Wealth Check: 'I'm still living with mum, but too hard-up to move'

Graduate Matthew Cooksey wants a place of his own in London but finds it unaffordable when his wages mean he spends so much time in the red

The Patient

Matthew Cooksey from Chessington, Kingston-upon-Thames, has been living at home since graduating, but is now keen to build up funds so he can move into his own place.

The 24-year-old left Aberystwyth university last year with a 2:1 in international politics, and is currently working as an operations assistant in a small company of six people.

"I started as an intern last June, getting only expenses, but started to be paid properly in September, earning £8 per hour," he says.

Matthew tries hard to be disciplined with his finances, but struggles to make ends meet on his earnings.

"I have an interest-free overdraft of £1,600 and essentially live on this," he says. "My pay tends to put me back in the black for a brief time, but I then go very quickly back into the red."

Matthew also has a Virgin Amex credit card and a student loan, which he hasn't begun to pay back yet. "The credit card has a limit of £2,400, and I do all my spending on this for the Airmiles," he adds. "But I then make sure I pay it off in full every month."

Matthew has £1,400 in an individual savings account with West Bromwich building society at a rate of 3.07 per cent.

"I also have about £8,000 in stocks and shares with BP, RBS, Apple, Sainsbury's, and Tesco," he says. "I made these investments myself, and am up from when I bought them. I bought BP and RBS during the oil spill, Apple in October, and Sainsbury's and Tesco in mid-January."

At present, Matthew does not have a pension. "The company I work for doesn't offer one, and I've not yet set anything up myself," he says. "I also have no protection policies in place."

As Matthew lives with his mum, he is in the fortunate position of being able to live rent-free. "This helps a lot with making ends meet, but my financial goal is to move into a place of my own," he says.

"The problem is, on my earnings of around £14,000, this is simply unaffordable. The cost of London living is so high that this would only just pay for rent, bills and transport each month."

Matthew is looking to apply for a graduate job in a bid to boost his earnings. "While I'm happy in my job and find it really enjoyable and interesting, the wage is unsustainable," he says. "I don't seem to have much choice but to find a new job but am not having much luck at the moment."

The cure

Our panel of independent financial advisers agree that Matthew has done well to secure a job in the current economic climate, but urge him to focus now on securing permanent long-term employment so he can build up his savings and move out of home.

They commend him for working hard to maintain a good credit rating, but also urge him to get some protection in place, and not too ignore pension planning for too long.

Focus on budgeting

Matthew has made a wise move investing in a cash Isa and has a found a good rate of interest, according to Justin King from MFP Wealth Management.

"However, living in his overdraft can be a dangerous strategy, as if there are months when he doesn't budget properly, or experiences unexpected costs, he could end up incurring hefty penalties," he says. "Matthew needs to work hard at budgeting to keep his costs as low as possible until his income increases."

David Brunning from Brunning Newman Houghton Limited urges Matthew to strengthen his cash reserves. "We recommend having savings equivalent to three months' outgoings," he says.

Find ways to boost income

Mr Brunning adds that while Matthew has set himself the realistic goal of moving out of his mum's house, achieving this depends largely on his success in finding a better-paying job.

"Matthew's position is a sign of the times, as many young people are entering a labour market offering limited opportunity and suppressed wages," he says. "But he does have the right mindset when it comes to understanding that the best way to seek employment is from employment."

Mr King suggests Matthew should also consider other ways of getting additional income. "This will either come by promotion or entrepreneurship," Mr King says.

"This could be extra part-time work or freelance opportunities, or even setting up a small part-time business to run alongside his full-time job."

Research rental costs

Mr Brunning urges Matthew to do the maths to ensure that renting his own flat is sustainable. "He needs to set a target income based on the expected costs of running a home," he says. "It may then be worth seeking professional careers advice to explore the available opportunities."

Getting onto the property ladder

If Matthew is determined to buy a property, rather than rent, he will needs to amass an adequate deposit, and boost his income, according to David Penny from Invest Southwest.

"One option would be to consider one of the shared-ownership schemes currently available," he says. "For example, the Government's new insurance scheme enables buyers to purchase new-build properties with a deposit of just 5 per cent."

Another option, says Mr Brunning, is to think about getting together with friends to buy a house. "The low mortgage rates on offer compare favourably against rents in many areas," he says.

Think carefully about equities

Mr Penny says he is concerned about Matthew's £8,000 direct investment into high-risk individual equities.

"I would want to be sure that Matthew fully understands how high risk such a strategy is, and that he would be comfortable with the significant losses should they occur, which they could well do," he says.

Mr King suggests a low-cost investment tracker held in an Isa could offer more diversification and lower risk.

"I applaud his strategy of buying depressed stocks, but market timing – and knowing when to sell – proves difficult for even seasoned professional fund managers," he says.

Be a responsible borrower

While Matthew is in work he should carry on demonstrating he is a responsible borrower, according to Mr Penny. "Matthew is already doing well at this with this overdraft and credit card, and this will be good for his credit rating and ultimately his ability to get a mortgage," he says. He adds Matthew is right to leave his student loan unpaid for the time being. "This should have no adverse effect on his ability to secure a mortgage, and is on an extremely low rate of interest," he says.

Don't ignore pension planning

Given that in the short term, all Matthew's resources will be going towards renting or buying his own home, he can afford not to worry too much about pension saving for the time being, according to Mr Penny.

"His employer is very likely to offer him a Nest-style work-related pension in the next two or three years, and that will be a good start," he says. "But once he has found a new home and got proper protection insurance in place, he should not delay pension planning any further."

Mr Brunning agrees that while Matthew may view a pension as low on his list of financial priorities, pensions are a tax-efficient way of saving.

Take out protection

Mr Penny urges Matthew to think carefully about protection. "He does not need life insurance as he has no dependants, but would be in trouble if he were unable to work for any length of time due to sickness or disability," he says.

"He should consider income protection, as this can be as low as £15 or £20 a month and can provide a replacement income until retirement, recovery or death; critical illness cover and unemployment cover could also be a consideration."

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

Arts and Entertainment
The Doctor and Clara have their first real heart to heart since he regenerated in 'Deep Breath'
TV
Life and Style
Apple showed no sign of losing its talent for product launches with the new, slightly larger iPhone 6 making headlines
techSecurity breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Arts and Entertainment
Jamie Oliver
filmTV chef Jamie Oliver turned down role in The Hobbit
News
The official police photograph of Dustin Diamond taken after he was arrested in Wisconsin
peopleDownfall of the TV star charged with bar stabbing
PROMOTED VIDEO
Arts and Entertainment
Jeremy Clarkson, left, and Richard Hammond upset the locals in South America
tvReview: Top Gear team flee Patagonia as Christmas special reaches its climax in the style of Butch and Sundance
News
people
Sport
Ashley Barnes of Burnley scores their second goal
footballMan City vs Burnley match report
Arts and Entertainment
Peter Mayhew as Chewbacca alongside Harrison Ford's Han Solo in 'Star Wars'
film
News
i100
Arts and Entertainment
Man of action: Christian Bale stars in Exodus: Gods and Kings
film
Arts and Entertainment
Tracy Emin's 1998 piece 'My Bed' on display at Christie's
artOne expert claims she did not
News
Ernesto Che Guevara and Fidel Castro, right, met at Havana Golf Club in 1962 to mock the game
newsFidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
News
Hackers revealed Oscar-winning actress Lawrence was paid less than her male co-stars in American Hustle
people
Arts and Entertainment
Clueless? Locked-door mysteries are the ultimate manifestation of the cerebral detective story
booksAs a new collection of the genre’s best is published, its editor explains the rules of engagement
Sport
Robin van Persie is blocked by Hugo Lloris
footballTottenham vs Manchester United match report
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

    Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

    Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

    Selby Jennings: Quantitative Research | Equity | New York

    Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

    Selby Jennings: SVP Model Validation

    Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    Day In a Page

    A timely reminder of the bloody anniversary we all forgot

    A timely reminder of the bloody anniversary we all forgot

    Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
    Homeless Veterans appeal: Former soldiers pay their respects to a friend who also served

    Homeless Veterans appeal

    Former soldiers pay their respects to a friend who also served
    Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

    Scarred by the bell

    The downfall of the TV star charged with bar stabbing
    Why 2014 was a year of technological let-downs

    Why 2014 was a year of technological let-downs

    Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
    Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

    Will revolutionary Cuba take 'bourgeois' golf to its heart?

    Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
    The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

    The Locked Room Mysteries

    As a new collection of the genre’s best is published, its editor explains the rules of engagement
    Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

    How I made myself Keane

    Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
    Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

    Parting view of Ofcom chief... we hate jokes on the disabled

    Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
    A look back at fashion in 2014: Wear in review

    Wear in review

    A look back at fashion in 2014
    Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

    Ian Herbert: My 10 hopes for sport in 2015

    Might just one of them happen?
    War with Isis: The West needs more than a White Knight

    The West needs more than a White Knight

    Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
    Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

    'The day I was shot by the Taliban'

    Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
    Revealed: the best and worst airlines for delays

    Revealed: the best and worst airlines for delays

    Many flyers are failing to claim compensation to which they are entitled, a new survey has found
    The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

    The stories that defined 2014

    From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
    Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

    Disaster looming? Now you know where to head...

    Which British city has become the first to be awarded special 'resilience' status by the UN?