Wealth Check: 'I need to stop living for today'

Each week we give 'IoS' readers a financial makeover

After buying her first property as she turned 30, Jenny Letts now wants to bed down her finances and start saving for milestones long into the future.

The problem

After buying her first property as she turned 30, Jenny Letts now wants to bed down her finances and start saving for milestones long into the future.

Jenny bought a two-bedroom flat in Walsall, Birmingham, a year ago and has an £85,000, fixed-rate, repayment mortgage with Abbey. This currently costs her £425 a month.

"The property has gone up in value and is now worth £120,000," she says. "I'm glad to have got my first foot on the housing ladder but I want to start thinking about the future and am looking towards buying my next property with my boyfriend in a year or so."

When they do buy, she plans to rent out the home where she lives now for income.

Jenny usually spends all her wages each month but has some savings - £4,000 in an online Egg account and £200 in an individual savings account (ISA) with Intelligent Finance.

"I only recently started paying into the ISA and want to try to build it up," she says. "I'd also like to get more into investing next year; I'm keen to make my money work harder for me."

Jenny's other priority is to increase her pension contributions. "I've been paying into a Prudential company pension for around four years," she says. "But I only pay in £50 a month and I want to step this up."

She has neither life insurance nor income protection.

Although debts no longer cast a shadow, as she paid off her student loans last year, Jenny carries an Egg credit card.

"I try not to rely on this, and aim to pay it off in full each month," she says. "I want to get away from buying things I want immediately - such as clothes and make-up - and start thinking further afield."

The patient: Jenny Letts, 30, from Walsall

Job: senior account manager for a public relations company.

Income: between £24,000 and £30,000.

Savings: £4,000 in an online bank savings account and £200 in a mini cash ISA.

Investments: none.

Goal: to step up her saving and investing and secure her financial future.

The cure: Get more from your savings

Jenny needs a strict monthly budget to decide how much she can afford to spend each month. "She must be disciplined about her saving," says Patrick Connolly of independent financial adviser (IFA) John Scott and Partners.

Savings and debts

Jenny is in a sound financial position with no outstanding debt, says Darius McDermott of IFA Chelsea Financial Services. "It is great to see her take a long-term view - and investing in a cash ISA is a good start."

But he urges her to transfer her mini cash ISA savings from Intelligent Finance to a provider offering a higher rate, such as the 5.35 per cent on Abbey's postal ISA.

Mr Connolly says that while the Egg account pays a competitive 5.5 per cent rate of interest, Jenny will have to pay 20 per cent tax on these savings. "A better option would be to use her mini cash ISA allowance in the next tax year."

Investment

Jenny should ensure she has adequate and easily accessible cash savings for any short-term needs, before considering investing in shares or other assets, warns Mr Connolly.

However, if she can afford to put money by for the longer term now, she has to decide how much risk she's prepared to take.

Mr McDermott recommends that as a first-time investor, Jenny should avoid buying shares directly. "She would be better off investing in a stocks-and-shares ISA with a long-term view," he says.

"Investing in an ISA via a fund supermarket is often cheaper and allows you to put money into a greater spread of funds - spreading your exposure to risk."

By investing on a monthly basis, she can also reduce the risk of buying into the market just as it is about to fall.

Mr McDermott's fund recommendations include Framlington Equity Income, Invesco Perpetual High Income and Rathbone Income.

Property

Nick Lincoln, from IFA Wilson Dean Financial Services, says Jenny should check whether her Abbey deal is competitive or whether she would be better off remortgaging. "Since her existing loan is only a year old, she needs to beware of redemption penalties if she wants to move to a cheaper deal or buy with her boyfriend."

The good news, says Mr Connolly, is that both Jenny and her boyfriend are likely to have made a profit on their properties by the time they come to buy together.

Retirement

Jenny may only pay £50 a month but she has made a good start on her pension, according to Mr McDermott, since Prudential offers a decent range of funds.

Mr Lincoln says Jenny should be looking to raise her contribution to at least 10 per cent of her salary - and see if her firm will match that. "This is subject to affordability but she is currently only paying 2 to 3 per cent - and this won't deliver a sensible income in retirement."

Protection

Jenny has more pressing priorities at present, but Mr Connolly advises her to find out if her employer offers any form of income protection.

If you would like a financial makeover, write to Sam Dunn at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS, or email s.dunn@independent.co.uk