Financial makeover: Safari Steve can still make his money work

Name: Steve Jackaman Age: 43 Occupation: Design & print sales executive

Steve cannot wait to get away for his next holiday. In two weeks, he is off to Mozambique with his wife Sue for an extended safari, exploring out-of-the-way places. Holidays are a major priority for Steve and Sue but he also realises the importance of securing his financial future.

They live in a small maisonette with a mortgage of pounds 20,000 and want purchase a larger property soon. Steve has a company pension and two small frozen pensions, plus investments in building society accounts. His main investment is Exeter Investment Group, an Alternative Investment Market (AIM) stock.

The Adviser: Tim Cockerill, managing director of White- church Securities Limited, an independent financial adviser in Bristol. Phone 0117 944 2266.

The Advice: Steve wants to buy the new home while renting out the small maisonette for pounds 400 per month to cover mortgage, agency fees, upkeep and taxation. Sue, a chiropodist, is a basic rate taxpayer and the rental income should be paid to her for tax purposes.

Finding a suitable mortgage can be daunting. Estate agents are happy to help because they rake in commission, so if you take that type of advice the mortgage you end up with is unlikely to be based on a proper assessment of your financial circumstances.

Steve and Sue should look at a flexible mortgage and Virgin seem to offering the best going. This mortgage account can operate like a current account, which would mean Steve and Sue could pay their wages into the account and this would immediately reduce the outstanding mortgage loan.

Because interest is calculated daily they would pay less of it. They can also use the account in the normal way to pay bills. As they do, so the outstanding loan increases again. The great advantage to this account is that you can have all your money working for you, reducing the burden your mortgage payments.

Steve calls himself a cautious investor, but his investment in the AIM stock is high-risk and he should consider diversifying. The big problem with holding an individual stock is that if their business plans don't work out, the share price can be hit badly, all the more so with an AIM stock which is higher risk.

He could diversify into a unit trust, held in an Individual Savings Account (ISA) to make sure the capital growth is tax free and he gets tax credits on any income. There are many suitable funds available for this, such as Fidelity Special Situations or Jupiter Income.

Steve is in his company's pension scheme. They pay 6 per cent and Steve pays 8 per cent. He has been in it for only a short time and he hopes, as would anyone, that over the years the contributions will grow and so will the fund. The pension is managed by Sun Life and Steve has control over where his premiums are invested. He has chosen to invest 30 per cent into their Managed Fund, 30 per cent in the UK, 20 per cent in Europe and 20 per cent in Asia.

The drawback to many modern pension schemes is that they are "money purchase". This means an individual puts money into a pension, but learns how much he or she will get only when they reach retirement age.

The value of the pension fund fluctuates according to stockmarket values. Steve, who has many years to go before retirement should consider a higher risk, the objective being to make the pension fund grow as much as possible. Steve might also wish to consider reallocating his premiums.

Finally, their plans should ensure that they can still go on holiday to places such as Mozambique. The whole point of financial planning is to enable you to do what you want to do.

For Steve and Sue, I don't think two weeks sitting on the beach at Bournemouth is quite their cup of tea.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Solvency II Project Manager - 10 month contract - £800 p/d

£800 per day: Ashdown Group: A highly successful, global financial services co...

SThree: Trainee Recruitment Consulant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250...

Guru Careers: Financial Controller

£45 - £55k DOE: Guru Careers: A Financial Controller is required to join a suc...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£12500 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Day In a Page

Mullah Omar, creator of the Taliban, is dead... for the fourth time

Mullah Omar, creator of the Taliban, is dead... again

I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

Margaret Attwood on climate change

The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

New Dr Seuss manuscript discovered

What Pet Should I Get? goes on sale this week
Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

The cartoon hedgehog leading the way into a whole new reality

Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
Ants have unique ability to switch between individual and collective action, says study

Secrets of ants' teamwork revealed

The insects have an almost unique ability to switch between individual and collective action
Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

Donovan marks his 50th year in folk

The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
Let's Race simulator: Ultra-realistic technology recreates thrill of the Formula One circuit

Simulator recreates thrill of F1 circuit

Rory Buckeridge gets behind the wheel and explains how it works
Twitter accused of 'Facebookisation' over plans to overhaul reverse-chronological timeline

Twitter accused of 'Facebookisation'

Facebook exasperates its users by deciding which posts they can and can’t see. So why has Twitter announced plans to do the same?
Jane Birkin asks Hermès to rename bag - but what else could the fashion house call it?

Jane Birkin asks Hermès to rename bag

The star was shocked by a Peta investigation into the exotic skins trade
10 best waterproof mascaras

Whatever the weather: 10 best waterproof mascaras

We found lash-enhancing beauties that won’t budge no matter what you throw at them
Diego Costa biography: Chelsea striker's route to the top - from those who shared his journey

Diego Costa: I go to war. You come with me...

Chelsea's rampaging striker had to fight his way from a poor city in Brazil to life at the top of the Premier League. A new book speaks to those who shared his journey
Ashes 2015: England show the mettle to strike back hard in third Test

England show the mettle to strike back hard in third Test

The biggest problem facing them in Birmingham was the recovery of the zeitgeist that drained so quickly under the weight of Australian runs at Lord's, says Kevin Garside
Women's Open 2015: Charley Hull - 'I know I'm a good golfer but I'm also just a person'

Charley Hull: 'I know I'm a good golfer but I'm also just a person'

British teen keeps her feet on ground ahead of Women's Open
Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

Our choice is years of Tory rule under Corbyn or a return to a Labour government

Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'