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Tony and Michelle Dear
Age 29 and 28
Live in St Ives, Cambridgeshire
Occupation journalist and nurse
Earn ?20,000 and ?15,800
Mortgage none
Debts none
Investments ?180,000 due on his 30th birthday
Pensions company pension and NHS scheme
Aims to review finances in light of his inheritance
Tony Dear is a golf journalist and his wife, Michelle, is a nurse. They met four years ago while they were both travelling. Neither has a clue about money. He says: 'We are never really certain about where our money is, where it is going or how much we have.'
Tony admits: 'My wife is infinitely more sensible than I am. I have always been gung ho about buying a villa in Spain, and my wife is very cautious. She knows what I am like with finances and how ignorant I am. Any hair-brained scheme I come up with, she pooh-poohs.'
It was Michelle who got them back into the black when they returned seriously in debt from travelling.
But their situation may be less disastrous than for most people with a careless attitude to money because next May, on his 30th birthday, Tony will inherit £180,000.
He already has £55,000 of his inheritance in a high-interest deposit account: 'This sum represents roughly a third of the inheritance my brother and I received after our parents' death in the early Nineties.' The proceeds of his mother's house, £30,000, are locked away at his solicitor's because his mother's will said he could not receive it until he turned 30. He does not know what the solicitor has done with the money or whether it earns interest. He assumes not.
A further £75,000 was invested five years ago which should, by next May, be worth £95,000 to £100,000; all told, when his birthday rolls around next year, Tony should have around £180,000. He realises that it is 'a bit rich' to suggest they have money problems: 'That is a lot of money, but it is not enough to allow my wife and me to pack it all in and move to Hawaii (something neither of us actually wants to do) but I am concerned that we are doing nothing at the moment to maximise our money's potential.'
Tony earns £17,000 a year, with another £3,000 to £4,000 from freelance work. Michelle earns roughly £15,800 a year. He pays £20 a month into his company pension and £20 a month into the firm's SAYE share scheme. Michelle pays £75 a month in the NHS pension scheme.
They pay rent of £450 a month and have no serious plans to buy a house at the moment, although Tony's inheritance could crystallise their thinking. Their joint bank account has £2,000 to £3,000 in it most of the time. Says Tony: 'This is a nice problem to have, but we feel totally out of our depth and in desperate need of good advice if we are to get the most out of what we have.'
Adviser 1: Danielle Leich
Tony and Michelle should use at least some of
the capital to buy a home so as to save on rent.
They could buy the property outright or take a
mortgage and invest the remaining capital,
hoping that the return is higher than the mortgage
payments.
This is risky, however, and they should fund a
property at least in part by their capital. If they do
take a mortgage, they should look for flexibility.
When the full money is received, they should
keep around ?15,000 in bank or building society
accounts - I urge them to look for better rates than
they are getting. They should invest the balance
in equity-related investments.
If Tony wants to be cautious, he should consider
with-profits bonds, which give exposure to the
stock market without fluctuations. The returns
should be better than the average
interest-bearing account.
To invest over 10 years or more with some risk, he
should consider unit trusts or investment trusts,
through an Isa for tax relief. First he has to decide
which geographical area to invest in and then
decide which market sector he fancies.
The alternative is a fund of funds, where the
selection of unit trusts is made for you, although
these cost more as you are paying twice for fund
management.
The solicitor should have his money in an
interest-earning account and pay Tony the
interest.
Danielle Leich works for PriceWaterhouseCoopers.
Adviser 2: Lynne Maltby
Tony and Michelle should identify their monthly
outgoings and fixed expenses to get a clear
picture of what is left over to spend and save. As
they have some ?2,000 in their bank account, I
suspect they could make regular monthly savings,
perhaps into an Isa.
Tony should check his pension, as paying ?20 per
month is very low. To give their savings focus,
they should decide their short- to medium-term
objectives over one to five years, including
holidays, house purchase, children and education
fees.
Because of their ages, I assume they will accept
average to above-average risk for their
investments. I suggest they put ?20,000 to ?25,000
in a deposit-based, low-capital risk area for a
rainy day and look for a good interest rate.
For the remainder, they could choose from a
range of higher-risk unit trusts: Save and Prosper
Premium Equity Growth, HSBC FTSE, Merrill
Lynch British Blue Chip, Rathbones Smaller
Companies, Cazenove European, Newton
Continental, Merrill Lynch American,
Threadneedle American Growth, Martin Currie
Japan, Invesco GT Japan Growth, SocGen
Technology, Norwich Union Property or Fidelity
South East Asia. They should expect to hold their
investments for five to 10 years, although they can
switch funds over the period.
Lynne Maltby works for independent financial
adviser Willis National.
Advice is for guidance only.
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