Wealth Check: 'On £15,000 a year, is buying a home an impossible dream?'

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The Independent Online

The patient

Katherine Cook, 28, from Hulme in Manchester, wants to buy her first home. But with a salary of £15,000 working in sales and marketing for a recycling company, this seems a long way off.

"I feel some concern about my pay," she says. "I am 28 and have a degree so I should be earning more, although I have job satisfaction."

Katherine recently reduced her working week to four days so she could go on a college course in horticulture. "I had an allotment and love growing things, so wanted to explore my interest in it."

She finds it hard to make ends meet and on occasion she dips into the red; at present she is £200 overdrawn. Fortunately, her father has paid off her £10,000 student loan debt.

To ease her eco-conscience, she would like to switch her current account from HSBC bank to Smile or the Co-op.

She has also just started paying £20 a month into a mini cash individual savings account (ISA) with HSBC, paying 5 per cent.

Recently, Katherine moved into shared accommodation where she pays £152 a month for a room.

"Since I moved to Manchester, I have rented nine properties," she adds. "I am not satisfied with the insecure feeling of renting and I hope to have a family one day too, which will cost money."

Katherine is not contributing to a pension scheme and has no protection policies in place.

The cure

Like many twenty-somethings, Katherine's dreams of owning her own home seem a million miles away. With a meagre salary and no savings, she needs to be patient to achieve her goal, say our panel of independent financial advisers (IFAs).

Savings/investments

As a start, she should switch her ISA to a better-paying account. Anna Bowes of IFA Chase De Vere recommends one from Kent Reliance building society, currently paying 6.21 per cent.

She will have to draw up a budget and stick to it if she wants to build real savings, adds Ms Bowes. But it will help in this respect that she is paying just £152 a month in rent, or around 12 per cent of her net earnings.

Debt

Katherine has done well to keep debt to a minimum. As for her desire to switch to a more ethically minded current account, Anna Sofat of IFA AJS Wealth Management recommends banking with Smile as it offers a fee-free overdraft of £500 at an interest rate of just 11.9 per cent.

Ms Sofat adds that Katherine could take out a Halifax credit card, offering an interest-free period of 15 months on purchases. This could be used in emergencies when her current account has run dry.

Property

Without substantial financial help, Katherine will struggle to get on the property ladder, says Mike Pendergast of IFA Zen Financial Services.

She could take advantage of a shared-ownership scheme. This involves buying a stake in a house or flat of as little as 10 per cent, and paying a subsidised rent on the rest of the property, which is owned by a housing association. The main agent in Manchester for affordable homes is Plumlife ( www.plumlife.co.uk).

If and when that time comes, Katherine should consider taking out a fixed-rate mortgage, giving her the security of knowing what her monthly repayments will be.

Retirement

To make sure she doesn't suffer a poverty-stricken retirement, Katherine should get saving into a pension as soon as possible, stress the advisers.

They urge her to join her company pension scheme, as her employer will match any contributions she makes.

By not joining the occupational scheme, she is in effect missing out on a pay rise, says Ms Sofat. "She will also receive tax relief on her contributions."

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