Wealth Check: Pregnant pause - a summer baby and the mother of all debts

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The Independent Online

The patients

As a young couple preparing for the birth of their first child in August, Robin and Phil Fleury-Beecham, both 29, are keen to get back in the black.

They are weighed down with £28,000 of debt, and the couple must deal with this before they can start saving. Alongside £7,000 in student loans, they have a hefty sum on credit cards. This includes £3,600 on a Citi Platinum card at an interest rate of 5.8 per cent, £400 on an HSBC Visa at 19.9 per cent and £2,000 on an HSBC MasterCard at 21 per cent. Also owing is £2,000 on a Marks & Spencer card at 18.9 per cent, and £245 on a Mint credit card at 12.9 per cent.

"We really want to reduce the cost of all our debts," says Robin. "And to know if there's any way we can pay them off quickly."

The couple also pay £200 a month for a £9,000 personal loan with HSBC at 6.7 per cent over five years, taken out to help with Robin's university fees. She is also overdrawn by £900 on her HSBC current account, charged at 18.8 per cent. Phil is overdrawn by £1,700 on his account with the same bank.

The couple have a combined salary of £46,000 but no savings. Phil is a performance analyst for a transportation company; Robin is an administrator.

They live in a one-bed flat in the Seven Dials area of Brighton, paying £720 a month in rent. "At the moment, a mortgage is not a possibility," says Robin.

Phil is about to join his company's final salary pension scheme, but Robin has yet to start planning for retirement. They have no protection policies aside from Phil's private medical cover through his employer.

The cure

Given their salary, Robin and Phil should be able to reduce their debts as long as they show a degree of discipline, according to our panel of independent financial advisers (IFAs).

Debt

After expenses, the couple should have about £500 a month available for paying off their debts, says Keith Churchouse from IFA Keith Churchouse Financial Planning. They should start by clearing the most expensive debts: the HSBC cards, the Marks & Spencer card and their overdrafts.

Ajmer Somal of IFA Positive Solutions recommends they switch the outstanding plastic debts to a card offering an introductory 0 per cent for balance transfers, enabling them to chip away at their borrowings.

As the rate on student loans is only 4.8 per cent and linked to inflation, they can continue to pay this off gradually.

Savings

Once they have tackled their debts, the couple should focus on building up a cash "emergency fund" of around three months' salary. An individual savings account (ISA) offers instant access and tax-free returns and is the best home for this money.

Their baby will be eligible for a £250 child trust fund voucher, adds Dennis Hall at IFA Yellowtail Financial Planning, and the couple may also be entitled to child tax credits. They can find out by going to www.hmrc.gov.uk.

Property

Before they can consider buying a house, Robin and Phil need to clear their borrowings and amass a deposit. All debts are taken into account when applying for a mortgage, and the greater the debts, the less they will be able to borrow.

Retirement/protection

Pensions are important but not a priority.

Once they have got their finances straight, Robin could start a stakeholder pension for her own retirement planning.

With a baby on the way, the couple will need to consider buying life insurance to protect their family. Cover for a healthy couple in their twenties should be relatively inexpensive.

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