Wealth Check: 'I'm just starting out and want to get into the habit of saving so I can buy a home' - Spend & Save - Money - The Independent

Wealth Check: 'I'm just starting out and want to get into the habit of saving so I can buy a home'

Shona is desperate to get a hold of her finances so she can build for the future.

Shona, 21, has two paid part-time jobs, both in the charitable sector. She lives at home with her mother in Crouch End, north London.

Having graduated from Leeds University last summer, and only recently started paid employment, she is struggling to keep on top of her finances.

"I have no sense of financial control or budgeting at all. I spend without any idea of whether I can afford to spend, and so end up in a constant state of debt and borrowing from family members," she admits.

As well as help with getting her money situation under control, Shona is also ambitious to move home and get a car, so would like advice on saving so that she can work towards her goals. "I would like to be able to move into my own place within the next year. I would also like to pay off my existing debts and work towards buying a car," she says.

Case notes

Shona

Income: Earns approximately £1,400 a month.
Monthly outgoings: £170 tax and National Insurance contributions, £750 living expenses including phone bill, food, going out and shopping.
Debt:Owes £1,445 in bank overdrafts and £13,000 to Student Loan Company.
Savings: ISAs worth £6,000.

Advice this week is given by Dennis Hall of Yellowtail Financial Planning, Danny Cox of Hargreaves Lansdown and Mark Osland of Formula.

All three experts agree that the top priority for Shona is to work out a budget. "Shona has identified what is probably the single most important factor that will determine financial success in her lifetime – budgeting. Regardless of the size of income, in my experience people that have grasped the concept of budgeting have the greatest financial stability," Dennis Hall says.

He recommends Shona calculates how much she spends each day by writing down all of her daily expenses in a notebook. "From this she can see where she can cut back and save more money." By writing down every time she spends money Shona can focus her mind and avoid over-spending, Hall points out.

"Once Shona has identified her spending, she should categorise it into three different types: essential (such as rent); important (such as clothing and mobile phone); and luxury (such as holidays, take-away coffees and eating out)," says Danny Cox. With all her spending listed, Shona can see where savings can be made, primarily by stopping or cutting down on luxuries and important items. "Armed with this information Shona can then set a strict budget which should create the space for repaying her debts and building better savings," says Cox.

Saving

Once Shona has worked out her budget, the experts recommend setting up a monthly direct debit from her current account to an ISA. This way each month a proportion of her income is being saved. Cox says: "If some of this surplus money is being set aside, perhaps with the aim of buying a car or, in the long-term, a deposit for a house, Shona is more likely to stick with it." Hall calculates that Shona has a surplus of around £480 a month. "If she has no savings structure in place this will likely be frittered away."

Debt

Shona should use some of her savings each month to pay off her overdraft, as the interest earned on the ISA is likely to be less than she is paying on her overdraft. "Her overdraft will be very expensive, yet she has money in her cash ISA," points out Mark Osland. "At the very least she should be working towards eliminating her overdraft by reducing it monthly or using some of her savings to pay it off."

Interest rates on student loans were reduced to 1.5 per cent from March 5 this year. Osland says that because Shona's gross earnings are higher than £15,000 a year, she will need to start paying off some of her student loan. "Based on her gross income, I would expect her to have to pay £162 per annum. She should speak to the Student Loans Company. Her desire to pay off her debts is admirable, but the interest rate on student loans is very low, so there is not such a pressing need to pay it off, unlike the overdraft."

Pension

All three advisers think Shona should ask her employers about a pension scheme. Cox says even though Shona is a long way off retirement, she should start thinking about the future. "If Shona is able to join a pension scheme run by either or both her employers she should consider doing so, especially if they will pay into the scheme."

Buying a car

Hall recommends that Shona thinks again about buying a car. "I can see the attraction of having a car, but is it really such a good idea? With all the costs of depreciation, maintenance, insurance, tax, etc, it is cheaper to take taxis everywhere, and someone else does the driving. For a younger driver, car ownership in London is a money pit."

For a free financial check-up, write to Wealth Check, The Independent, The Independent, 2 Derry Street, London, W8 5HF; or email wealthcheck@independent.co.uk

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

News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
News
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
Property
Home body: Badger stays safe indoors
property
PROMOTED VIDEO
News
The programme sees four specialists creating what they believe are three perfect couples, based on scientific matchmaking. The couples will not meet until they walk down the aisle together
tvUK wedding show jilted
Arts and Entertainment
US pop diva Jennifer Lopez sang “Happy Birthday” to Gurbanguly Berdimuhamedow, president of Turkmenistan
musicCorporate gigs become key source of musicians' income
Arts and Entertainment
You've been framed: Henri Matisse's colourful cut-outs at Tate Modern
artWhat makes a smash-hit art show
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skis as 007 for first time
Sport
Mikel Arteta pictured during Borussia Dortmund vs Arsenal
champions league
Voices
Yes supporters gather outside the Usher Hall, which is hosting a Night for Scotland in Edinburgh
voicesBen Judah: Is there a third option for England and Scotland that keeps everyone happy?
Arts and Entertainment
Pulp-fiction lover: Jarvis Cocker
booksJarvis Cocker on Richard Brautigan
Arts and Entertainment
Robin Thicke and Pharell Williams in the video of the song, which has been accused of justifying rape
music...and he had 'almost no part' in writing it
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

    Sales Executive

    £20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

    Payroll & Accounts Assistant

    £20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

    SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

    £280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Senior BA - Insurance **URGENT**

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week