Wealth Check: 'My family has expanded greatly and money is tight'

Nick Brown recently remarried, and the couple have seven children between them, aged eight to 17. Since the wedding money has been tight, however, not least because they have extended their house to fit everyone.

Nick Brown recently remarried, and the couple have seven children between them, aged eight to 17. Since the wedding money has been tight, however, not least because they have extended their house to fit everyone.

Also, Mr Brown's job was outsourced, and he faced moving north or accepting a job with lower status. Relocation was not an option, so Mr Brown is due to start a new job soon, which will bring a significant increase in his current salary.

Mr Brown wants to know how he can save. Currently his outgoings exceed his income, and his wife is looking to take on another job. This is a burden the couple could do without, however, as Mr Brown concedes that already "running such a big household is a nightmare".

He would like to know how to boost his savings, especially in case of emergencies, and if his financial position in in good shape for the future.

NICK BROWN, 45, PROGRAMME MANAGER

Salary: Combined £44,600.

Debt: £15,000 NatWest loan. Credit cards £5,300.

Property: £97,000 Abbey mortgage, fixed at 7%.

Savings: £2,260 Norwich Union. £2,050 Scottish Friendly; both Isas.

Investments: 145 shares with Grupo Sandander. 2,272 shares with Xansa.

Pension: various; expected to give income of £30,000.

Monthly outgoings: Child support £677. Mortgage £731. Bills £290. Food £650. Loan payments £250. Car insurance £44.

We put his case to Justin Modray at BestInvest, Ben Yearsley at Hargreaves Lansdown and Patrick Connolly at John Scott.

Debt, Mortgage And Spending

Mr Modray doesn't think that Mr Brown is spending money on unnecessary luxuries. Instead, the cost of raising a large family, and Child Support, is the root of his high outgoings.

One option for the family would be to remortgage their home - they have a good amount of equity - and transfer their loan and credit-card debts to the new mortgage. Mortgage interest rates are significantly lower than other loans, and there are plenty of discounted and fixed rate mortgages on offer at five per cent or under.

He should check first for redemption penalties, not just on his existing mortgage but on his personal loan, too. Mr Connolly says that Mr Brown's mortgage deal with Abbey could be bettered. Even paying one per cent less interest will save the family almost £1,000 a year.

As an alternative, Mr Brown could switch to a credit card offering a zero per cent rate, though he should watch for charges after the free period.

Mr Yearsley suggests that Mr Brown should think about selling some or all of his investments and using the money to pay off debt, starting with the credit cards and then the loan, assuming there are no onerous repayment penalties on the latter. Mr Yearsley agrees that there is little scope to cut outgoings, but suggests that the Browns could look to switch gas and electricity suppliers.

Pensions

Mr Brown is far from unusual in having his retirement savings spread across a number of providers and schemes. He is, however, in a relatively good position for retirement. Mr Modray says that Mr Brown should check the terms of his new employer's pension. If it does not match his current scheme he may need to top it up, as his projections for retirement are based on his current pension plan.

Mr Yearsley says that a consolidation exercise might make it easier for Mr Brown to manage his pension planning. He should also check whether his former wife is entitled to any of his pension under their divorce settlement.

Investment And Savings

Investment is not an immediate priority for Mr Brown. Mr Yearsley suggests that Mr Brown's two Isa investments and his shares could be used to repay debt. It would almost halve what he owes, and the interest he is currently paying is very likely to exceed any investment returns.

Mr Connolly agrees that selling the shares and Isas is the best option for Mr Brown. Once he has paid off as much of his debt as is possible, he should then aim to build up cash savings. This will reduce the family's need to borrow to cover any emergencies. A mini-cash Isa offers tax-free savings along with competitive interest rates.

Mr Modray says that Mr Brown should use the proceeds of any cost-saving measures, along with any spare cash he has once he moves jobs, to build up savings. He should look for an Isa that offers instant access to his money.

If Mr Brown does feel he has the scope to invest in the stockmarket, Mr Modray recommends that he reviews the performance of his current funds. If he does not feel that the performance is up to scratch, he could make a switch to a global fund, such as Jupiter's Merlin Growth Isa.

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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