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; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
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

    Ashdown Group: Editor-in-chief - Financial Services - City, London

    £60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Guru Careers: Management Accountant

    £27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

    Guru Careers: Project Manager / Business Analyst

    £40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

    Day In a Page

    General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

    Miliband's unlikely journey from hapless geek to heart-throb

    He was meant to be Labour's biggest handicap - but has become almost an asset
    General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

    On the margins

    From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
    Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

    'This is the battle of young Egypt for the future of our country'

    Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
    Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

    Why patients must rely less on doctors

    Improving our own health is the 'blockbuster drug of the century'
    Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

    Flesh in Venice

    Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
    11 best anti-ageing day creams

    11 best anti-ageing day creams

    Slow down the ageing process with one of these high-performance, hardworking anti-agers
    Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

    Juventus vs Real Madrid

    Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
    Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

    Ashes series looks a lost cause for England...

    Whoever takes over as ECB director of cricket, says Stephen Brenkley
    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power