Wealth Check: 'I'm up to my neck in debt and facing redundancy'


CASE NOTES


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.

REDUNDANCY

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.

EXPENSES

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.

DEBT

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.

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

News
Alan Bennett has criticised the “repellent” reality shows which dominate our screens
tvBut he does like Stewart Lee
Life and Style
The Google Doodle celebrating the start of the first day of autumn, 2014.
tech
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Sport
David Moyes and Louis van Gaal
football
PROMOTED VIDEO
News
i100
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
News
Former Governor of Alaska Sarah Palin, left, with her daughter, Bristol
newsShe's 'proud' of eldest daughter, who 'punched host in the face'
Sport
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
rugby
Arts and Entertainment
Salmond told a Scottish television chat show in 2001that he would also sit in front of a mirror and say things like,
tvCelebrity Trekkies from Alex Salmond to Barack Obama
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Life and Style
food + drink
News
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
News
A cabin crew member photographed the devastation after one flight
news
Voices
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
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

    Trainee / Experienced Recruitment Consultants

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

    Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Quantitative Risk Manager

    Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

    Day In a Page

    Secret politics of the weekly shop

    The politics of the weekly shop

    New app reveals political leanings of food companies
    Beam me up, Scottie!

    Beam me up, Scottie!

    Celebrity Trekkies from Alex Salmond to Barack Obama
    Beware Wet Paint: The ICA's latest ambitious exhibition

    Beware Wet Paint

    The ICA's latest ambitious exhibition
    Pink Floyd have produced some of rock's greatest ever album covers

    Pink Floyd have produced some of rock's greatest ever album covers

    Can 'The Endless River' carry on the tradition?
    Sanctuary for the suicidal

    Sanctuary for the suicidal

    One mother's story of how London charity Maytree helped her son with his depression
    A roller-coaster tale from the 'voice of a generation'

    Not That Kind of Girl:

    A roller-coaster tale from 'voice of a generation' Lena Dunham
    London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

    London is not bedlam or a cradle of vice

    In fact it, as much as anywhere, deserves independence
    Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

    Vivienne Westwood 'didn’t want' relationship with McLaren

    Designer 'felt pressured' into going out with Sex Pistols manager
    Jourdan Dunn: Model mother

    Model mother

    Jordan Dunn became one of the best-paid models in the world
    Apple still coolest brand – despite U2 PR disaster

    Apple still the coolest brand

    Despite PR disaster of free U2 album
    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits