Wealth Check: Therapist who seeks a treatment for her life

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Laura Knight, 26, has still to put in practice the diploma in dramatherapy she took last year.

"Patients express themselves through stories, metaphors and art works," she says. "It not as well known as art therapy and music therapy but it's slowly becoming more established."

Ms Knight, 26, studied at Breton Hall, which is affiliated to Leeds University. Before that, she took acting for three years.

Setting up as a dramatherapist is difficult. So Ms Knight is working in an acute psychiatric ward in St Charles' hospital, London, as an activities co-ordinator.

Like most new graduates, she has debts, £5,000 in student loans and an £11,000 HSBC graduate loan. She will soon start repaying her graduate loan at £190 a month for 83 months.

"I accumulated my student debts are over six years and I wasn't frivolous," she says. She wants advice on the best way to deal with her debts.

On the savings side Ms Knight has £1,000 in an HSBC Isa. "I spend £800 to £1,000 a month. I've been a student so long I'm not used to spending." But she does not have much left over. "Should I be investing more?" she asks.

Ms Knight lives with her partner in Queen's Park, near St Charles'. She is in the NHS pension scheme and has life insurance to cover her debts, which costs her £6 a month.

Ideally, she would like to set up a private dramatherapy practice and buy a property. "But I need to make myself secure," she says. "In an ideal world I'd invest in a property but that feels a long way off."

We put Ms Knight's case to Darius McDermott, of Chelsea Financial Services, Ben Yearsley, of Hargreaves Lansdown and David Higgins, of Glazers Financial Services.

LAURA KNIGHT, 26 DRAMATHERAPIST

Occupation: Activity co-ordinator on an acute psychiatric ward

Education: ABA in acting; PGDip in dramatherapy

Salary: About £18,000

Debts: £11,000 on HSBC graduate loan, £5,000 in student loans

Savings: £1,000 in HSBC Isa current account

Pension: NHS pension scheme

Outgoings: £800 to £1,000 per month

Property: Living with partner in Queen's Park, south London

DEBT

Mr Higgins says Ms Knight has a monthly after-tax income of £1,162, so with loan repayments of £190 she will be left with £972 a month. Her first step should be to work out an exact budget. A good planner can be found at the Financial Services Authority website (www.fsa.gov.uk).

Sticking to the budget will mean she avoids high-charge overdrafts and credit-card balances. She can defer the repayments on her student loan because she is earning less than 85 per cent of national average earnings, or £1,780 gross a month.

GRADUATE LOAN

Mr Higgins says the HSBC graduate loan has a fixed interest rate with a typical APR of 7.9 per cent. This is not the cheapest but it is still competitive. Cahoot offer one of the lowest fixed-rate personal loans with a typical APR of 5.9 per cent.

But Ms Knight should request a redemption statement from HSBC because the amount she needs to repay her loan may be higher than she thinks.The Cahoot maximum term may be five years rather than the HSBC loan's seven. Ms Yearsley says the life assurance for her loan looks expensive. For £5 a month with Liverpool Victoria she could get £86,000 in cover.

Mr McDermott says the best graduate loan rate is from the Royal Bank of Scotland who are offering 0 per cent ABR (above base rate). Or Ms Knight could transfer some of her debt to a 0 per cent interest credit card. The best deals available are from MINT (Royal Bank Of Scotland) who are offering 0 per cent interest for nine months or First Direct who are offering 0 per cent interest for six months.

SAVINGS

Mr Yearsley says Ms Knight needs to save rainy-day money. Six months' salary is sensible. Mr Higgins says Ms Knight should consider a cash Isa for tax-free interest. Intelligent Finance pay 4.35 per cent a year for a CAT standard Isa. Withdrawals can be made without notice.

Mr McDermott says the best interest rates available on instant-access accounts are from the Scarborough Building Society One Plus Saver Issue 3 who are offering 4.40 per cent and the Bristol & West Easylife Guaranteed account who are offering 4.25 per cent. The best mini-cash Isa rates available are from Intelligent Finance and the Portman Building Society who are offering 4.35 per cent.

CAREER

Mr Higgins says a NHS dramatherapist can earn between £17,960 and £29,465 plus London allowance. As a NHS employee, Ms Knight qualifies for the NHS superannuation pension which provides an inflation-proof pension linked to her earnings from age 60.

Although she will have to contribute 6 per cent of her salary the benefits greatly outweigh the costs and starting now would mean a pension of around 42 per cent of her final salary plus a tax-free lump sum of three times that amount.

When she has repaid her loan she may want to pay more into her pension through additional voluntary contributions or contributing to a stakeholder one. If she wants to start a dramatherapy practice, she should seek the advice from her Business Link and trade association, The British Association of Drama Therapists. Working with other therapists should allow shared costs and offer a broader range of services.

If you would like a financial check-up, write to Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk

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