Wealth Check: Wedding plans keep this pilot's feet on the ground

A fledgling flyer asks how he can best save for his big day and a deposit for a house, and still be able to pay off his student debts



The Patient


Will Godwin, 29, got engaged last December, and he and his fiancée are now trying to save up enough money so they can married August next year. As the couple are paying for the wedding themselves, they will need to build up a sizeable pot.

Working as an airline pilot, Will earns £25,000 a year, plus £500 in allowances. “Once I have accumulated 500 hours on the aircraft I fly, my salary will increase to £37,940,” he says. “This is on track for September this year. There is then another salary jump to £46,828 once I reach 1,500 hours – which takes about two and a half years.”

Alongside his flying, Will is a lieutenant in the Territorial Army which brings in an additional £2,000 per year. “This does vary according to how much time I’m able to put into it, but a tax-free bonus of about £1,600 is also paid out if training commitments are met,” he says.

While Will has spent a lot of money on his pilot training, he has managed to slot away just under £7,000. However, he has amassed quite a lot of debt over the years.

“I owe £41,451 on a professional studies loan with HSBC which I took out to fund my pilot training,” he says. “The rate is 2 per cent above the Bank of England base rate. I also owe £14,960 on a student loan.”

Will also has a credit card which he uses for the occasional big purchase. “Most recently, I used it to buy Olympics tickets,” he says. “But I do pay the card off in full each month, as I learnt the hard way about spending too much on credit cards at university.”

Will lives in Cheltenham part-time rent-free with his fiancée, but also pays £350 a month to rent a room in a house in East Midlands for work. His aim is to get a foot on the property ladder once he’s married. “We’ll no doubt want to consider starting a family and will need to start looking at getting a house, and raising the necessary deposit,” he says.

Will is also keen to build up savings for the longer term. “I’m conscious that I’m 29 and don’t really have any idea about pensions, or where pension saving sits in my financial priorities,” he says.

“We’d also both like to be in a position to take holidays, as we’ve only been away properly once in the three years we’ve been together. Plus, as my fiancée is a teacher, we are stuck with having to go away in school holidays which is inevitably more expensive. In addition, we’d also like to have the option of being able to afford to send our children to private school when the time comes.”

In terms of protection, Will pays £52.58 a month for medical cover with Bupa and £10.26 per month for life cover with HSBC which he took out alongside his loan.

“I also pay £9.27 per month for another life insurance policy which I took out when I was on my last tour of duty in Afghanistan – and which I have kept going,” he adds.

The Cure

Our panel of independent financial advisers (IFAs) agrees that while Will has good career prospects and a great future ahead of him, he needs to draw up a financial plan to ensure he achieves his goals. With a little discipline, he should be able to reduce his debts and also pay for a wedding, afford holidays, buy a house and start a family.

Clear debts

Will needs to focus on paying off his debts by prioritising the loans charging the most interest and making overpayments to them, according to Robin Keyte from Towers of Taunton.

“The overpayments should be funded from disposable income, plus any savings out of income that can be made by reducing non-essential expenditure,” he says. “For example, Will could consider selling the Olympic tickets he has bought, and use the proceeds to reduce the HSBC loan.”

The upward trend of Will’s earnings as a pilot is very good, adds Mr Keyte, but he needs to continue to increase his earnings so the rate of loan overpayment can be increased by as much as possible.

Aj Somal from Aurora Financial Planning says there is no need to clear the student loan straight away, as the interest is low compare with other forms of borrowing.

Paying for the wedding and a first home

Will should maintain his existing savings of about £6,770 to pay for the wedding without having to reduce his debt repayments, says Mr Keyte.

He should also maximise his annual cash individual savings account (ISA) allowance says Kusal Ariyawansa from Appleton Gerard.

“In the current tax year, the allowance for a cash ISA is £5,340,” he says. “Will should choose a high-paying instant access account ISA. He could then also direct a fixed sum into a regular monthly savings account which pays a high rate of interest. With First Direct, for example, if he pays in up to £300 per month and makes no withdrawals, he will receive 8 per cent interest.”

Once this pattern of regular saving is established, Will needs discipline to maintain this, adds Mr Ariyawansa.

“After the wedding, both Will and his wife could start saving together to build up a deposit with a view to buying a house,” he says.

Getting a mortgage

Will should wait until he is married and on higher earnings of £46,828 a year to apply for a mortgage, according to Mr Somal.

“This will increase his borrowing potential, enabling him to get a bigger mortgage than he could on his current earnings.” he says.

Saving for school fees

Given the longer timeframe for the goal of saving for children and education expenses, Will can afford to take slightly more risk, according to Mr Ariyawansa. “He could consider a stocks and shares ISA,” he says. “These outperform deposit-based investments over the long term.”

Under current rules, savers can put their entire £10,680 ISA allowance into a stocks and shares Isa.

Pension saving

As Will has been in his current job only since March 2011, it is likely that he will be offered access to an employer-sponsored pension scheme only once he is through his probationary period, says Mr Keyte.

“At this stage I recommend Will joins the scheme,” he says. “If this is a money purchase scheme – rather than a final salary scheme – he should think carefully about his choice of pension investment funds.

“Given that his pension fund will probably be invested for up to 35 years, a fund mostly invested in shares would be preferable. While the fund price may be volatile and go up and down a lot, the short-term volatility is very small compared with the likely long-term compound returns.”

Protection

Given the low level of premium on the private medical insurance and life insurance, Will should continue with these policies, says Mr Keyte.

However, he should also find out what level of benefits his employer offers in case these could replace his existing cover and save him the cost of his ongoing premiums. Mr Ariyawansa also suggests he consider income protection which will pay out a replacement income in the event of incapacity.

Do you need a financial makeover?

Write to Julian Knight at The Independent on Sunday, 2 Derry Street, London W8 5HF

j.knight@independent.co.uk

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