Wealth Check: The warning signs are going off everywhere

Carly Sugarman graduated from the University of Leeds in 2004. Plans to live with her parents and save monthly for travelling have since given way to having fun and a considerable shopping habit. She recently sold her car and used the money to clear her student overdraft. The remainder has been put into an ISA.

She hopes to pursue a career in London but is concerned she would be unable to afford the living costs on a starting salary. Carly aims to pay off her credit card and loans within the next five years but would like advice on how to do this.

We asked three independent financial advisers for their help: Susan Hannums of Chase de Vere, Chris Holmes of Harrington Brooks and Philippa Gee of Torquil Clark.

Case notes

Carly Sugarman, 22, Manchester

Personal: Carly works as an ssistant manager of a shoe shop. Her annual salary is around £12,660 after tax, which gives her just over £1,000 of disposable income each month.

Property: Recently moved out of her parents' home into a rented (£400 a month) shared city centre flat. She would like to buy her own property within two years, but has yet to start making significant savings for a deposit.

Savings: £750 in a NatWest individual savings account.

Monthly spending: Living expenses £615; bank loan £98; credit card £46; entertainment and clothes £300; student loan according to monthly earnings and inflation.

Pension: Carly has yet to start saving for retirement but does not feel able to open a pension.

DEBT

"The warning signs are going off everywhere with Carly," says Hannums. "She's having fun - and why shouldn't she at her age? - but her need to assess her situation couldn't come at a better time."

Carly is spending £300 a month more than she is earning and so is only adding to her debt. All three advisers recommend that Carly concentrates on her budgeting skills. Gee fears that if she carries on as she is the debt will cripple her.

Gee recommends a two-fold plan, including calculating a weekly spend. "First you need to identify exactly where you are with your finances, and look at ways of cutting costs such as mobile phone and utility bills," she says. "Second, you need an immediate plan to boost your earnings, moving up the career ladder."

SAVINGS

Gee also advises that the interest rate Carly is paying on her debt will be higher than that which she gains from her ISA. Therefore, she is actually losing out each month by keeping the money in an ISA.

Holmes agrees that a new financial regime is necessary. Carly must not take on more credit, must keep up to date on payments and cut her spending.

PROPERTY

Holmes suggests that moving back home, alongside cut-backs in other areas, would release up to £725 to put towards saving for a deposit on a property, debt reduction on the credit card and loan, and even some rainy-day money.

Hannums advises that by saving on her £400 rent, Carly could pay off her credit card in six months, as opposed to the 17 years it will take if she continues paying the minimum. "Done correctly she won't have to give up shoe shopping," says Hannums. "Carry on like this and she'll be the woman who lived in her shoes."

For a free financial check up, write to Wealth Check, The Independent, 191 Marsh Wall, London E14 9RS or email cash@independent.co.uk