Teach us a lesson we won't forget

S?an Harries and Alastair Veysey
Ages 27 and 30
Live in Billericay
Occupations Teachers
Earn c.?22,000 each
Mortgage ?70,000
Debts Car loan ?10,000, student loan ?4,000
Investments Bank and building society accounts, Equity Isa
Pensions Members of Teachers' Superannuation Scheme
Aims To pay off debts, save for honeymoon and for larger property, and generally get sorted financially.

Sîan and Alastair met during teacher training. They are planning to get married in August, but now S?an is worried less about organising their big day and more about sorting out their finances. Despite their relatively good incomes, she feels hard-up: 'We never seem to be able to make our money stretch far enough. Any savings we gather over the year are spent during the school summer holidays.'

They need to save for their honeymoon and they also want to build a nest egg with a view to moving to a bigger house in a couple of years time.

In the long run they would like to start a family, and S?an hopes to be able to spend a few years at home. But as things stand she does not feel they could ever afford her to stop working.

The couple's main outgoings are their mortgage, which costs ?475 a month and a car loan of ?10,000 which they are paying back at ?210 a month over the next five years. They feel the car loan in particular is a real burden and have decided not to replace their second car because they do not want another loan. Alastair also has a student loan which he is repaying.

They are not completely without savings. S?an has an Abbey National SAYE scheme worth ?1,750 which is maturing this month. She is considering using this to pay off part of the car loan. She has also been saving ?150 a month for the past couple of months in a Barclays savings account towards their honeymoon. In addition, she has ?600 in a Northern Rock account.

Last April Alastair invested ?7,000 in a Skandia equity Isa, but they were dismayed recently to discover that it had gone down in value to ?5,845. It is spread across six funds recommended by a relation - Henderson Global Technology, Jupiter UK Special Situations, Invesco European Smaller Companies, Gartmore European Selected Opportunities, Henderson UK Smaller Companies and S & P Japan Growth. In view of the losses, they wonder if this investment is worthwhile.

Both are members of the teachers' pension scheme. Being in a public-sector final salary scheme nowadays is a huge advantage, but S?an wonders whether she could consider topping up her pension with additional voluntary contributions.

One money-saving possibility the couple are considering is selling their house and moving into S?an's father's house while he spends a year in Spain. This would enable them to save their mortgage repayments, which they could then put towards a larger property.

Adviser 1: Gillian Cardy

There is nothing for it - S?an and Alastair must sit down with a clean piece of paper and work out what they do with their money. They should monitor their income and outgoings over a three-month period.

The symptoms they describe often mean that too much is spent on casual and unplanned purchases. The only real way to make progress is to control the amount they spend from their current accounts, by perhaps setting a weekly limit.

For immediate savings, it is always worth taking out a cash Isa rather than a plain savings account. The interest rates on cash Isas are often higher, and the interest is tax-free. The period of saving does not matter with cash investments. Look out for best buy interest rates in the weekend papers.

As for Alastair's equity Isa, the Skandia scheme is expensive but does give access to a range of funds. The plan has fallen in value because of initial charges and because the underlying funds are inherently high-risk. The charges have now been paid and the value has fallen, so it is probably not a good idea to cash it in. I would wait until the value improves before transferring the money elsewhere or selling it.

The Teachers' Superannuation Scheme is extremely valuable and I would suggest that they get other things right first before worrying about AVCs. If they move into S?an's father's house, I would advise them to rent out rather than sell their own home. If they sell, they may find it hard to get back into the property market.

Gillian Cardy works for financial adviser Professional Partnerships.

Adviser 2: Andrew Jones

S?an and Alastair have one of the most common financial problems in the South East: they earn respectable salaries but feel their living expenses leave them with little in the way of disposable income and no ability to save.

S?an's plan to repay part of the car loan with the proceeds of her Abbey National account is sensible. As a rule, all debts should be paid off before an individual begins to save or invest.

Now that Alastair has the Isa, he should hold on to it. The funds he has chosen are growth-oriented and quite aggressive in their management style. It is well positioned to benefit from any improvement in global stockmarket conditions.

I like their idea of moving into S?an's father's house. This is an imaginative way to release some extra cash. I think they may be better off letting their home rather than selling it, as this avoids the costs of selling and repurchasing. If they do so, they will need to inform their lender and make sure they use a properly drafted assured shorthold tenancy agreement.

The rental income they receive would be taxable but they can offset their mortgage interest payments and other related expenses against it.

Finally, I suggest S?an leaves additional pension contributions towards the bottom of her financial wish list. The Teachers' Superannuation Scheme will provide a good level of benefits to each of them, especially if they spend their whole careers in the education system.

Andrew Jones works for chartered accountant Blick Rothenberg.

• Advice is for guidance only.