine reception rooms, four self-contained flats and a 13th century Peel Tower. £850,000.
A classic six-bedroom Victorian Manse house 10 miles from Edinburgh. £495,000.