Wealth Check: The problems are multiplying for a single parent
Sunday 09 July 2006
The problem: The flat, the debts and the limit on earnings
Trying to make ends meet as a single parent is a struggle for Lucy Davies. Although her work as a freelance public affairs consultant gives the 36-year-old from Tulse Hill, south London, the flexibility to look after her five-year-old daughter, she finds it hard to juggle the dual role of mother and breadwinner.
"I work every hour I can but still have to take time off to collect my daughter from school," she says. "I try to live on as little as possible, but it's not easy."
Earning around £24,000 a year, Lucy has been unable to put any money by in savings or investments. She also has debts to contend with, including £7,000 on a credit card from Egg and around £200 on a longstanding student loan - though she will have paid this off by the end of August.
Lucy bought a three-bedroom maisonette for £212,000 in December 2004 and has since spent time and money revamping its interior - pushing its value up to £280,000.
However, she recently found out from the freeholder that the property is due for a "full external renovation" [to upgrade the outside of the building]. Faced with a substantial service-charge bill of £10,000, she has had to remortgage.
"My initial mortgage was for £160,000 but I've now borrowed an extra £40,000 to cover the service charge - and to allow me to consolidate the personal loan [taken out to pay for her own renovations] and other debts."
As a result, Lucy now has a £200,000 Standard Life mortgage. This is an interest-only deal at 4.9 per cent, which sets her back £830 a month.
She is concerned about the size of these repayments and worries that she may have to sell the maisonette. "It would break my heart after having put so much work into it."
When her daughter is a little older, Lucy wants to be in a position to afford out-of-school childcare so that she can work longer hours and earn more. "It is my goal to achieve a secure home for the two of us."
To this end, Lucy pays £57 a month for a mortgage-protection policy - in case she can't meet her repayments due to illness or unemployment - and £37 a month for private medical cover.
She is also concerned that she has not yet started a pension.
The cure: You may have to move. 'This is no way to live'
Lucy needs to cut back her expenditure to the essentials, says Caroline Anstee at independent financial adviser (IFA) Elements.
It is also worth having a chat with a debt counsellor at a body such as Citizens Advice, she adds.
Mike Pendergast from IFA Zen Financial Services says Lucy should definitely consider selling up and downsizing.
He also asks if Lucy has claimed all the financial help to which she is entitled. "As a single parent, she should receive a reasonable amount of support for childcare, and extra tax credits. She should contact the benefits agency."
Debts and savings
Philippa Gee from IFA Torquil Clark says Lucy is doing a "fantastic job" in trying to find a balance between earning money and caring for her daughter. "But if she really wants to wipe out her debt and start saving, she needs to be very strict."
So even though Lucy doesn't spend much now, she should take a tough approach to anything that might be superfluous.
"She could establish a weekly amount that will cover all of her outgoings and then strive to keep to this limit - perhaps by withdrawing this sum at the beginning of the week."
Lucy has been making regular repayments on her student loan, and once this is cleared at the end of next month, she should divert the same sums into whittling down her credit card balance, adds Mr Pendergast.
These are the solutions Lucy could apply now. In the future, says Ms Gee, she could improve her income by working longer hours. Alternatively, she may be able to use her experience and knowledge as negotiating tools to secure higher contractual employment rates.
Another approach to boosting future earnings, Ms Gee continues, is to study for further relevant qualifications.
Lucy has in effect borrowed more than eight times her salary on the mortgage, says Mr Pendergast. "This is clearly well in excess of what she can afford: her monthly repayments are around 55 per cent of her net income."
He also points out that she is covering only the interest on the mortgage. "This cannot continue indefinitely as she has no repayment vehicle in place [to clear the whole home loan at some point in the future]."
Lucy should think about selling up and moving somewhere cheaper - using the equity she has created in her home as a deposit - he says.
Ms Gee agrees that while Lucy may be emotionally attached to her home, she should look at the situation "a little more coldly".
"At present, she is weighed down by the constant worry that she will not be able to make the mortgage repayments," she says. "This is not any way to live. Lucy needs to consider [a move] or even renting in the short term."
Lucy does need to think about starting a pension as soon as possible, says Mr Pendergast.
The tax breaks available for investing in a pension, whether an occupational or personal scheme, make it one of the most efficient ways of setting money aside for your old age.
"However, her priority at the moment must be either to increase her income or reduce her mortgage."
Mr Pendergast suggests Lucy try shopping around to see if she can secure a better mortgage-protection deal. The £57-a-month premium seems "a little expensive"; industry averages suggest it should be closer to £40.
Given the many demands on her finances, Ms Anstee says Lucy needs to ask whether private medical insurance is essential expenditure.
It is worth checking to see if her employer offers any income protection or sick cover above basic statutory sick pay.
If you would like a makeover, write to Sam Dunn at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS, or email email@example.com
Rain doesn't stop profits at Andy Murray's £600-a-night hotel Cromlix House
Think twice about investing in fine wine - it's a vintage ploy for the fraudsters
Five Questions On: GB Energy's new tariff
Santander's Kitti app aims to bring the good old cash kitty into the 21st century
Questions of Cash: 'I want a refund on my TV licence payments but they've turned my claim into a soap opera'
- 1 Windows 10: man updates PC, wakes up to find porn slideshow on repeat
- 2 The 'world's most beautiful vagina' has been debunked by science
- 3 John Green schools morning show hosts after awkward interview with Cara Delevingne
- 4 Supermodel Gisele Bundchen mocked for wearing a burka to avoid being seen visiting plastic surgeon in Paris
- 5 Bulletproof armadillo puts Texas man in hospital after shot bounces off hard shell
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn – or a return to a Labour government
Labour leadership contender Jeremy Corbyn says 'we can learn a great deal from Karl Marx'
Is Britain really full up? Are migrants taking our jobs? Leading academic answers the most common anti-immigration claims
Calais Migrant Crisis: Deputy Mayor of Calais labels Cameron's use of 'swarm' as 'racist' and 'ignorant'
Public anger after French sunbather beaten up by gang for wearing a bikini in Reims park
Labour leadership: New poll shows party is now even 'less electable' than under Ed Miliband
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...
£13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...
£22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...
£35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...
Day In a Page
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.