Three years ago, Anoushka Pletts, 31, left her job in marketing at a blue-chip firm to set up a yoga school.
"I wanted more autonomy, so decided to start my own business," she says. But while she has successfully pursued her dream career, financial security is proving elusive.
Anoushka, who lives in south-west London, earns around £30,000 and hopes to increase her salary as her business grows. As well as the school, she runs her own yoga retreats in Turkey, Egypt, Sri Lanka, Greece and Ibiza.
"But I am struggling at the moment as I still haven't made the transition from being paid a regular salary to managing my own cash flow. And I have to find money to pay my tax bill and I don't know where this will come from." Her only short-term savings are £6,500 in a cash individual savings account (ISA) with Nationwide, paying 5.3 per cent.
She bought her two-bed flat for £250,000 five years ago and it is now worth £400,000. But meeting her mortgage repayments is hard – a hefty £1,290 on her 25-year £295,000 interest-only mortgage with Abbey, at a fixed rate of 5.14 per cent until August. "A financial goal is to make sure I am able to keep my flat and not lose my business," she says.
Anoushka also has some £2,000 in student loans, but has managed to avoid taking out other more expensive forms of debt.
She has £7,000 in a stakeholder pension with Legal & General but is not contributing to this at the moment. She pays £17 a month for life cover that was originally taken out to cover the loan on a previous home she shared with a partner.
With hefty outgoings and a young business, Anoushka must make every penny count, say our panel of independent financial advisers (IFAs). This will mean cutting out any luxuries and making the most of tax allowances to ease the financial pressure.
As Nationwide's ISA pays a fairly competitive rate, Anoushka should keep her money here. But anything that can be saved from now on should go into an account offering better returns, such as National Savings & Investments' cash ISA, paying 6.05 per cent.
As she's self-employed, she should aim to keep around six months' salary in cash accounts in case of emergency, says Anna Sofat from IFA AJS Wealth Management. To meet her tax bill, she needs to start setting aside at least 25 to 30 per cent of her earnings.
Wiping out the student debt is not a priority as it is one of the cheapest forms of borrowing – despite the rate doubling to 4.8 per cent recently. "It is sensible for her to maintain minimal payments and steer any excess income to savings," says Mel Kenny of IFA Radcliffe & Newlands.
Anoushka should review her mortgage options a few months before her current deal expires in August, to avoid slipping on to the len- der's standard variable rate.
The advisers also say she should consider switching to a repayment mortgage as soon as possible – to repay the capital debt as well as the interest. One way of meeting bigger repayments is to use the "rent a room" scheme, says Frances Kemp at IFA Knowlden Titlow. This allows tax-free rent of up to £4,250 a year.
When she can, Anoushka must pay into a pension again. To retire on an income of at least two-thirds her annual earnings, says Ms Kemp, she will need to build a fund worth £364,000.
Income protection insurance is important for the self-employed if they are unable to work due to long-term illness. This is more relevant to Anoushka than life cover, as she has no dependants. A policy paying a tax-free income of £15,000 after six months until the age of 50 would cost about £26 a month, says Ms Sofat. "This is not much more than she is paying now for life cover, but gives better protection for her."