Jeremy Wicks, 43, from High Wycombe, Buckinghamshire, is working hard to make up for his misspent youth. The site manager for an ice cream producer puts all his available cash towards repaying the £17,000 in credit card bills that he stacked up as a younger man.
He has been living within his means for a number of years, but Jeremy is concerned about his financial future and wants to know how to build an adequate retirement fund.
"I no longer have any credit cards – preferring to use only what cash I have on hand these days," said Jeremy. "But my savings are nonexistent thanks to my debt. I finally finish paying it off in March 2010, and can then start saving, so I really need to know what my best options are for a future of financial security."
Jeremy has no savings or investments and although he is contributing to his company pension scheme, he doesn't know whether it will be enough to provide him with the £15,000 a year he hopes for in retirement.
"My financial situation is simple. I have the sort of job that lots of people would love – making ice cream and helping support the motor racing team our company sponsors," Jeremy said. "I've been there 17 years so my income is stable."
"That means I should be able to build up my savings over time as soon as my debt is cleared. I just don't know where to put the money!"
Our panel of independent financial advisers are impressed that Jeremy has worked hard to claw himself out of a financial black hole.
"Jeremy deserves much praise for the way he has turned his finances around, having gone from financial incapability and spiralling credit card debt to a high level of financial capability where he is well in control of his money and expenditure," said Robin Keyte of independent financial adviser (IFA) Towers of Taunton.
"It is important that once the loan is repaid, Jeremy maintains that savings discipline and continues to set aside sizeable monthly amounts," Mr Keyte said.
Creating a detailed monthly budget, and putting his spare cash into his savings and pension pot should help him build up a strong position for the future. Unlike many British workers, Jeremy may not need to worry about having enough to live on in retirement.
Jeremy currently puts £358 a month into paying off his loan. Once that has been cleared, he should set up regular monthly saving via direct debit to create an emergency fund.
"A contingency fund worth around three times his net monthly income will be sufficient to provide breathing space should an unexpected expense suddenly occur," suggests Philip Pearson of P&P Invest. "A cash Individual Savings Account (ISA) would be an ideal choice because it provides a low-risk home for savings with the added benefit of tax-free returns. Up to £3,600 could be allocated in the current financial year rising to £5,200 in the new financial year for 2010 to 2011 which begins just as Jeremy's debt is cleared."
Although rates change frequently, the most competitive are currently from Standard Life Bank at 2.65 per cent, or the Manchester Building Society at 3.01 per cent on its 35-day notice ISA account.
Once he has topped up his cash ISA, Jeremy could look at an equity investment ISA for medium-term savings.
"This should provide the opportunity of a higher return than cash over the medium to longer term, when selecting fixed interest and equity funds such as unit trusts, OEICs [open ended investment companies] or investment trusts," said Mr Pearson.
Savers can invest up to £7,200 in an ISA this tax year, and £10,200 next year. Savers can either put up to the full allowance into a "stocks and shares" ISA, or put up to half into cash and the remaining half into equities.
"I recommend the Skandia ISA which provides access to over 900 individual funds with potentially no initial set-up charges," Mr Pearson said.
Jeremy hopes for a retirement income of £15,000 a year at today's values from the age of 65. With inflation, by the time he retires, he will need around £16,377. But he shouldn't think about his pension savings in isolation, the advisers warn. He owns a small flat in Luton which is worth £50,000 with no mortgage, which he hopes to sell next year. Meanwhile, he contributes 5 per cent of his salary to his company pension scheme.
"Many people hope to use the proceeds from property sales to fund their retirement, and Jeremy should consider what proportion, if any, of his property assets will be ring-fenced for funding retirement," said Stephen Smith, of Davison Smith Financial Management. "An essential starting point when considering saving for retirement is to ascertain what your current pensions are likely to produce in the future."
Jeremy's should have full entitlement to the basic state pension, currently worth £4,953 a year, and around £4,537 from the state second pension, both of which will rise in line with inflation during his retirement. Meanwhile, Jeremy's previous job with the BBC should entitle him to payouts from the corporation's final salary pension scheme worth around £2,575 a year.
"That leaves an annual income shortfall of £4,312," said Mr Keyte. "Jeremy has saved enough with his employer's money purchase pension scheme to receive around £1,829 in today's terms, but if he carries on until 65 it will be worth another £1,791 in today's money. He needs another £692 per annum in today's terms, which means saving a further £26,859 by the age of 65.
"Overall, I estimate Jeremy will need to add another £55.36 a month to his pension pot, and with over £350 a month freed up in just a few months, this is more than possible."
"Jeremy needs to review with his employer the sick pay that will be provided in the event of long-term illness," said Mr Pearson. If this is insufficient then he could look at additional protection through permanent health insurance, which will provide income should something happen. The premium could be particularly cost-effective if Jeremy could afford to take a policy which deferred payment for up to six months."
For protection against unemployment and illness or disability, Jeremy should consider an income protection policy which would pay out a monthly income until he reaches 65 if necessary.
Do you need a financial makeover?
Write to Julian Knight at the Independent on Sunday, 2 Derry Street, London W8 5HF firstname.lastname@example.org