Wealth Check: Start by paying off the debts that carry the highest interest

Peter Reynolds lives in a house in Chichester that he bought six months ago. He earns a decent salary, but the £179,500 purchase price left him stretched, and his mortgage is interest-only. That makes the monthly payments more affordable but for now the capital he owes is not being repaid.

Also, Peter doesn't have the money to pay a £10,000 service charge due in 18 months for new double-glazing he was required to install shortly after moving into his new home.

Saving for a pension is Peter's final financial priority - currently he has no retirement savings at all.

We asked three firms of financial advisers - Chase de Vere, Hargreaves Lansdown, and JSP Towry Law - for their help.

Case notes

Peter Reynolds, 29, Chichester, West Sussex

Personal: Peter works in the oil industry, earning between £30,000 and £40,000 a year

Savings: £500 in an online account; no investments or pension

Mortgage: £162,000 Northern Rock loan costing 5.99 per cent a year

Debt: £1,300 on NatWest credit card; £8,000 car loan costing £179 a month

MORTGAGE AND DEBT

"Getting the mortgage sorted is the priority," says Ben Yearsley of Hargreaves Lansdown. "His options are to change to a repayment mortgage or to start a savings plan such as an ISA to cover the mortgage capital."

If Peter puts £200 a month into a stocks-and-shares ISA, Yearsley says, he can still open a cash ISA, which could be a good savings vehicle for needs such as the double-glazing bill. With 23 years to go until the mortgage is due to be repaid, a stock market ISA could be a good bet.

There is a risk the ISA might not grow enough to repay the mortgage, though Peter will be able to monitor performance. But the total monthly payments on this model will be smaller than if Peter switches to a straightforward repayment mortgage. JSP Towry Law's Patrick Connolly adds: "The initial focus should be to pay off the debt where the highest interest is charged - the car loan or the credit card."

Peter is worried about the double-glazing bill, but there's no point saving money if he earns a lower rate of interest on the cash than he pays on his debt. At the very least, Connolly suggests, Peter must consider cheap credit-card deals such as 0 per cent offers and move his NatWest account.

SAVINGS

"Raising £10,000 won't be easy, and the only option may be to take out another loan, maybe added to the mortgage," says Susan Hannums of Chase de Vere. "Peter should also put as much as he can into a high-paying savings account."

Peter must be more organised about money. "Budgets are not simply about saving money; just monitoring it is important," Hannums says. "This shouldn't stop him going out or buying clothes, say, but if Peter puts by a set amount each month to spend on luxuries, he's less likely to overspend."

PENSION

Hannums' colleague Anna Bowes says a low-cost pension could be a good starting point: "A stakeholder pension could be right, if Peter chooses one with a good choice of funds, such as Legal & General or Standard Life." These plans will allow Peter to make contributions of as little as £20 a month, though Bowes suggests he tries to save more.

Yearsley adds: "As a broad rule, you should save half your age as a percentage of your salary each year." In other words, Peter should be saving 13.5 per cent of his salary, which equates, after tax relief, to about £240 a month.

This may not be realistic for Peter, but the earlier pension money can be saved, the more it will produce in old age.

OTHER ISSUES

Yearsley says Peter must address the issue of protection; he has no insurance that would pay out if he was unable to work due to ill health or an accident.

For a free financial check up, write to Wealth Check, 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

PROMOTED VIDEO
News
REX/Eye Candy
science
News
A photo of Charles Belk being detained by police on Friday 22 August
news
News
i100
Sport
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
Extras
indybest
Life and Style
Google Doodle celebrates the 200th birthday of Irish writer Sheridan Le Fanu
tech
Arts and Entertainment
Vinyl demand: a factory making the old-style discs
musicManufacturers are struggling to keep up with the resurgence in vinyl
News
i100
News
In Eternal Sunshine of the Spotless Mind Jim Carrey and Kate Winslett medically erase each other from their memories
scienceTechnique successfully used to ‘reverse’ bad memories in rodents could be used on trauma victims
Arts and Entertainment
Singer Pixie Lott will take part in Strictly Come Dancing 2014, the BBC has confirmed
tv
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    C# Developer (C#, ASP.NET Developer, SQL, MVC, WPF, Real-Time F

    £40000 - £48000 per annum + benefits+bonus+package: Harrington Starr: C# Devel...

    C# Swift Payment Developer (C#, ASP.NET, .NET, MVC, Authorize.N

    £45000 - £60000 per annum + benefits+bonus+package: Harrington Starr: C# Swift...

    DevOps Engineer - Linux, Shell, Bash, Solaris, UNIX, Salt-Stack

    Negotiable: Harrington Starr: A fast growing Financial Services organisation b...

    Trade Desk FIX Analyst - (FIX, SQL, Equities, Support)

    £50000 - £60000 per annum + excellent benefits: Harrington Starr: An award-win...

    Day In a Page

    Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

    Robert Fisk: No victory for Israel despite weeks of devastation

    Palestinians have won: they are still in Gaza, and Hamas is still there
    Mary Beard writes character reference for Twitter troll who called her a 'slut'

    Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

    The Cambridge University classicist even wrote the student a character reference
    America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

    America’s new apartheid

    Prosperous white districts are choosing to break away from black cities and go it alone
    Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

    What is the appeal of Twitch?

    Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
    Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

    How bosses are making us work harder

    As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
    Manufacturers are struggling to keep up with the resurgence in vinyl records

    Hard pressed: Resurgence in vinyl records

    As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
    Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

    A tale of two writers

    Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
    Could a later start to the school day be the most useful educational reform of all?

    Should pupils get a lie in?

    Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
    Prepare for Jewish jokes – as Jewish comedians get their own festival

    Prepare for Jewish jokes...

    ... as Jewish comedians get their own festival
    SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

    A dream come true for SJ Watson

    Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
    10 best cycling bags for commuters

    10 best cycling bags for commuters

    Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
    Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

    Paul Scholes column

    Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
    Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

    Kate Bush shows a voice untroubled by time

    A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
    Robot sheepdog technology could be used to save people from burning buildings

    The science of herding is cracked

    Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
    Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

    This tyrant doesn’t rule

    It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?