Wealth Check: 'I'm transferring to New York and want to stay out of debt'

Eleanor Giles has been working in public relations for eight years; she has lived in London for six. She is about to move to New York after being offered a transfer.

Eleanor Giles has been working in public relations for eight years; she has lived in London for six. She is about to move to New York after being offered a transfer.

Ms Giles will earn a higher salary in the US and taxes are lower there. Her employer is also paying for health and dental insurance. Accommodation is her main expense: Ms Giles will be renting a studio apartment for almost £1,000 a month.

As part of her relocation package, her employer has put up a three-month deposit on the flat; she has six months to repay this. Ms Giles is budgeting for the cost of regular flights back to the UK, but living costs in New York will be lower than in London. She will have a 10-minute walk to work, and eating out and leisure activities are cheaper than they are in the UK.

Ms Giles wants to know how she can make this move work for her financially, save money for the future, and not gain any more debt.

ELEANOR GILES, 29, PUBLIC RELATIONS CONSULTANT

Salary: £34,000.

Debt: Student loan £140. First Direct credit card. Loan from employer for New York flat deposit $7,000.

Property: Renting.

Savings: Nationwide cash builder account £3,000.

Investments: None.

Pension: None. Aiming to join 401k plan (equivalent to personal pension) in the US.

Monthly outgoings: Rent $1,895 (£1,000). Bills not known. Flight to UK every month £250. Smoking: four packs a week (about £83 a month). Going out: unknown.

We put her case to Mike Pendergast of One Group, Jonathan Fry of Jonathan Fry & Co and Robert Lockie of Bloomsbury Financial Planning.

SAVINGS AND DEBT

Mr Fry says Ms Giles should prioritise paying off her student loan and credit card, then build up savings. With the pound high against the dollar, it might be worthwhile to transfer savings to the US now. This would almost cover the $7,000 deposit on the New York apartment.

Mr Lockie says Ms Giles should build up a contingency fund from her salary, rather than just relying on her UK savings. He adds that she also needs to set aside money to cover any outstanding liabilities in the UK. Americans make even more use of credit cards than Britons, but Ms Giles should make sure she pays off the bill each month so she does not have to pay interest.

Mr Fry says that if Ms Giles is leaving money in the UK, she should make sure the account pays a high rate of interest, such as in a mini-cash Isa. If Ms Giles becomes non-resident for UK tax purposes, however, she will no longer be able to save in an Isa, so should shop around for a high-paying savings account.

Mr Pendergast says that with a salary increase, Ms Giles should be able to divert a fair amount of money to her savings

PENSION, PROPERTY AND INVESTMENT

Ms Giles does not have a pension in the UK, but is considering starting a US pension, known as a "401k" plan.

Mr Lockie points out that individuals can put up to $14,000 a year into a 401k plan, and it offers a wide range of investment options. Assuming Ms Giles is happy to invest in stock markets, she should look at investing in internationally-diversified, low-cost funds that track stock markets. This is a better option than investing all her assets in the US market.

Mr Pendergast suggests that Ms Giles should put off starting a 401k plan for the first few months, when money will be tightest and she is repaying her apartment deposit loan. Ms Giles' overall approach to investing will be determined by whether her move to the US is for the short or long term. When it comes to longer-term assets, such as stock market investments, she should aim to hold her money in the currency in which it will be spent.

The same thinking applies to property, says Mr Fry. A priority for Ms Giles should be to build up funds for a property purchase. If her long-term plan is to stay in the US, it will make sense for her to build up her savings in dollars. The weak dollar is also an opportunity to build up savings in that currency. If her plan is to buy a home at some point in the UK, she will be better off building up her capital in sterling. She would be able to receive interest gross of tax, but would have to pay US tax.

SAVINGS

Mr Lockie says that Ms Giles should set a budget, especially for her first few months in the US. Living in a new environment can easily lead to spending running out of control.

He suggests that she sets aside 10 per cent of her net income for savings. She should also allow for more expensive flights home; the best deals will not always be available.

In the short term, Ms Giles might need to use her credit card for initial expenses related to the move. But the panel cautions that Ms Giles, who is a Manchester United supporter, might not be able to make it to enough matches to justify retaining her season ticket once she moves.

Advisers' views are given for guidance only.

If you would like a free financial check-up, which will appear in the Wealth Check column, write to The Independent, 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk.

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

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