Graduate On Good Salary "hopes To Have Saved Enough For A House Deposit By Age 40"

[Zaranna]

In 10 years' time, will FTBs be 40 years old....?

Link here:

http://business.timesonline.co.uk/article/...2077795,00.html

The world is passing me by

Rebecca O’Connor helps a 27-year-old who is finding the burden of graduate debt hard to bear

YOUR twenties are meant to be the last bastion of youthful indulgence, the chance to revel in a bit of irresponsible behaviour, such as going clubbing in Ibiza, before burdens such as children and mortgages take over.

But the luxuries of youth are things that Naomi Healey-Cathcart, 27, can scarely afford. After she has paid rent and bills, and made debt repayments, she has only £90 a week left over. “I am only just keeping my head above water,” she says. “I feel that the world is passing me by.”

Naomi’s job as an environmental analyst for an engineering consultancy in Redhill, Surrey, pays £27,000 a year. But Redhill is not quite where Naomi thought her careeer would take her. “I had visions of living on a coast in a trailer, sipping cocktails and staring out at the ocean, but I have ended up in Redhill,” she says.

Higher education proved costly. She studied ocean science and geography, followed by a postgraduate qualification in coastal zone management. Wages from part-time jobs were not enough to cover her outgoings, so she took out student loans of £9,000. But the borrowing didn’t stop when she graduated. “My starting salary of £14,000 was not enough to live on, so I had to get a loan,” she says.

Naomi has an overdraft of £1,000 with Barclays and a £5,000 graduate loan that charges 8.1 per cent interest and costs her £195 a month in repayments. Her student loan repayments will start in April and will eat up a further £102 a month from her pay packet. A further burden is £5,000 on a 0 per cent credit card deal with Virgin Money.

Naomi’s struggles have not been caused by a lack of financial discipline. “I make a budget every month, I don’t have a car and I have a pay-as-you-go mobile. The most expensive thing I own is my travelcard.”

Until December, she had to live with her mother and her sister to save money, sharing a bedroom with her mother. She now rents a flat in Wimbledon with two friends, paying £430 a month plus bills.

Financial difficulties stand in the way of many things that Naomi would like to achieve. She has considered moving to a developing country, where her environmental training would be most useful. But the problem, she says, is that her wage would be equivalent to the national average, which could be very low.

If she stays in the UK, she hopes to be free of debt by 30 and to have saved enough for a deposit on a house by 40.

Naomi’s mother is not in a position to help her. “I think it is hard for my mum to see me in trouble and know that she cannot help,” Naomi says. “We try to laugh about it. I tell her that letters from the bank are my hate mail.”

Her long-term provision is at least partly taken care of by her company pension scheme, into which she puts £90 a month.

Despite the strain, Naomi is optimistic. “I panic when I receive a big bill or there is an unusual, unavoidable expense such as a wedding. But I feel that I should not get upset because I have opportunities that others do not have.”

What the experts say

MONEY MANAGEMENT

Chris Tapp, associate director, Credit Action

“Naomi is managing her situation well. It is encouraging to see that she has set herself clear goals. Even if they will be hard to achieve, it should be easier for her to stay financially focused if she sticks to them.

“As a young professional with good career prospects, the potential for increased income makes her aim of buying a house by the age of 40 not at all unrealistic, provided that she buys in an area where housing costs are less substantial.

“She must focus on first paying off the debt that is accruing the most interest. The graduate loan should be a priority because this will be costing more than her student loan and the overdraft. She must make sure that she pays off as much as she can from the credit card every month and that she is disciplined whenever she thinks of using it.

“If she wants to be debt-free by 30, which is not entirely unrealistic if her wage continues to rise, she may have to be prepared for her disposable income to stay quite low and she will have to keep her leisure spending under strict control. Credit Action’s guide, Thinking about Money, can help.

“Not having wads of spare cash need not mean misery. There is still plenty of fun to be had in London, even on a limited budget. Summer is coming and it does not have to cost much to relax in a park with friends or to throw a bring-your-own barbeque in the backyard.”

SAVINGS

Justin Modray, adviser, Bestinvest

“With £20,500 of debt and a net monthly income of about £1,600, Naomi really isn’t in a position to save.

“Her priority must be to clear the expensive debt because the rates of interest on her overdraft and loan are well in excess of what she could earn on savings. Moving her current account could ease the overdraft pain. For example, the Nationwide FlexAccount has an authorised overdraft rate of 7.75 per cent.

“The student loan is less pressing. Because the rate of interest equals inflation, it is costing her nothing in real terms. However, the credit card debt gives cause for concern as Virgin’s 0 per cent balance transfer offer expires after nine months. With more than 30 credit card providers offering 0 per cent balance-transfer deals, Naomi should be able to secure another 0 per cent rate.

“With a determined effort, Naomi should be able to clear her debts (excluding the student loan) within the next three to four years. This will free up several hundred pounds a month, giving Naomi the opportunity to start saving in earnest. Although she might want to start treating herself to a few more luxuries, she should still make a concerted effort to save at least £200 a month. Initially this should go into a high-interest savings account, ideally a cash mini-Isa, to build a safety net against any unforeseen expenditure.

“Once Naomi has the equivalent of about three months’ income in savings

she could then consider making stock market investments to try to gain better returns. Investing in a fund such as Jupiter Merlin Growth through an Isa will give her exposure to a wide range of global stock markets.

“The fund could fall in value, but investing for five to ten years is likely to provide a better return than cash.

Saving £200 a month over ten years, assuming a 6 per cent annual return, would build a lump sum of £32,500 to put towards getting on the property ladder.”

BORROWING

Stuart Glendinning, director, Moneysupermarket.com

“Naomi sounds pragmatic and gives the impression that she is budgeting carefully. She needs to keep her monthly outgoings down. She should try to reduce her credit card debt while she can obtain

0 per cent deals. The best balance transfer credit card deal at present is from Halifax, offering 0 per cent for 12 months, but this charges a balance transfer fee of £50. If Naomi could stretch to pay off £75 a month this would reduce the debt to £4,150 in one year. Lloyds TSB’s Rewards American Express card has a fee-free offer of 0 per cent for nine months.

“Naomi should consider opening a current account with Alliance & Leicester, which offers a 0 per cent overdraft on up to £2,500 for one year. After this period the overdraft rate is 5.9 per cent.

“Rates for personal loans are as low as 5.5 per cent, but the outlook for making savings here is bleak. Naomi’s credit profile is unlikely to be strong enough for her to obtain the 5.5 per cent rate available from Moneyback Bank. In this respect, her Barclays rate looks good. She should not apply for too many loans because each time she will leave a footprint with a credit reference agency, and too many footprints can tarnish your credit record.”

Naomi’s response

“The experts have given me a lot to think about — all the advice was very useful. The first thing I will do is take a look at the Credit Action website.

“The advice on reducing my credit card and graduate loan debt repayments provided me with very specific options to consider. It was also nice to be quoted figures on what I might be able to save, instead of being presented only with mind-boggling rates.

“I was particularly interested to read about changing my current account. I have been considering leaving Barclays ever since I was denied a second account after exceeding my overdraft limit by £1.50 in September last year.

“It will be interesting to see whether I can put the experts’ suggestions into practice. I do already cut up the credit cards

— it’s just that I must now try to stop myself from ordering new ones to replace them.

“I appreciate the sentiment behind the low-cost entertainment ideas, but I am not so sure about the idea of holding bring-your-own barbecues.”

[Guest Winners and Losers]

They won't have to wait that long.

[Europa]

F***ing sickening :angry:

This girl has clearly worked hard to get herself to the position of earning a reasonable wage with a responsible job.

What does she have to show for it? 20k of debt.

Still, if she follows the experts' advice, in 13 years she will have enough of a deposit to get a home of her own; so long as her expectations aren't too high.

More constructive advice would be to stick a finger up to the banks and card companies and go bankrupt. Not like she has much to lose.

[the_duke_of_hazzard]

F***ing sickening :angry:

This girl has clearly worked hard to get herself to the position of earning a reasonable wage with a responsible job.

What does she have to show for it? 20k of debt.

Still, if she follows the experts' advice, in 13 years she will have enough of a deposit to get a home of her own; so long as her expectations aren't too high.

More constructive advice would be to stick a finger up to the banks and card companies and go bankrupt. Not like she has much to lose.

Quite. I wonder if the next Kinnock will be the first Kinnock in a thousand generations to be advised not to go to university.

[Goat]

In 10 years' time, will FTBs be 40 years old....?

Link here:

Thinking about it, today's FTB's are still in a better position than those even a couple of years younger. Most of us just missed tuition fees (another £3,000 on your university leaving debt), with top up fees of £3,000 p/a plus above inflation rises in other living expenses the avearge graduate debt will easily pass £20,000.

Naiomi's debt is higher than usual because of the postgraduate qualification.

[Europa]

Thinking about it, today's FTB's are still in a better position than those even a couple of years younger. Most of us just missed tuition fees (another £3,000 on your university leaving debt), with top up fees of £3,000 p/a plus above inflation rises in other living expenses the avearge graduate debt will easily pass £20,000.

Naiomi's debt is higher than usual because of the postgraduate qualification.

Sound point - I sometimes wonder if we'll start to emulate the US, where declaring bankruptcy on graduation is becoming as much a part of graduating as picking up the scroll.

Seriously, the more I read this article the more annoyed I get. The experts offer nothing more than a life of serfdom; forget getting married, having children, or even owning the roof above your head until you're middle-aged. I'm getting depressed on her behalf

Edited March 14, 2006 by Europa

[Smell the Fear]

Sound point - I sometimes wonder if we'll start to emulate the US, where declaring bankruptcy on graduation is becoming as much a part of graduating as picking up the scroll.

Seriously, the more I read this article the more annoyed I get. The experts offer nothing more than a life of serfdom; forget getting married, having children, or even owning the roof above your head until you're middle-aged. I'm getting depressed on her behalf

Student loans are exempt from bankruptcy proceedings. I.e. you still have to pay them back even if you declare bankruptcy. This applies to loans from the Student Loans Company, not bank loans.

[miro2021]

F***ing sickening :angry:

This girl has clearly worked hard to get herself to the position of earning a reasonable wage with a responsible job.

What does she have to show for it? 20k of debt.

Still, if she follows the experts' advice, in 13 years she will have enough of a deposit to get a home of her own; so long as her expectations aren't too high.

More constructive advice would be to stick a finger up to the banks and card companies and go bankrupt. Not like she has much to lose.

Pay off the student loan with credit cards (Stud loans don't get wiped by bankruptcy), buy loads of gift vouchers for sainsburys and John lewis with credit cards, pay landlord a couple of years rent in advance on credit card, buy a travel card, holiday vouchers, postal orders etc etc. THEN go bankrupt... live rent free for 2 years, buy food, clothes, holidays etc using vouchers and save huge chunk of salary for the 2 rent-free years, then a slightly lesser amount for the next few years still getting free food, clothes, cashing postal orders. By that time your credit record will be wiped clean ready for a mortgage application and house prices will have crashed - BINGO!!!

[FTBvish]

Thinking about it, today's FTB's are still in a better position than those even a couple of years younger. Most of us just missed tuition fees (another £3,000 on your university leaving debt), with top up fees of £3,000 p/a plus above inflation rises in other living expenses the avearge graduate debt will easily pass £20,000.

Naiomi's debt is higher than usual because of the postgraduate qualification.

Glad to see someones made that connection without having to be told...

I keep telling older folk how hard it is for University go'ers these days. These kids walk blindly into debt without a second thought. Yes parents are expected to help, but many don't or CAN'T. I'm not against Tuition fees because I don't really see an alternative, and the hard up do get grants etc...

But the current generation are the first to have to deal with this level of student debt, and along with that there is the double whammy of unaffordable housing at the end of it.

It's shocking... and the future is bleaker.

Edited March 14, 2006 by FTBvish

[a j]

“As a young professional with good career prospects, the potential for increased income makes her aim of buying a house by the age of 40 not at all unrealistic, provided that she buys in an area where housing costs are less substantial.

From what I know of the environmental sector, she may be able to increase her salary by £5k or so, but there is a bit of a ceiling at this point. Everyone else competing for better jobs would also have postgrad qualification so little to distinguish one from another.

The advisor thinks that if she scrimps and saves, and increases her income she may be able to buy by the time she is 40. Why doesn't she just ignore the loans and go on a third world jolly?

[Bingley Bloke]

Let's just suppose house prices, the cost of living, and wages all stayed exactly the same from now on...

At my current rate of pay, with house prices as they are, and my ability to save money after meeting living costs, I would be 71 by the time I had a deposit big enough to buy the house my dad bought when he was my age... that's assuming the deposit was the amount required to reduce the mortgagable balance to 3.5 times my salary.

Nuff said!

[Running Bear]

Too be honest I see her only option being emigrate and change her name.

I emigrated the second I got my degree, but had no student debt to speak off. I would encourage any one nowadays to follow "miro2021" advice and pay off student loans with credit cards before absconding.

There truly is nothing left in britain but debt and servitude for those silly enough to stand up to their responsibilities and work.

[Guest]

One of the good things about the Internet will be the ability of sites like this to record the thoughts of ordinary individuals throughout major events like this. I could imagine historians being interested in keeping records. Webmaster: Don't delete your hard disc!

Sometimes I look back at 1996 when I started work, and compare times to those now. It was a golden age when people didn't talk about bloody houses.

I left university with £800 debt. Wish I had taken the full allowance every year, though could have stashed it away somewhere: The interest was something piddly like 1%. Maybe the student loans company was borrowing from the Japanese!

[Guest Guy_Montag]

Let's just suppose house prices, the cost of living, and wages all stayed exactly the same from now on...

At my current rate of pay, with house prices as they are, and my ability to save money after meeting living costs, I would be 71 by the time I had a deposit big enough to buy the house my dad bought when he was my age... that's assuming the deposit was the amount required to reduce the mortgagable balance to 3.5 times my salary.

Nuff said!

Sucker, I'll only be 64

[the_duke_of_hazzard]

It's real life cases like this that make a bit of a joke of those that claim house prices only go up and will probably be double what they are now in 20 years time.

And what if she wants kids? I suppose they'll advise her to freeze her embryos and save up for the inevitable court case...

[Europa]

And what if she wants kids? I suppose they'll advise her to freeze her embryos and save up for the inevitable court case...

Natural selection, unfortunately - only the fittest survive. And in our wonder society that means the chavs and dole-fodder :angry:

If this girl wanted children, should would have been better off dropping a few before her 20th birthday. Financially, she would be in a better position now

[miro2021]

Natural selection, unfortunately - only the fittest survive. And in our wonder society that means the chavs and dole-fodder :angry:

If this girl wanted children, should would have been better off dropping a few before her 20th birthday. Financially, she would be in a better position now

Our government is breeding out our intelligence

[Property Investor]

By getting a decent education, this girl will be able to pay off her debts easily, and as aforementioned, the rates are extremely low.

In 3 or 4 years time, she will have a good salary, a decent house, and won't be whinging about house prices.

You all need to grow up, face reality, get educated and get a good job. Then maybe, you'll be able to buy a house, and stop giving me grief as a landlord.

[OnlyMe]

The only people who seem to belong to a jobless, skilless caste around here seem to be the landlords.

[Zaranna]

By getting a decent education, this girl will be able to pay off her debts easily, and as aforementioned, the rates are extremely low.

In 3 or 4 years time, she will have a good salary, a decent house, and won't be whinging about house prices.

You all need to grow up, face reality, get educated and get a good job. Then maybe, you'll be able to buy a house, and stop giving me grief as a landlord.

Did you actually *read* the article at all?

[CrashedOutAndBurned]

This is typical of so many people I knew from Uni. It was vaguely reminiscent of my own position - the student debts combined with very low starting salary leads to more debt despite almost no extravagances at all.

These aren’t out-every-night-ipod-buying-debt-junkies. They are mostly people who would be largely without debt had higher education not been made to seem compulsory at the same time as making it brutally expensive.

At least she actually struggled on to a career job and s doing pretty well on 27k at 27, considering she started on 14k. The trouble is, it sounds like the kind of job that requires knowledge, but isn’t doing to attract the big pay. She may actually be at near the top of the scale for her job and it may take some time to become a manager in her field or whatever the next step is. It’s a common complaint for many in mid-career – they know they could basically run the show but the opportunities are scarce with many chasing a handful of roles.

She’s basically trapped - she can’t buy or even rent a place, she can’t use her skills in the way she wants, she’s swimming in debt, she doesn’t have much at the end of the month. What a shitty life for someone that played the game, done the graft, played it by the book.

Ultimately, we need monetary reform now. Currently only the coins and notes in circulation are debt-free (they’ve been purchased with ‘debt money’ so they have a cancelling-out effect). Education and other major public works programs need to be paid for with government-created money. Private banks should have their ability to issue credit restricted until the balance of debt-money to interest free money is ‘about right’. Taxes could be scaled back and more of our money would no longer be someone’s debt.

Too radical? Then just run a huge deficit like our European neighbours that still have over the last few decades and who have reasonable welfare provision, good infrastructure and industry. Better the people feel debt free than have the government slyly hand the debt-money problem on to hapless individuals in the form of privatisation of vital services, student debt, etc.

Debt-money is killing us – it’s gone too far, it’s had its day.

[DonnieDarker]

Dont get this.

Her income is:

£1610 per month take-home (after £90 pension contribution)

Her outgoings are:

430 rent

100 food

100 bills

100 travel

195 loan repayment

102 other loan repayment

That still leaves her with £600 a month left.

Even after phone...£30...gym...£50...random magazines £20 she'd have £500 left.

Give her a social-life as well (£200 per month) ans she has £300.

I've been pretty generous there and she should be able to save £3000 a year. (ISA)

The problem I suspect is that she lives in Wimbledon, eats out a lot and goes out drinking a lot. Throw in a skiing holiday and its all gone.

The only way to escape this is to save hard. She clearly isnt.

PS.

Alvin Hall is my Hero.

PPS.

This girl could actually earn herself more money by boxing clever...when she gets a free phone upgrade sell it on ebay for a couple of hundred quid. Get a cashback credit card and that will make her another £100. By following various tips and scams from moneysavingexpertdotcom you can make yourself £1K in a year.

The big saver for me is making ones own lunch. Probably saves me about £600 per year and pays for a holiday.

Edited March 14, 2006 by DonnieDarker

[Mushroom]

By getting a decent education, this girl will be able to pay off her debts easily, and as aforementioned, the rates are extremely low.

In 3 or 4 years time, she will have a good salary, a decent house, and won't be whinging about house prices.

You all need to grow up, face reality, get educated and get a good job. Then maybe, you'll be able to buy a house, and stop giving me grief as a landlord.

Utter nonsense.

[Father Fred]

The thing that strikes me most about that article are...

I'm damn lucky I graduated with under £1500 debt. (Half taken up at the end of my second year so that my last ever long summer holiday could be work free, and half for the hell of it in my third year).

Secondly, financial education and careers advice...

Kids should learn how to budget and basic finance from the ages of 8-12. From 12 onwards they should learn about economics, more complicated finance and given clear, simple careers advice.

Kids should be told their options. It should be made clear that the lucky few can go to Oxbridge and study Latin and end up with a fantastically well paid job. It should be made clear that some skills are better suited to running your own business and controlling your destiny. It should be made clear that taking on £20k debt may not be buying you any extra earning power, and in fact it may just mean you are working your way up the pay scale later and with a bigger noose round your neck.

My school was fairly posh, and the careers advice was crap. Doctor, dentist, army officer, vet, accountant were the only jobs that existed as far as they were concerned. Ask the kids what they want out of life and guide them in the right ways.

Someone should have sat her down and said "if you are studying the sea for the love of it go ahead, but please consider where you could be in 6 years if you take the following two routes -

(1) collect £20k debt over 4 years to acheive a half decent wage.

(2) do a 6 week word-processing /typing course, get a £15k job and start saving now".

There is no right or wrong answer, but you do have to think things through. And careers advisers / parents have a lot to answer for that they don't get their kids thinking things through.

[miro2021]

Someone should have sat her down and said "if you are studying the sea for the love of it go ahead, but please consider where you could be in 6 years-

The thing is she may well have considered what her expected salary would be 6 years ago - but at that time she would have calculated she could afford to buy her own house because she didn't know HPI was going to outrun her salary to the extent it has.