Wealth Check: 'I'm up to my neck in debt and facing redundancy'
Saturday 29 April 2006
Ben Waits, 28, Edinburgh
Personal: Ben is a technical- support adviser for a software company. He is being made redundant in July. He lives in rented accommodation with his girlfriend.
Income: £17,665 a year full-time. £3,000 a year part-time.
Monthly outgoings: £853 on general living expenses, travel and repayment of loans.
Debt: £12,000, including £7,000 loan and overdraft, £3,500 on credit card with Morgan Stanley and £1,500 on credit card with the Bank of Scotland.
Ben Waits, 28, has been a technical-support adviser at a software company in Edinburgh for two years. He is expecting to be made redundant in Julybut the payout won't go far given that he is only entitled to one week's pay for each year worked - a severance package of around £580. He has debts to cover, two of which are on credit cards with aggressive interest rates. He has a part-time job that pays £3,000 a year.
Ben pays £225 a month in rent, but wants to buy a home. He is also keen to save and start a pension. But these may have to be postponed given his employment predicament. He has a £7,000 overdraft and owes £5,000 on credit cards (£3,500 with Morgan Stanley and £1,500 with the Bank of Scotland). His monthly rent, bills, food and debt repayments add up to £853, leaving him with £290. He has no savings.
We asked three independent financial advisers for help: Ashley Clark of needanadviser.com, Chris Holmes of One Advice Group Ltd and Susan Hannums of Chase de Vere.
Holmes advises Ben claim for redundancy benefit on his payment protection insurance and take advantage of any possible claims against his redundancy.
Clark says that there are few loan companies, if any, that will now lend him money to consolidate debt into one manageable monthly payment. The only companies that would lend to someone in Ben's situation are those charging extortionate interest rates.
Ben's main concern, says Clark, should be surviving the coming year by focusing on getting a job and agreeing terms with his existing creditors. His pension, mortgage and savings plans will have to be relegated to the bottom of his list of priorities for the time being.
Budgeting and prioritising spending is vital, says Hannums. A spending plan, properly mapped out, will allow him to keep on top of everything. Prioritising is key here. For example, does he really need to pay a £50 mobile phone bill each month or would he be better off using this to pay off his debts?
While it is imperative he gets this in order, Hannums says that he shouldn't deny himself his social calendar, too. Holidays, Christmas, New Year and birthdays all have to be included in the spending plan. Budgets are not just about cutting back, she says, but also about not missing out.
The payment protection insurance on his credit cards could save him for the next year, says Clark. This would allow him to reduce his monthly minimum payments and redirect the savings to other unprotected debts. Ben would not be able to do this if he transferred his debt to a cheaper card as this would mean losing the payment protection. Knowing this is taken care of for the next 12 months will give him breathing space; he should do this immediately.
Clark adds that Ben should be proactive, immediately notifying all loan providers about his redundancy and potential difficulty in meeting future payments. The more bankers know, the more they can help. He could ask them immediately for a temporary interest suspension which would prevent his debt growing and he might even want to ask if they can postpone payments whilst he is not working. This is far better than burying his head in the sand and defaulting on a loan or an overdraft arrangement.
Once Ben gets a job, Holmes suggests he converts any balance of debt to a credit card with a 0 per cent rate to allow him time to consider his new income position. Thereafter, a longer-term, low-interest loan could be negotiated. Ben must whittle his interest payments down to an absolute minimum, says Hannums. As far as his credit cards are concerned, he should consider free 0 per cent balance transfer deals without a balance transfer fee such as Lloyds Amex, which offers nine months at 0 per cent. To deal with his overdraft, he could look at moving to Alliance & Leicester, which offers 5 per cent credit interest on overdrafts for the first year.
Ben could then make a real dent in his debts, says Hannums. He has £290 left each month. Add to this his £100 credit card repayments, and he could clear both cards in just over a year.
Bargain Hunter: Now's your chance to watch the best movies free of charge at home
How much lower will mortgage rates go?
The FTSE 100 is inching closer to its record high but can it maintain these levels?
MPs call for Equitable Life policyholders to be paid £2.8bn owed by government
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
- 1 Liam Gallagher brands Kanye West 'utter s**t' during BRIT Awards performance
- 2 Isis burns thousands of books and rare manuscripts from Mosul's libraries
- 3 People who sleep more than eight hours are more likely to have a stroke, research shows
- 4 Kanye West climbs on table at Nando's to crowd chants of 'Yeezus' before Brit Awards 2015 performance of 'All Day'
- 5 New theory could prove how life began and disprove God
Oscars 2015: Birdman beats Boyhood as Eddie Redmayne and Patricia Arquette win big - as it happened
New theory could prove how life began and disprove God
Half of Ukip voters say they are prejudiced against people of other races
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
Aqsa Mahmood branded a 'disgrace' by her parents after claims she recruited three UK girls flying to Middle East
Russia's roadmap for annexing eastern Ukraine 'leaked from Vladimir Putin's office'
iJobs Money & Business
£17000 - £25000 per annum: Recruitment Genius: An opportunity to join this new...
£18000 - £21000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£36000 - £44000 per annum: Recruitment Genius: Encouraging more businesses to ...
Day In a Page
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley