Michelle Adabra, 23, publishing assistant, Luton
Salary: £16,000 a year.
Debts: a student loan and a small graduate loan from a bank.
Savings: £100 in a savings account and an individual savings account.
Pension: Michelle is not currently making any pension contributions.
Monthly outgoings: £350 on travel costs, plus general living expenses.
Michelle Adabra works as a production assistant at a London-based publisher. She is worried about her lack of disposable cash, particularly because a large chunk of her £16,000 annual income goes to cover the cost of travel (£350 a month) from her Luton home to work. Michelle also has parents who rely on her for financial support. Michelle's goals include saving for a deposit on a house and a retirement plan, but she is being held back by debts.
We asked three independent financial advisers for their suggestions: Marc Ruse, of Swallow Financial Planning; Kim Steven Barrett, of KS Barrett & Associates; and Paul Duckworth, of Paul Duckworth IFAs.
Michelle should pay off her student and graduate loans as a matter of priority, Paul Duckworth advises.
While student loans can look like cheap money, because the rate of interest payable is pegged to inflation, it is far easier to make long-term financial plans without borrowing hanging over you. If Michelle has any surplus income, this should be used to repay these debts as a priority.
Michelle needs to ensure that her finances are solid enough to face up to the three major crises: death, serious illness and redundancy, Duckworth says.
Once her loans have been paid off, all three advisers recommend that she should start building an emergency fund. This would be the first call in the event of a crisis or an unexpected bill.
They all suggest she should keep three to six months' worth of money in an account such as a cash individual savings account.
ISAs offer instant access to your cash and interest is tax free. Marc Ruse says the best way to start is by setting up a monthly standing order or direct debit to her cash ISA. Even a few pounds each month will be a start (the maximum she can invest in a cash ISA is £250 a month).
Save & Spend's best-buy tables (see page 9) will help her identify the most generous accounts.
Michelle needs to concentrate on either earning a lot more money or cutting back on travel expenses, Ruse says. But better budgeting will be a start. She should write down exactly where every penny of her money goes each month and see if there is any way she can cut back on spending to fund regular savings.
With a clear idea of her cash-flow situation, when Michelle's income improves she will have a good idea of how much she can afford to put aside.
Michelle describes herself as a cautious investor but with 40 years to go before retirement, Kim Barrett strongly advises her to consider a higher risk strategy to ensure good potential growth to her pension asset.
As a general rule, the more risk you are prepared to take, the greater the potential rewards. Ruse warns that if Michelle sticks to following a very cautious investment strategy, she may not reach her objectives.
Ruse advises Michelle not to invest in a pension just yet. Her finances are not in good enough shape for her to save for both old age and shorter-term goals such as an emergency fund or a deposit on a house.
That said, Ruse suggests she should check what her employer offers in the way of occupational pension provision. If a pension contribution is available from her employer, then she should grab it if she can possibly afford to do so.
Duckworth says that even if her employer does not have a formal pension scheme, assuming the company employs at least five people, it should have a stakeholder plan into which Michelle would be able to make contributions.
Some employers will pay a matching contribution up to a certain percentage of pay if you join this scheme.
Barrett says that if Michelle's parents are financially dependent upon her income then some basic life assurance policy may well be important - otherwise they could be in trouble if she died.
For someone of Michelle's age, assuming that she is in good health, a premium of £10 to £20 a month will buy her a reasonable amount of life cover.