Wealth Check: In debt but in a hurry to get on the ladder
Each week we give 'Independent on Sunday' readers a financial makeover
Sunday 19 December 2004
Nick Gentry, 24, from north London.
Job: graphic designer.
Savings: £1,100 in a monthly saver account and £400 in a mini cash ISA.
Investments: £200 in BT shares.
Goal: to build up substantial savings and clamber on to the property ladder with a cheap mortgage.
Nick Gentry has been weighed down by a hefty student loan since graduating from university three years ago - and still has £12,000 to pay off.
His debt is stifling two ambitions: saving enough for a sizeable deposit on a first home and being able to travel each year.
He has recently moved into a rented three-bedroom house with two friends in Highbury, north London.
Nick pays £500 rent each month - not including bills - and wants to stop doing this as soon as possible. "Over a long period, I don't think it makes financial sense to rent," he says.
He is looking to buy a property on his own for no more than £160,000. And, in the longer term, he has his eyes on investing in an overseas property, perhaps a flat in Paris.
Despite his debts, Nick is determined to make headway with some savings. After depositing an initial £500 into Abbey's fixed-rate monthly saver account in September, he now pays in £200 a month.
"I've saved £1,100 so far and the account lasts for a year with a 7 per cent interest rate," he says. "By the end of next year I'll have at least £3,000 set aside for a deposit on a house."
Nick has also put £400 into a mini cash individual savings account (ISA) with HSBC. This pays 4.35 per cent.
Nick is determined to avoid personal loans until his student debt is fully repaid. He has an HSBC credit card to fund his holidays but pays the balance off in full every month.
Currently without a pension, he is keen to set one up in the next five years. His employer provides him with basic life insurance and health cover.
Loan alone: focus on clearing the £12,000
Nick must wipe out his debts before even thinking about funding a pension and buying a house, says Kevin Tooze of independent financial adviser (IFA) Equal Partners. "He has some sensible goals but certain fundamentals - the student loan - should take precedence."
Patrick Connolly from IFA John Scott & Partners says Nick needs to be realistic about what he wants to achieve. "For a deposit on a home, he is taking the right approach by building up cash deposits." However, he adds, short-term sacrifices will have to be made in areas such as his travel plans.
Mr Tooze warns Nick to beware of the interest accruing on his student loan. This currently stands at 2.6 per cent.
Nick should consider using some of the money set aside for savings to make [over] payments to whittle away at this instead, says Meera Patel at IFA Hargreaves Lansdown.
"He stands a better chance of getting a mortgage if he has very little debt," she adds.
Mr Connolly says Nick has taken a sensible approach by opting for a competitive savings account as well as using his mini cash ISA allowance. But he should monitor the rate on the Abbey account in case it drops at the end of the year, he warns.
Given that mini cash ISAs offer tax-free savings, Nick ought to be considering putting more money into them. Although HSBC pays a respectable 4.35 per cent, Mr Tooze points out that Abbey's no-notice postal cash ISA currently pays 5.35 per cent.
"This would be a good place for Nick to continue to build his deposit."
Renting may well be the equivalent of throwing money into the wind, but it is a good option for the time being, says Ms Patel.
She urges Nick to wait and see if prices in the overheated property market cool down over the next two or three years before buying.
Mr Tooze is concerned that Nick is putting undue pressure on himself. "He should take a step back to plan his goals and work towards a greater salary and debt-free position before considering a property purchase," he says.
Nick's thoughts of holding back on longer-term saving are understandable, according to Mr Connolly.
"But he will need to be careful he does not keep delaying this and then find himself with too much catching up to do," he adds.
Nick should consider taking out a personal pension if his employer does not offer one, says Ms Patel.
"He doesn't need to save a lot of money, but what he can save in the early days will be worthwhile later on in life," she adds.
"A stakeholder pension [with low charges] from an insurance company such as Standard Life could be one option. Alternatively, he may wish to invest in a self-invested personal pension (Sipp), which he can do at low cost."
Putting money directly into individual shares is a high-risk strategy, warns Ms Patel.
Instead, Nick could consider cashing in the BT shares to help make a further dent in his student loan.
If you would like a financial makeover, write to Sam Dunn at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS, or email email@example.com
Bargain Hunter: Now's your chance to watch the best movies free of charge at home
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
You'll need £220,000 for a minimum wage in your retirement
Fuel poverty could claim 100,000 lives over next 15 years, warns energy charity
- 1 Isis burns thousands of books and rare manuscripts from Mosul's libraries
- 2 Scarlett Johansson new band 'already hit with legal complaint' from another The Singles
- 3 Husband and wife die holding hands within hours of each other after 67 years of marriage
- 4 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
- 5 'Jihadi John': CAGE representative storms off Sky News after accusing Kay Burley of Islamaphobia
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
This is what it's like to be dead, according to a guy who died for a bit
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